Before I delve into the details of this topic, I want to issue a disclaimer that the advice I'm about to share does not apply to everyone. It is intended for a particular segment of the population, and even within that segment, it comes with many caveats, conditions, and restrictions. If you belong to this segment and meet the requirements, then you may benefit from the advice I'm going to share.

As the title suggests, I am not a big fan of extensive savings. Saving is important to some extent, but beyond that, you need to crunch the numbers and ensure it makes sense for you. As an accountant and financial planner, the advice I’ll provide is based on over two decades of interactions with thousands of clients and observing various scenarios. So, this perspective is shaped by those experiences.

Let's start by understanding the concept of savings itself. We earn money—some through working for others, some through their own businesses, and others through investments. At the end of the day, we have a certain amount of money over a given period, such as a month. For example, let’s say you have an income of $10,000 in a given month.

So, that is your total income. Naturally, you will have expenses against it, which you will pay. Here, I’m focusing on the personal side, not the business side, because most of the time, any income earned through a business flows through to your personal finances. In this blog, I'll be discussing personal finances. The money you earn in a given month flows to you, you pay your expenses, and what’s left is your savings. What you do with that savings is another matter. You might set it aside for an emergency fund or invest it in various tools and instruments, depending on your access to cash and your needs. Whether you put it in short-term or long-term investments depends on your situation.

This is a general overview of the concept of saving, which most of us are familiar with. However, what's happening now is that a certain class of people, especially professionals who have gone through extensive education to earn their degrees, often have a late start in their earning years. When they do start earning, they typically make more money than their immediate expenses require. The same can be true for some entrepreneurs. Again, this isn’t applicable to everyone but to those in similar situations. These individuals often find themselves with more net cash available than they immediately need.

In other words, they are generating more income than they necessarily require at that moment, and they have every right to do so. They’ve worked hard for their degrees, ventures, and businesses, so they should be able to reap the benefits.

Typically, the first step is to set aside some money, perhaps enough to cover six months of expenses, in case of an emergency like health issues, financial difficulties, job loss, or business challenges. Once that’s done, you move on to investments, setting aside money for retirement. Then, you start paying off debts, especially those against assets. Any debt not backed by an investment, like credit card debt, should be paid off before investing in a retirement account. For instance, it doesn’t make sense to be paying 20% interest on your credit card debt when it’s tough to generate that kind of return on your retirement account. So, you pay off those debts first before contributing to retirement.

Once those basics are covered, you might consider putting aside money to pay off mortgages on your home or investment properties more aggressively.

Once these things happen, there is a class of people who still have excess cash, particularly later in life as they have accumulated more assets, and those assets themselves are generating cash flow. As a result, they are significantly pulling more money out of the system than they are putting back in through their spending. This is where the need for careful financial planning comes in. You need to crunch the numbers, sort out the equation, and determine how much money you need for retirement or financial freedom. Financial freedom means that your assets can cover your ongoing expenses without needing to work anymore.

Let's say you reach this point, and yet you're still accumulating more money. You might justify it by thinking that you might need more in the future due to unforeseen events. However, in reality, the chances of these events occurring are quite remote, and whatever savings you have should be sufficient. After all, there are fallback options built into the system, such as government assistance programs, additional loans to cover interim difficulties, or, in the worst-case scenario, bankruptcy. So, financially, you should be fine.

Now, let me get to the core of my argument. I've seen many of my clients fall into this category because, most of the time, if they are hiring a CPA, they are already making a decent amount of money. They are professionals, business owners, and by definition, most of my clients already fall into this category. Over the years, I’ve noticed that the amount of money they are pulling out of the system is significantly more than what they will ever need.

So, what do you do with this extra money once you've covered all the necessary bases? Let me share an example of one of my clients, let's call him Steve. During the COVID period and a year before and after, he made several investments and significant changes in his business. In some ventures, he saw positive results and made millions of dollars. In others, where the strategy was wrong, he lost millions. His financial portfolio fluctuated with the stock market and real estate prices going up and down.

