Balancing Consumption & Conservation

Money is a resource. Like any other resource, it is finite. We may have been deluded into thinking money is an infinite resource because we’ve had unprecedented access to credit but that doesn’t make it true.

Since we only have a set amount of time during which to make money, and we hope to last well past our working lives, it only makes sense that we figure out what the balance should be between Consuming our financial resources and Conserving them.

Consumption versus Conservation plays a huge roll in whether people have an emergency fund. And while being exhausted at the end of a long day may feel like an emergency, you’ll know different if you every have to face the real thing.

Sure, dinner out a couple of nights a week makes the week a little smoother: it’s nice to get out or to order in when you just can’t think of what to cook or you’re just too tired to bother. But if you’ve got an $80-a-week restaurant habit, that’s costing you over $4,000 a year. Cut it in half, and you’ve got an extra $2,000 for the future. Invest that $2,000 for 30 years at 7%, and your conservation means you’ll have an extra $9,000 to eat later on. Do it every year and you’ll have almost $139,000. Food…check!

It’s much the same when it comes to choosing where we will live. It’s become de rigueur to buy a huge home fully equipped with every conceivable convenience. We want marble in the front hall and granite in the kitchen. Bathrooms aren’t just bathrooms anymore; now they are spas. It’s almost embarrassing to take someone from Europe or Japan through a typical North American home because we waste so much space. In the mean time, we’re spending so much on our mortgages that we don’t save a cent for the next chapter of our lives when a much cozier existence with money left over for simple pleasures like heat will really count.

Conservation isn’t as hard as most people think it is. It does take a little thought, and some planning. Maybe a little less itch-scratching. If you aren’t of a mind to conserve, what are you planning to eat when your earning days are at an end and you’re left with a lot of stuff, but not much money? And how much of that stuff can you burn to stay warm?

24 Responses to “Balancing Consumption & Conservation”

  1. Today’s blog has reinforced for me how great I think you are Gail and how much I value your advice! I am 36 and we have just paid off our mortgage. With lots of help from reading this very blog every day. 🙂 We have struggled with the thought of buying a bigger nicer house and reading what you wrote about our homes here in North America has once again made me realize we are just fine where we are. If we stay here, we will have more freedom to do the things we feel are really important. This can only enrich our lives and our daughter’s lives. Thanks so much for keeping me on track!

  2. I found you a little under a year ago and much to my husband’s amusement, I changed the way we were spending our money. At the time finances were great and we felt we didn’t need to worry but after hearing you flat out call people dopes I thought some changes should be made. So we drew up a budget and set up some automatic withdrawals for savings (TFSA and emergency fund) and after 7 years of being a stay-at-home mom I got a part-time job two days a week.

    That was in Feb/March of last year. Fast forward to July and my husband’s business partner who is in charge of sales has a medical emergency. We end up going months without a paycheque due to slow sales at hubby’s work. And you know what? Our emergency fund got us through. Not only that, but my decision to go back to work part-time after such a long absence made finding a full-time job much easier and less scary.

    Now hubby is getting paid again and I’m making enough that my paycheque alone would keep us mostly out of the emergency fund if things got bad again. I’m so grateful I found you in time.

    Thank you Gail.

  3. I’d be very excited to have $139k…. it would mean I could afford to pick up dinner a few times during the week whenever I want…. oh wait…. 😀

    To be honest… while the point is good for those that want to save money… there’s nothing wrong with trading 139K when I’m 65 for dinner out once or twice a week for 30 years.

    At 65 I’m retired… nothing to do but sit at home and cook…. and I probably lost half my tastebuds by then…. at 35, I’m lucky if I have 20 mins before I pass out from low blood sugar some days…

    However, in regards to the house I agree… I live in T.O. and still rent apartment. Whilst it’s not glamorous… and I do sometimes envy those with nice houses… I enjoy alot more not stressing about mortgage payments.

  4. Nowadays its thought you need north of $5 million in the bank to live in financial independence. No need to work. Able to do as you please (although you still need somewhat of a plan – its not $100 million).

    For the vast majority of us, conservation is a must, especially if we want to approximate our quality of life at the end of our working time.

  5. Great, thoughtful post Gail, thank you!

  6. A good way of looking at it Gail. I think Conserving money is easier if you know what you’re conserving it for. I want to travel when I’m retired and I want to stay at 5 star hotels when I do it. This means that I need to set aside $x and build our current budget to accomodate that.

    For my current consumption I want a cleaning lady. This means that I have the basic landline phone, no cell phone, no TV and no dry clean only.

  7. avatar Marilynne Says:
    January 18, 2013 at 1:55 pm

    Couldn’t agree more with all that Gail says. Who would argue with Gail …are they nuts!? The comment about big houses really hit home – have several friends in huge homes – just the 2 of them rattling around. Although I would like a little bit bigger space, I really don’t want to do all that extra housework! I can vacuum/dust etc through my palce in no time at all. Gives me extra time to sit and read…volunteer ….veg out!

