I try not to "preach" about spending in general or spending in retirement in particular. It's not my place to tell anyone how much to spend or what to their money on. If you're a responsible person, you certainly don't need me to tell you that your essential living expenses and caring for your family are a priority—before and during retirement (1 Tim. 5:8). Beyond that, I can't say that one kind (or amount) of spending is better for you than another. That's between you (and your spouse, if you have one) and God.
What I have discussed (here and here and here) are stewardship principles dealing with managing your spending before retirement to create enough margin to save. I also talk about managing your spending and savings withdrawals in retirement to try to make your money last as long as possible. (That's more important for those with smaller savings account balances.)
Based on my writing, you may have the impression I am a very frugal person. If you ask my wife and others who know me well, they may say something like, "yes, he is, but not extremely so." They'd be right. I don't mind spending money, but I try to be careful about it—certainly for bigger ticket items.
On the other hand, I don't pinch pennies; I don't think I'm "cheap." Cheap people don't enjoy their money, nor do they derive much pleasure in using it to bless others. Cheap people don't tip extra, give more than a tithe to their church or other ministries, or pay just a little extra for a product or service to help out a struggling small business person.
Cheap people nickel and dime themselves, their families, and those they transact business with, to the point of exhaustion. And worse, they become hoarders, only deriving joy from accumulating more and more—much more than they need—instead of putting their money to good use (Ecc. 5:13).
You probably know someone like that. It's your neighbor who can't mow the grass but who certainly isn't going to pay someone else (who needs the work and would do a great job at a fair price) to do it for them. He'd instead let it get a foot high. (If you're wondering if I have such a neighbor, yes I do.)
Proverbs 23:6–8 offers some good advice about such people:
"Do not eat the food of a begrudging host, do not crave his delicacies, for he is the kind of person who is always thinking about the cost. "Eat and drink," he says to you, but his heart is not with you. You will vomit up the little you have eaten and will have wasted your compliments" (NIV).
Harsh, I know (the Scriptures can be very direct), but you get the point. These people are no fun to be around, especially in stores and restaurants.
We bought an (almost) new car
Speaking of spending, my wife and I just spent a fair amount of money on an almost-new vehicle. We've been talking about getting a mid-size SUV (one that would carry both of us and our four grandkids that live nearby) for a while, and an opportunity presented itself that we took advantage of. Still, it was more than I have paid for a vehicle (or anything, for that matter) in a long time, and it was, I admit, more than a little painful to write such a big check. (I have a used Honda truck to sell that will offset some of the cost, but not much.)
If you've been reading this blog for a while, you may find this ironic since I advocate for watching your spending closely, especially in retirement. I also recommend buying cars that are at least 2 to 3 years old, and the one I purchased is a slightly used 2020 model that the owners decided was too small for their needs and traded it in for a bigger SUV after owning it only a few months. Their loss was my gain, so to speak.
Even more out-of-character was our decision to buy the vehicle in the "spur of the moment." My son is in the automobile business, and he told me about it and thought it wouldn't last long under the circumstances.
The car is practical (it's a Honda Pilot; it will carry and tow a lot of stuff, which we needed), but buying it was also an emotional decision. Having something almost new, with lots of nice features, that would hopefully last a long time outweighed the financial considerations of paying more than the cost of a two or 3-year-old model capable of the very same things.
One of my favorite authors and bloggers, Tim Mauer (who also happens to be a successful CFP), recently wrote the following in his "Financial Life Planning" newsletter about an interesting interaction with one of his clients:
"'We bought one,' the client said, speaking of a fancy new Lexus that parks itself with his head bowed in apparent shame. I'd never communicated that these folks—or anyone, for that matter, who has sufficient means—shouldn't use said means to purchase a vehicle of their choosing. But the general impression the public has toward financial advisors and educators seems to be that we all think the best use of money is in storing it up and avoiding its deployment . . . It's hard to argue that we in the money business don't have a tendency to overstate the benefits of deferred gratification. Some (loudly) preach the outright virtue of financial asceticism early in life, pledging that present deprivation will surely result in future comfort, if not abundance. The cowed mentee may be afraid to ask the question begged: 'But how long should I defer? And what if that future never comes?'"
Ever since I read this in Tim's newsletter, I've been thinking about spending and our own decision to purchase a nearly-new SUV (that doesn't park itself, as far as I know, but then I'm still working my way through the owners manual).
