Are You Saving Money Just to Save, Or Saving With Purpose?

Earlier this week I walked into our HR office and asked about maxing out my 401k contributions. Up to that point, I had been saving exclusively in a Roth IRA because my company did not match contributions (they contribute a portion of salary rather than a percentage of employee contributions).

I felt pretty good about myself. We have already maxed out Roth IRAs for 2010, and now we were maxing out the 401k at my job. To celebrate, I decided to skip the brown bag and head out for lunch. And then it hit me like a glass of cold water smacking me right in the face. Why did I just sign up to have $16,500 in annual salary diverted into retirement savings? Aren’t there other things I could do with that money?

I guess you could call it “saver’s remorse,” and I had it bad. I choked down my lunch while trying not to think about how much lighter my next paycheck would be. I replayed the events in my head and it finally occurred to me that I had made the move in an effort to sort of pat myself on the back. Hey, look at me…I’m maxing out my 401k!

My gut reaction was to fly back to work and withdraw the form before payroll started siphoning away hundreds of dollars from my check. However, since I was already guilty of one emotional decision that day, I decided to let it go and reflect on what I would do with that money.

Saving With Purpose

After starting Frugal Dad two years ago I started day dreaming of trading in the corporate badge for a full-time writing career. Unfortunately, a couple things stand in the way of that dream. First, I’m not a particularly great writer. Second, I don’t make quite enough here to replace my full-time income. And finally, we have many aggressive financial goals that require more than a modest income to fulfill. Indirectly, these goals have prevented me from making the leap to a full-time blogger. And for the first time in a while, I don’t resent that fact.

My savings goals, like many others, have always been rather nebulous. Saving for retirement, or kids’ college expenses, or even a “rainy day” have no real definition. It’s like saying, “I need to lose weight.” I finally accepted the reason I’ve been floundering, financially, even after paying off debt, was because I never actually sat down and identified my savings goals. I was starting to do smart things with money, but only because they sounded smart – I never applied them to our situation and made the goals personal.

Just think of all the “smart” advice we hear from financial gurus. Save 15% of your income for retirement. Put 3-6 months of expenses aside for emergencies. Pay off your mortgage early. The list goes on. But none of these instructions come with a “why.” Why are we saving 15% of our income towards retirement? What are we going to do when we get there? Why 15%? Why not more…or less?

Take some time to reflect on why you are saving money. Your list should be comprised of both short-term and long-term goals, from saving for next year’s Christmas shopping, to funding a retirement still 20 or 30 years away.

A New Series Here at Frugal Dad

Beginning next Monday, I plan to share some of our personal savings goals with you in a series I’m calling, “Saving With Purpose: How To Live A More Intentional Financial Life.” It’s my hope that by sharing our goals with you, I might inspire you to put pen to paper (or finger to keyboard) with your own goals. As the saying goes, “If we aim at nothing, we’ll hit it every time.”


  1. I think it is a lot easier to save money when there is a purpose involved; without it, what will keep the individual focused on the task altogether?

  2. What you are saying here is right on, Jason.

    You only know me from recent years, when my focus has been on investing topics. In my early days (May 1999 through May 2002), I wrote only about saving at the Motley Fool boards. I built the most successful board at that site (the Retire Early board) with the idea of finding out what is the “secret” possessed by the most successful savers in the world. Is it just that they possess bigger incomes? Do they possess a greater willpower? Did they come from families of great savers?

    All of these things have an effect, of course. But these are not the primary drivers. The primary driver is MOTIVATION. Those who truly want to save figure out a way to do it no matter what the obstacles. Those who do not feel a strong desire fail to save much even if they earn six-figure incomes. I concluded from this experience that the entire saving project is developing a strong motivation to save.

    No one who saves solely for an old-age retirement possesses a strong motivation. It’s not possible. That’s too negative a goal. Those who follow the conventional goals are saving only to escape something (an impoverished old age) and not to achieve something (some Life Goal that possesses a particular appeal to that particular human personality). The secret to highly effective saving is saving for a goal of intense personal concern.

    This is the entire deal. If people develop customized saving goals, they will save effectively. If they do not, they will not. In the days when I tried to save for an old-age retirement, I saved virtually nothing. It was boring to try to save. Once I began saving for the purpose of financing a transition to a freelance writing career, I spent every spare moment thinking of new ways to cut spending. I came up with ideas when standing in the shower, when riding my bike, when waiting for a bus.