  8. I agree with Kat, I don’t mind spending money to enjoy eating out today and I will make accommodations for the future when the time comes. That said, we do have a budget for this area so we know how much we are spending. This also makes things simple if a day comes where we need to cut back in certain areas.

  9. J A H –> I can’t stand when people quote numbers like that! It’s insanely wrong. If you have $5 million saved up, you could retire at 50 and pay yourself a salary of $100,000 a year until you reach age one hundred.

    $5,000,000 divided by 50 years = $100,000

    Surely, you can live very comfortably on $100k a year? If you think you might kick it at age 75, you retire at 50 and salary yourself $200k a year.

    None of these calculations even include the extras you’ll be getting from investments and interest.

    You don’t save $5 million , retire, and then live on the generated income without drawing down the principle. Who would do something like that?

  10. Edward, I’m sorry to make you so angry. You’ve read a lot into my numbers and you’ve said some things that I never implied. Honestly, I’m not exactly sure with what you are angry.

    My point was that for every dollar you earn, some has to be conserved for tomorrow. Most people never have enough in the bank to only consume.

  11. People have a tendency to think that retirement is all about getting and being old. There are plenty of people in thier 60’s who could be travelling, enjoying hobbies, etc. but they dont because they didnt save enough. I see lots of people my dad’s age (67) who would be doing so much more now, if they had saved more or better.

    @ Kat, my Dad’s tastebuds are just fine, and i’m pretty sure yours will be too when you 65.

  12. J A H –> I’m not angry. Did it read that way for some reason? It’s just recently I’ve heard many people say around the Net that outrageously large numbers like $3-5 million aren’t enough to retire on. (I’ve read it several places, one was even a newspaper.) …And I wonder why/where that logic is coming from? Like I said, out of $5 mil you could easily pay yourself $100,000/year (even if it makes no further income on the original principle) until the day you die. So, why isn’t it enough?

  13. I am a realtor and I have routinely had people look at my very modest but fully paid up thome wondering why I do not live in a mansion. I do not need it and don’t want all that cleaning and maintenance. besides i secretly smile as i have no debts, another property and savings. I work without any pressure because I do not have to grab people to make a commission. as a result lots of work flows to me. And I sleep like a baby. I am so glad I was brought up conservatively!

  14. Edward, the number I put forward was about financial independence, not retirement. I never said nor meant you needed $5 million (or even $1 million, a number we all read I’m sure) to retire. I actually agree with much you wrote in your first post. You just used language and framed things to suggest there was a problem with what I said.

    The numbers that bother you come from the financial services industry who want us to oversave. You may be interested in a new book by Frank Vettese at Sheppell ( written with his collegue) about being realistic with retirement planning. A very good working paper from the company is available in PDF free online. It’s the September 2010 Vision newsleter.

    And just to confirm your thoughts, if I had $5 million in the bank I ‘d retire and stop posting here.


  15. Thanks for this Gail! As always, I go back and forth on the idea of moving. We are 4 in a townhome which is quite comfy but can be short on storage! While I no longer enjoy being “attached” to my neighbours, we haven’t pushed a move for several reasons.
    1) having travelled a lot – I always consider, as Gail mentioned, that people around the world live in tighter spaces and do just fine
    2) we are close to work and the kids’ school – love our location
    3) it’s cosy and has helped since we finished the basement
    4) our bedrooms are a great size – better than some of the new homes I have looked at
    5) we will have our mortgage paid off within 9-10 years – before I retire
    6) all costs increase with a bigger home (hydro, utilities, property taxes – that’s a big one! I can’t believe the property taxes of some of the new homes in our area!)
    7) Hubby and I got to go on a trip this year and we are taking the kids to Disney this year

    For anyone who is debating on this topic, it helps to do a list like this! Also, I had put it out their to Gail followers and the answer was consistently to “stay put” with some convincing reasons!

    I just wish others saw it that way instead of suggesting we could use a bigger home or asking why we don’t consider it.


  16. Oops! “there” not “their”!

  17. I am considering retirement, this year or next year, as my employment income is becoming lower than my pension income will be. I will have a small pension coming then of less than $20 000 per year. Therefore, I will now concentrate on paying down my 2.3% mortgage, using money from my Tax Free Savings Account, which is rendering much less than 2.3%. Should a time come when I need to cash in some of my RRSP’s, after retirement, with my pension income being so low, how is the income tax percentage calculated on the RRSP withdrawal? What are the existing tax brackets? Should I consider not retiring, and simply withdraw from my RRSP’s if my employment income is low? What financial strategies do you suggest that I need to use at this point in my life?

  18. Aiming for a high savings rate of 30% or 40% over the long term will set you up for a very nice or even early retirement. There’s a fine line between living well and over indulging which I think many of us are prone to.

    Since retirement is quite a ways off for me, I sometimes prefer to think about how the choices I make now will affect my lifestyle between ages 40-50, it’s a little easier to think of that timeframe!

