In last week’s Roundup, Joseph linked to a CNBC article that summarized some of the findings from an interesting Principal Financial Group study about “Super Savers.” For anyone desiring to do a better job saving, whether building a more sufficient emergency fund or better preparing for retirement, a few other insights from the study are worth highlighting.
Putting first things first
The survey defined Super Savers as those who “put away 15% or more of their income or 90% or more of the IRS maximum.” How could they manage to save so much? Was it because they earn more than the average person? Not necessarily. Principal found Super Savers across the spectrum of people earning from $35,000 to $500,000 per year. So what does make a difference? It may not seem very surprising, but it’s worth pointing out that it has largely to do with making saving a priority.
Most of those who said they plan to save $20,000 or more for retirement in 2022 attributed their ability to save so much to “feeling confident they are in good shape to endure a recession and the sacrifices they are willing to make to their daily expenses to maximize their retirement contributions.”
Of course, both are related. Proactively managing daily expenses can go a long way toward building a financial foundation strong enough to endure a recession. When asked what “sacrifices” they have made to save for retirement, 49% said they drive an older car, 40% don’t travel as much as they’d like, and 39% own a modest home.
All of that is in sync with what the late Thomas Stanley and William Danko found among those who do an unusually good job of building wealth no matter how much income they earn, detailed in their classic book, The Millionaire Next Door. As the title of their book conveys, Stanley and Danko found that true wealth builders tend to not look the part, driving modest cars, living in relatively modest homes, and not buying the latest fashions.
Another noteworthy finding from the Principal study is that 69% of Super Savers said they don’t worry about keeping up with the Joneses. That’s a point emphasized by Sarah Stanley Fallaw, Thomas Stanley’s daughter who is following in her father’s footsteps through her company, DataPoints, and with a book she co-authored, The Next Millionaire Next Door. She has said:
If you look at some of the research that relates to self-efficacy (which means you believe you can do things) and internal locus of control (believe that things around me are driven by my actions and behavior), you see the importance of social indifference. Do I care what other people are driving, or about trends? That sort of thing....
The research we’re doing demonstrates that those who ignore trends have higher net worth, regardless of their age, income and percentage of wealth that they inherited. Building wealth means ignoring what others are doing, which may be more challenging today than [ever].
What a helpful phrase — "social indifference"!
As Christ-followers, the main caution here is to not allow saving to become our highest financial priority. The Bible says to put generosity in that position, emphasizing a “firstfruits” approach to giving (Proverbs 3:9) where we give the first and best portion of all that we receive back to God. Saving is important though. God’s Word says, “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has” (Proverbs 21:20).
A good, practical financial framework is to give a portion of all that we receive as a first priority, save and invest portions, and then build our lifestyle on what remains.
At the same time, the Bible says we can go too far with saving, calling a man a “fool” for devoting himself to finding ways to store up all that he had accumulated and dreaming of a life of leisure (Luke 12:13-21).
What “sacrifices” have you made in order to be able to save adequately? And where do you draw the line between wise saving and foolish hoarding?