    When you save for a goal you care about, saving is no longer something you feel you need to force yourself to do. It is something you want to do. That makes all the difference in the world. 90 percent of saving advice should be aimed at helping people develop customized saving goals, in my assessment.


  3. I like the idea of short-term and long-term goals — I hadn’t thought of that. My wife and just have vague, nebulous goals (save money for our daughter’s college, amass a nice nest egg for retirement, etc.). It would definitely help to have more clearly delineated goals for the near and distant term.

    Also, Not to be obsequious, but I disagree with the point that “I’m not a particularly great writer.” I’ve been in the written world for a while, and there is definitely something to be said for writers who don’t try to be overly stylish and instead convey thoughts clearly. You should give yourself more credit.

  4. I think you’re right about setting short, medium and long term goals. I’ve been focusing mostly on the short term lately, but RRSP season always gets me thinking about how much we will really need to retire. I really need to revisit those numbers soon.

  5. @4, you really think that money will be there when you need it? I consider a pension like Social security. It it happens to be there, great, but don’t count on it.

    We save for numerous goals, most of which have a clear goal. We save for ‘gifts’ because we can’t get through Christmas time without some extra cushion.

    But we save for retirement for a different reason. You know, I like my job, but I don’t want to HAVE to do it. I might work for a long time, but I need the freedom to leave if I want to, and not worry about money doing it.

  6. I look forward to reading your series! This sounds like JD Roth’s “third stage of personal finance,” and it will be nice to get another blogger’s perspective of the journey.

  7. I completely agree. My husband and I (26 and 27) are a teacher and an office worker and we save more every year than anyone we know personally, even the ones making 6 figures. We save like crazy and are paying off our home early because we don’t want to have to work forever. We want to be able to retire when my husband can first draw a full pension…age 52.

    We live on $38,000 annually of the $62,000 we make after taxes. $14,000 of our living expenses is our mortgage, additional payments towards principal, property taxes, and home owner’s insurance. We bought our home in 2007 and it will be paid off no later than 2017.

    The rest of our money is saved in a Roth IRA (two after this year), my 401k, his pension plan, Scottrade, and multiple purpose-based savings accounts (emergency fund, home and auto expenses, pet fund, vacation fund, etc).

    Financial goals motivate us. We have fun now, but we don’t splurge too often so that we will have more options in 25-26 years. We set short-term account goals every 6 months to keep us going on a daily basis.

  8. I’m looking forward to follow-up posts on this subject. I’m still young, so I have lots of things to save for, which are listed in a spreadsheet that I visit many times a day. My savings targets range from a new washer & dryer to my property taxes to my travel budgets. There is nothing more rewarding and comforting than to know that my savings has a purpose and isn’t subject to impulses.

  9. This really hit home with me as I have just done the same thing at my employer.
    I have now maxed out all of my employer based savings options (~25% of my income).
    The reason is that I do not have any additional use for the money, other than to save it.
    All consumer debt has been retired and I am borrowing at 1.75% for my mortgage, so it makes little sense to pay down the mortgage any faster than I have to.
    What am I saving it for? That is a good question. Ideally I’m saving in order to transition to a more mobile income earning career. Whether as an employee or an employer, the ability to work from wherever, whenever is the greatest appeal.

  10. Looking forward to this series!

    Like Rob’s note of saving for something of “Intense personal concern”… after all, emotions of some sort are involved in all our decisions, financial or not. But disagree that saving for old age retirement is a negative goal…. for me it is not about worrying about impoverishment in old age, as that is covered already by being debt free, including the mortgage, with tax/insurance on on the house of under $100/month, and a basic bare budget plan of under $450/month. No problems there with meeting that with SS, IRA, 401K, PERS, and a small pension….

    Why I save for retirement is to be able to DO the things I want to do, relax – travel – enjoy grandkids – garden – enjoy my hobbies…. without worrying about spending the money. To have it set up to ENJOY freely what I want to do. So for me, that’s the motivation for retirement savings – the enjoyment 🙂

    But then I am probably closer to retirement than most of Frugal Dad’s readers – so for me it is NOT a long term goal 🙂

    Enjoy life!

  11. Agree, save with a reason, but I don’t think it has to be specific. I set up a 10 yr general investing fund and contribute monthly but have no specific reason for it. I’m young and figure in 10 years could use the money.

  12. A bit like you, I seem to be wired the wrong way around compared to most people, and saved by default from my first paycheck.

    Then one day (illness related, inevitably, though nothing serious as it turned out, thankfully!) it hit me – I may not get to spend the money.