Spending Based on Biblical Principles
Spending is a big part of our financial lives, before and during retirement. The following are some of my thoughts on spending based on biblical principles:
Stewardship is the first principle of biblical personal finance.
Whether we're talking spending, giving, saving, or investing—in retirement or not—stewardship is the fundamental guiding principle for what we do. It's not just a principle; it's a biblical truth that informs all other biblical money management principles.
As God's stewards, we must always be mindful of our role as agents, not owners. We are responsible to God for making wise decisions, promoting what is good, and caring for our families and others with the resources God has entrusted to us (Prov. 27:23).
Financial resources enable us to care for ourselves and our families and to use foresight and faith to envision a better future for all as we seek to balance the material and the spiritual in obedience to God's Word. Though we are free to spend on ourselves, we must also love our neighbors as ourselves and share with those less fortunate. We must also be ever-mindful that our money (and the things it can buy) can easily become an idol (Ecc. 5:10, 1 Tim. 6:10).
Living this way requires much more focus, thought, and effort than many of us are willing to apply. But if we are willing, we will experience that joy that comes from freely and responsibly using the wonderful gifts he has given us (James 1:7).
Spending is an economic activity that is a good part of God's creation.
Spending has been part of God's created order, seemingly since the beginning of time. (Archeologists say that the Chinese used seashells as currency over 3,000 years ago!) All the biblical evidence suggests that spending is "good" to the extent that it promotes human flourishing and promotes relationships (Luke 16:9).
Economic activity is a good part of God's creation. Moreover, our personal financial decisions, including how we spend our money, impact others well beyond our immediate families. Spending money may give us utility or even pleasure, but it also helps others involved in the product's or service's supply chain. It enhances the productivity, and therefore the flourishing, of others (Prov. 11:24).
Spending blesses you and also those with whom you spend money with. It is also a "vote" for the product or service that the individual or company offers. Therefore, we would do well to spend money, whenever possible, with companies that treat their workers and God's creation well while providing a fair wage and return to their shareholders, if they have them.
For instance, during the pandemic, most dine-in restaurants have been closed. Suppose you choose to support a local small business (like your favorite pizza place) by ordering take-out, which can be more expensive than a frozen meal (or pizza) from the grocery store. In that case, you may not be "saving money," but you are making good use of the money God has provided by spending it in ways that help others.
Extreme frugality costs time, which may be more precious than money.
I mentioned frugality versus "cheapness" earlier. There is an aspect of extreme frugality and being "cheap" that many often overlooked: time.
Time is a limited resource for all of us. Therefore, it is just as important to steward our time as it is our money. If we spend hours and hours hunting for and then negotiating the lowest possible price on everything we buy, we can waste precious time. If we track our spending down to the penny and try to figure out how to save a few dollars a month, we are probably penny-wise and time-foolish. That's time that you can use for something much more meaningful, enjoyable, or productive.
If we're so cheap and miserly that we worry over every dollar we spend, we take something good (wise, thoughtful stewardship and spending decisions) and turn it into something burdensome, controlling, and potentially idolatrous.
We save now to spend later, but that doesn't mean we can't spend now if we want to.
A big part of retirement planning is all about saving (Prov. 21:20). And a big part of managing your money in retirement is making sure you don't spend too much too fast.
Spending too aggressively in retirement may not be a problem for most people but think about all the people who saved diligently for a retirement that never came—years and years of financial responsibility without the big "payoff" in retirement.
We can take from this that real joy and satisfaction does not come from possessions or money. It comes by knowing the living God and receiving everything from his gracious hand with thanksgiving (Ecc. 5:19, Ecc. 9:7–10). We can make all the right choices and still experience a bad outcome. In the end, very little is in our control, yet we tend to spend and save as if it is.
Over-spending can inhibit saving and giving.
In the U.S., we have a consumption-driven economy. Many economists view high levels of consumer spending as a key indicator of economic health. The problem isn't spending; it's overspending, especially when we fund it with debt.
The other big problem with overspending is this: Money we spend isn't available to save or give. If we unwisely spend all we have (and then some), we will be unable to give or save, both of which are commended in scripture (Prov. 3:9, Prov. 11:25, Prov. 30:24).
The primary biblical principle about spending is moderation—to cultivate contentment with "enough" (Prov. 30:8, Phil. 4:12, 1 Tim. 6:6–8). But this doesn't mean that we can never spend a little extra for a vacation, some new furniture, or even a new (or almost new) vehicle.