  19. Had a conversation about our consumption and consumerism today with a friend. One of her friends lost everything in a fire. My friend realized how much she’d have to lose if she was in a similar situation, but how little of it really mattered. She knows she needs to let go of her possessions, and her want of more, but is finding it difficult to get started. She admires where my family is at. We are far from where I’d like to be, but much further than where many I know are. I’m guilty of buying my kids too much. This last week, I bought more Wii games and exercise equipment for them, but I justify it by saying that it keeps them moving. And, it does, because they do use them. I bought my daughter an outfit, but I can’t remember the last time I did that. Bought myself a sweater, but it’s been a few months since I’ve purchased anything for me. Everything purchased, though, was 2nd hand and minimal cost. I bought 2 movies and a shirt for my husband from my friend, who insisted I didn’t have to pay, but she used the money to help someone who I knew was in need, and said the donated items were from both of us. I would love to be one of those people who could own 100 things, but I, alone, am far from that, nevermind our household.

  20. avatar Marc Eric Says:
    January 20, 2013 at 6:00 am

    Here is a quote by myself :

    Wealth is not defined by how much you have. It is defined by how little you need.

  21. I feel very demoralised about saving right now. Having money in the bank is like burning it. Last year I made barely 2%, with inflation being 2 point something and mortgage interest about the same. Mandatory pensions get slashed every two years (used to be 66% of last income when I was young, it’s 43% now), voluntary-but-strongly-recommended tax-exempt pensions produce negative returns because all the middle (wo)men in insurance and finance have to feed their kids, too…

    I still save 25% of income, because there is nothing I really want to buy, but these granite countertops start to look like a solid investment. (just kidding!)

  22. @Chuchu Your father thinks he’s doing fine…. it’s well documented scifentically.

    Here’s a blurb:

    Smell (and to a lesser extent, taste) also play a role in both safety and enjoyment. We detect certain dangers, such as spoiled food, noxious gases, and smoke with taste and smell. A delicious meal or pleasant aroma can improve social interaction and enjoyment of life.

    The number of taste buds decreases beginning at about age 40 to 50 in women and at 50 to 60 in men. Each remaining taste bud also begins to atrophy (lose mass). The sensitivity to the four taste sensations does not seem to decrease until after age 60, if at all. If taste sensation is lost, usually salty and sweet tastes are lost first, with bitter and sour tastes lasting slightly longer.

    Additionally, your mouth produces less saliva as you age. This causes dry mouth, which can make swallowing more difficult. It also makes digestion slightly less efficient and can increase dental problems.

    The sense of smell may diminish, especially after age 70. This may be related to loss of nerve endings in the nose.

    Studies about the cause of decreased sense of taste and smell with aging have conflicting results. Some studies have indicated that normal aging by itself produces very little change in taste and smell. Rather, changes may be related to diseases, smoking, and environmental exposures over a lifetime.

    Regardless of the cause, decreased taste and smell can lessen your interest and enjoyment in eating. Some people become less aware of personal hygiene when the sense of smell is decreased. Enjoyment of your environment may be diminished.

    Sometimes changes in the way food is prepared, such as a change in the spices used, may help.

    For some people, there is an increased risk of asphyxia because they cannot detect the odor of natural gas from the stove, furnace or other appliance. A visual gas detector that changes appearance when natural gas is present may be helpful.

  23. @Kat,

    65 year olds have far more to do than sit around and cook. They now have the time to indulge their passions – and for those who budgeted wisely – they also have the financial means to do so. This may or may not include eating out many nights a week.

    Many have far busier lives than working people do outside of work.

    Your blurb is hardly definitive – “may”, “can”, “decrease” (as opposed to absolutely, will, absence of). I work in the field of aged care and I can assure you the amount of money people have in their 60s, 70s, 80s and 90s impacts on the quality of life they have at that age. And, believe it or not, many many people these days, those who can afford it, have fantastically full and quality lives into their 90s.

    Those who frittered their money away in their 30s, 40s and 50s live lives wondering how they will pay for their food, electricity and send some money to their grandchildren for Christmas.

    There would be 20 year olds who think 35 year olds to be “old” enough to be able to cater for their own nutritional needs without passing out from low blood sugar.

  24. @Tess – Hmmm, it would appear you are quite passionate about poor elderly people.

    Let me address a couple of the things you said…

    1. decrease is definitive. It does not state how much, but there is a decrease.
    2. I did not state that all 65 year olds have nothing to do but cook, I said that’s what I would be doing. Frankly, I hope I have nothing to do, as I work full-time and have a side-business as well. I should have phrased that as “nothing that I *have* to do.
    3. I stated that it is a good way for savings if people have to save. I’m not one of those people. I already save more than 20% of my income. But there is a point, where consumption is not necessarily evil.
    4. Those 20 year old’s would be naive as to how some businesses works now, (problems do crop up unexpectedly) and also, quite narrow minded in not realizing that planning on picking up a meal, IS CATERING to their nutritional needs.

    Every person needs to look at their individual circumstances and judge where the line between spending and saving should be….

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