Despite all these fluctuations, what remained constant was his lifestyle—it stayed exactly the same. But what Steve told me made a real difference during those 3 or 4 years was the money he spent on himself. For instance, he bought a luxury car, which he still enjoys driving regularly. That purchase made a tangible difference in his life.

Now, let's extend this scenario over 20 years instead of just 3 or 4. Over that time, Steve would continue to explore new projects, succeed in some and fail in others. He would implement various strategies, expand his business, and face challenges such as market downturns, employee turnover, and client complaints. All these ups and downs would happen over the span of 20 or 30 years. But, as we project these experiences forward, we see that the only things that consistently make a difference in his quality of life are the investments in his personal enjoyment and well-being.

The lesson here is that while financial prudence and saving are important, the real value of money lies in how it improves your life. Accumulating wealth for the sake of it, especially when your basic needs and future are secure, might not bring the satisfaction you expect. It's crucial to find a balance between saving for the future and enjoying the present.

What would have truly made a difference in Steve's life is the amount of money he spent on himself and the time he spent with his family. At the end of the day, that’s what counts. If he reaches 60 or 70 years old with a huge bank balance, it’s of little utility if the decades leading up to that were filled with stress, misery, and stringent spending. What good is having $20 million when you retire if, from age 45 to 65, you were constantly in a mindset of saving every dollar and not enjoying life?

On average, people spend less than 5% of the money they generate on themselves. The rest is spent on others—family members, obligations, and so forth. The real goal should be to spend more on yourself because, at the end of the day, that is your true savings. The irony is that the biggest saving is actually the money you don’t save. Let’s delve into this further. If you are a professional, saving often means putting in more time at work, which equates to more income and more savings. But this also means you are spending less time on other activities that bring you joy, such as spending time with family, traveling, or pursuing hobbies.

It’s a trade-off. Similarly, if you’re an entrepreneur running a business, that’s no easy task either. Even if you hire people to manage the business, the ultimate responsibility—and the stress that comes with it—still falls on you. You are making the decisions, and with that comes stress and other related issues. It’s not a one-sided deal where you make money without giving something in return. You are giving your time, your attention, and accumulating stress and anxiety in return for that money.

Even if you have investments generating passive income, in most cases, you worked for that money at some point. It’s rare to inherit wealth; most people have to earn it. And earning it takes time away from your personal pursuits. There’s an opportunity cost for that money, and now that money is making money for you. But the truth remains: nothing in this world is free. We have to earn it, one way or another, by giving our time, attention, and resources to make it grow.

In conclusion, what I want to emphasize is the importance of carefully evaluating the trade-off between accumulating wealth and how you spend your time and energy. If you've already achieved financial freedom, why continue to pursue wealth at the cost of other valuable aspects of life? Shouldn't you consider only pulling from the system enough to meet your needs and set aside a bit for savings or retirement, rather than accumulating far more than you require?

Ultimately, if you accumulate excessive wealth beyond your lifetime spending capacity, that money will either fund philanthropic endeavors or be passed on to your heirs. But if your goal is to leave your children with excess money, consider the trade-off: is it worth depriving them of the quality time, love, and attention they need? Which will they value more—your money or the love and attention you gave them as they were growing up?

My humble opinion is that as parents, our responsibility is to guide our children, provide them with a nurturing environment, and give them the best education we can afford. Then, let them thrive on their own, making their own financial decisions and building their own financial networks.

During this process, it's crucial to give them unconditional love, undivided attention, and plenty of time. You achieve this balance by spending wisely—not just saving. The best way to save is, ironically, by spending in a way that enriches your life and the lives of those you love. I hope this concept resonates with you. It's a straightforward idea, and I'm confident that some people will find it useful. Good luck to everyone in figuring out your own saving plan.