Also, as with so many things, you can reach a point of diminishing returns in your efforts to manage your spending well. If it's out of control, get a budget, track your spending, and make the changes you need to make. But if you become obsessed with every penny, you'll miss the big picture of stewardship, which includes giving and savings.
Is Government Spending "Good" Spending?
Since this has been a prominent feature in the news recently, I wanted to touch on government spending as economic stimulus.
A lot of government spending is "good" spending on day-to-day operations, national defense, and entitlement programs. (Though admittedly, there is a lot of inefficiency and waste, and some spending may be misguided.) Of late, an enormous amount of money has been pumped into the economy for stimulus and relief. It's reminiscent of TARP and HARP during the 2008–2009 financial crisis.
The government has been struggling with how to deal with the economic fallout of the pandemic. First, it reduced interest rates to near zero, then announced it would keep them there indefinitely. Then it re-started QE (quantitative easing), buying up treasuries and even corporate bonds at a feverish pace to increase the money supply. These actions exhausted the monetary policy playbook, with one exception: direct fiscal stimulus.
The remaining step (which has now been done twice, and a third time appears likely) was a direct fiscal stimulus to businesses and customers in the form of forgivable loans and direct cash payments. Perhaps the "third time's the charm."
The direct cash payment strategy has been called "helicopter money," alluding to the indiscriminate way the government makes the payments—without any assurance that the spending will produce the desired result.
I don't want to minimize the financial suffering the pandemic has caused, nor am I suggesting that all forms of government assistance are harmful. I think the problem with "helicopter" money is that many people receive payments who don't really need them. Plus, it increases the national debt, which was already out of control. (The federal debt amount for a family of four increased by $100,000 last year—without a commensurate benefit).
This kind of stimulus produces short-term prosperity, and you can see it in an ever-rising stock market despite a fundamentally weak economy and continued consumer consumption despite record unemployment. I would suggest this is a false prosperity that masks serious underlying problems.
No one knows how this will play out. But I think one thing is sure: the ever-increasing federal debt is something that will have to be reckoned with. The government was "broke" before the pandemic, and all this short-term stimulus is actually long-term debt in disguise. Whether it will ultimately prove to be "good debt" in delivering real economic value remains to be seen. I'll leave you to judge whether it's consistent with the biblical principles listed above or not.
Spending in Retirement
Spending can be a real conundrum in retirement. Depending on your overall financial situation, you may have just enough to cover your essentials or a lot more. Still, as a general rule, retirees tend to be reluctant to spend in retirement, even if they have the means to do so.
As already mentioned, I think it all comes down to balance and moderation. I recently read a report that said that the average retired adult who dies in their 60s leaves behind almost $300,000 in net worth, and the number doesn't change much for those in their 70s, 80s, or even 90s.
Of course, those numbers are averages, meaning that many people have less—a lot less—while others have much more. For those with less, spending decisions become much more critical.
While it's possible to deplete your savings too quickly, I also think it's possible to leave too much on the table for the sake of maximizing your savings account balance over an extended time. You could end up with a big pile of money that you may not ever be able to spend anyway and with missed opportunities to give it away.
I'm not talking about being overly-impulsive or reckless with your spending (or giving, for that matter); that's not wise stewardship. I am suggesting that using some of the money God has given you to enjoy, bless your family, a business owner, your church, etc., is wise and brings joy.
Then there's the matter of inheritance.
If you make significant sacrifices with your spending just so you can leave behind a bigger inheritance, you may just end up being a rich person in the cemetery.
Don't get me wrong; there is absolutely nothing wrong with leaving money to your heirs; many aspire to do that (Prov. 13:22). But doing it by sacrificing things in retirement that would have brought you joy or been a blessing to others may not always be the best use of the resources God has given you.
Although the Bible doesn't promote a "carpe diem" lifestyle such that we fulfill our every desire, we also shouldn't live so frugally that we reuse our dental floss either. Once again, balance and moderation, with a focus on generosity, is critical. But I will be the first to admit that finding that balance, especially in retirement, isn't always easy.
We Live, Therefore We Spend
Because we live, we spend. We spend on lots of things—some are essentials, and others are discretionary. Yet, a lot of the focus of retirement stewardship is on saving and investing, and rightly so. But expenses are also a key part of the retirement equation.
Some will be able to retire at the same spending level they had before retirement. However, for many, reducing expenses before retirement will be the best way to ensure they will have enough income to live with financial dignity in retirement.
I will go into this more in-depth in my next article, which will also serve as an important announcement about a new book I plan to self-publish later this winter or early spring.