Here are my thoughts on consumption and savings and how to balance between the two.
My initial understanding of consumerism
When I was in Grade 12, my Economics teacher told us that one of our life-time goals as human beings was to become consumers. I don’t remember exactly what the context was. It might have been on the topic of Keynesian economics, in which the big “C” representing Consumption was in the equation for driving economic prosperity. For better or worse, his words made a deep impression on my mind, as if he opened up a complete new chapter in my life. I silently, and later openly declared to my parents, that my goal was to make as much money as possible and consume as much as possible, because that was what human beings were born to do.
My journey towards clarity on balancing between consumption and savings
However, over the years, as I grew older, it dawned on me that what my Economics teacher told us was just one side of the coin. I did spend a few years when I first started having some steady income living what I preached, buying items just because they looked pretty, or dropping $100+ to go to a concert of a band that I had never heard of just because my co-workers were all talking about them.
But gradually, when I opened my closet and looked at the clothes filled to the brim, I no longer felt joy and satisfaction, but rather anxiety. I have started to feel more lost and confused instead of excited when I walked into a store and saw a huge selection of flavours for that one thing I intend to buy. I have also realized that my happiness has become so dependent on my source of income that I have become afraid to ask myself, what would happen tomorrow if I lost my job?
These realizations have led me to learning more about how to save instead of just spending everything I earn on consumption for instant gratification. I have realized that the habit of saving money and living below your means can have many benefits.
But I still believe that a certain level of human desire for consumption helps advance our economy and culture
Of course, even nowadays, I still believe that a certain level of consumption is enjoyable, or even necessary, for the economy and the livelihood of everybody.
Renaissance wouldn’t have happened if the rich patrons did not have a penchant for art, and the Louvre wouldn’t have been built if the French royal family did not have the desire for space that was larger than absolutely necessary.
Even in modern days, continuous consumption still plays a pivotal role in driving our human creativity and society forward. Without people’s desires for better products and fun activities, there wouldn’t be so many movies, theme parks, beauty products and luxury goods that you and I enjoy. Is it really necessary to buy a nice dress, a luxury winter coat, or a brand-new laptop? Not really. However, those things and experiences do give me joy, not to mention that millions of people like me together support the companies that can, in turn, support their employees and research and develop even better products. It’s a full circle that will break if, all of a sudden, people all decide to retreat to living in their Waldens like what Thoreau did in the 19th century.
Of course, it helps to earn some cashback on your purchases.
My favourite cashback options that I use regularly are:
- Drop app
- Rakuten (sign up here today to get a bonus cashback with your first qualifying purchase!)
- Honey browser extension (sign up here today to get $5 free cash with your first purchase!)
- Tangerine Money-Back credit card (Canadian residents only)
Still, we should still keep in mind the benefits of savings
Certainly, this is not to say that we should just keep on spending beyond our means for the sake of our economy. We shouldn’t forget about the other side of the balance – savings. Below are some key benefits of savings that I recommend we keep in mind next time you think about spending.
1. An adequate amount of money saved in your bank account gives you security
An adequate amount of money saved in your bank account gives you secThis highlights the importance of an emergency fund. In case of an emergency, you can tap into your savings. It also gives you choice if you are in a very difficult situation at work and cannot endure working there any longer. Even if you are fortunate enough to not have to use the money, the mental benefit of seeing a positive number in your bank account is also worth mentioning, because you know it is there. It’s like the crash pad on the floor when you go rock climbing.
2. Saving for something meaningful gives you a sense of purpose in life and makes you enjoy the things you are saving for so much more when you finally reach your goals
To live with purpose, you need to have goals. They could be as small as wake up 10 minutes early weekend for some stretches, or bigger goals like starting your own company.
In terms of financial goals, saving for a big cross-country trip with your best friends, or a watch that you have been dreaming of for years, or a down payment for your first house, are all valuable goals that will bring you immense joy once you get there. Even though these experiences and products cost significantly more than a regular lunch-out, they will leave a deep impression in your mind that brings you a smile whenever you think of them, and the level of satisfaction that they bring are long-lasting, if they truly are what you really really want.
Note that you must make sure that these things are what you absolutely want in your life; focus on the ones that increase your heart rate whenever you think about them even if you are just taking a leisure stroll down the street. You may ask, is it still consumption though? Yes I think so, but this is mindful consumption, consumption with a purpose.
3. Saving makes you appreciate what you have so much more
You know, it really is a privilege to be able to save, because this means that you are no longer at the bottom rung of Maslow’s Hierarchy of Needs still struggling to have enough necessities like food and shelter. For me personally, saving money reminds me of my past when I was juggling three jobs and when a $1.80 bagel with cream cheese was considered luxury. It allows me to appreciate what I have today, and gives me comfort that if one day my income decreased drastically, I could just save less and still maintain my lifestyle without having to adjust it downwards too much, which will inevitably be painful.
My final thoughts
Of course, saving so much money to the point that you no longer enjoy your present life is not something I recommend. After all, you only live once, and FOMO is a real thing. But let’s suffer only selectively, and try to achieve a balance between consuming and experiencing life and saving for a rainy day, or a sunny day that you dream of. For example, I have stopped buying many items that I used to love.
Should you be interested in seeing what savings rates it will take for you to join the millionaire club, please visit my blog post here.