    Most people start off fearing the being hit by a bus scenario, but it’s important the others of us see it the other way around, too.

  13. I think as you get closer to retirement, saving becomes more important. On the negative side, we save like heck for retirement because it’s less than 10 years away, and I’m afraid we won’t have enough money. On the positive side, we save for retirement because I want to be able to enjoy a comfortable lifestyle. Similar goals, I suppose, but they elicit different emotional reponses.

  14. We put about 15% of our money into retirement via automatic draft. I’m glad we have that option; we’re notoriously lazy savers, so for us, automated savings = good for us!

    I am 31, and I don’t have any defined plans for retirement. I just know that I want to be modestly comfortable and not have to rely on my kid for support. Ultimately, that’s why we’re saving.

    In terms of short-term saving, that’s difficult right now… We have a small emergency fund, but we’re kind of strapped, financially. I feel like we’re always just saving up for the next engine problem or broken plumbing. 😛

  15. I thought this post hit home even when I read just the title i knew what I was in for, it spoke to me and my decisions that I’ve made in the past. I had started to save money to help with my retirement and I had wanted to have a nice little nest to have ready when I did decide to retire.It seemed every time I would look at my statement and saw that little bundle growing, something in my head would say “that’s not enough…so you might as well get the house painted sooner than later”.Eventually that bundle dwindle away and I had to start all over again. I’m thinking one really does have to save with a real “goal” in mind too. Great post and excellent tips and I look forward to reading your new series. jj

  16. Love it, Jason. I love talking about intentionality and purposeful action. Our lazy brains want it the other way around, but it’s the intentional people that make things happen. Looking forward to the series.

    Not to knock the concept, but I think there’s definite value in maximizing. That’s a ton of taxes you won’t be paying NOW. And on the concept as a whole, I think it’s fine if people save without intention. People just need to start saving. They aren’t doing it.

  17. 52- short term- continue saving 30-40% of combined income of jobs we love. No house or car payments
    Medium term- car, Harley and new bathroom in the next five years when full retirement hits. We have saved enough to simply spend out of savings for the first five years. This money is never counted in our portfolio (neither is our house). Saving this money in a seperate account and not included in our savings rate – it is another 15% of our incomes.
    Yes, that means we live on less than one salary.
    Medium long term- sell the house and move into a condo (rent or buy will be the question then) near our kids so we can enjoy the grandbabies. Put that money to work for us.
    Long term- continue to live within means.We have no plans to take money from principle for at least ten years when hubby reaches that magical 701/2. Then it will only be the traditional IRA (which does not have tons in it). We will live off pensions and interest and later pensions,interest and Social Security.
    So far the plan looks well on its way to be in place. No health care costs since my husband was smart enough to do 20 years in the military! Both of us are covered.

  18. Part of this is why I want to get into a savings habit early… Then I don’t ever have to max out a 401(k) to have enough for the ever-ambiguous retirement.

    I also don’t want to feel stuck to a particular income level. As long as my husband is fine in his job, I’m happy to not have to be faced with the hard choices between what I’d rather do and the money I have to make. My earnings can be low and we’ll still be alright, because we live a fairly good life on not a whole lot of money.

    Of course, I have my fingers crossed for a military retirement, that would pretty much take care of everything for us and my own retirement savings would be gravy. 🙂 That’s at least 14 years off, when my hubby would be the ripe old age of 38! I’d love to be able to live a nice life with THAT kind of early retirement…. Lol. (And, quite possibly, we can be financially savvy enough to pull it off, granted we stick to our no-kids attitude. Chances are pretty good of that, I assure you.)

  19. Looking forward to your series next week. We have spent the last 2.5 years paying off debt and have less than 12 months left (if we stay on plan). With the end finally in sight I have let my mind wander to what/how/where we go with that “snowball” of money each month. Should we paydown the mortage first? just pay more to it- if so then how much more each month? how much goes to retirement? kids college? home repairs? ect.. a well deserved family vacation.
    I think your articles next week may inspire to really crunch some numbers and talk seriously wiht my hubby about your future goals. Thank!

  20. Personally I think you are a fantastic writer and clearly a fantastic blogger overall.

    I have NO savings but as I have just started a debt management plan I am in a position to start getting some! I can’t wait to keep reading…. IRA’s and all this stuff is kind of garbage to me so I gotta learn!!!!

  21. You definitely need a plan for that sort of money if you are going to pinch in order to save that much. It makes it a heck of a lot easier if you actually know where that money is going to – say, for instance, a retirement home.