You’d probably love to save more money. Which part of your finances would that break, though?
In the 5th Century BC, the Greek playwright Sophocles cautioned that “nothing succeeds without toil.” Then in 1734, Benjamin Franklin wrote, “There are no gains, without pains…”
So, in the 21st Century AD, Fidelity Investments announced that Americans, by the age of 35, should have 2x their annual salary in savings.
If you’ve heard that advice, you likely felt the pain immediately.
How much suffering should financial stability require from you?
As an alternative to acute pain, what if you plan to work an extra 6-12 months before you retire? Now, you may not want to choose that path. But the math at least gives you the option: that extra time at work is equal to saving 1% more of your salary over 30 years.
Sophocles and Franklin may have introduced us to “no pain, no gain.” But Jane Fonda converted us.
In the 1980s, her exercise videos suggested that “if a little bit of exercise is good for me, then more should be better. …She “urged viewers to ‘feel the burn’ and exercise beyond the point of reasonable physical stress.”
More than three decades later, writes Morgan Housel, “the intuition of (modern) amateur athletes is to push as hard as they can, testing the limits of their potential, maximizing what they’re capable of, grind until you’re broken, no pain no gain.”
And Fidelity shows how this mindset has influenced our personal finances. On a webpage entitled, “Save More,” Fidelity says:
“Go for it. Challenge yourself to save a little more. Whether it’s a 1%, 3%, or even 5% increase, the extra money saved today could make a big difference in helping achieve the retirement you envision. Think about it this way: Do you want to be worrying about money in retirement?”
So we go for it. Because “no pain, no gain” seems to summarize what money management means for most people.
As with exercise, though, we’re often not sure what an effective approach to saving money even looks like. But the training habits of elite athletes may offer a guide. Housel explains:
“A group of researchers recently looked at the training schedule of a dozen Olympic-level cross-country skiers, who are some of the most insane athletes you’ll ever witness.
Over a year the athletes trained an average of 861 hours – a couple hours a day. Each hour was broken up into three buckets: High intensity (>87% of max heart rate, huffing and puffing), medium intensity (82%-87% max heart rate, heavy breathing), and low intensity (60%-82% max heart rate, you can probably carry on a conversation).
After a year, the training schedule broke out like this:
88.7% of training hours were light intensity;
6.4% were medium intensity;
4.8% were high intensity.”
Academic research has found similar splits among professional runners, cyclists, rowers, and swimmers.
And that training data yields a lesson that can apply to many aspects of our lives. Exercise physiologist Stephen Seiler notes:
“[Professional endurance athletes] go for a long time at a low intensity where they can recover, and repeat it day after day. And that’s what really brings success. For the highest levels to be attainable over time, the training process has to be sustainable. At higher levels of intensity, chronic levels of stress lead to burnout and stagnation.”
Our financial decisions have to be sustainable, too.
When you’re 30 years away from retirement, increasing your savings rate from 15% to 16% will enable you to retire almost a year sooner (Nick Maggiulli shares the math here). An exciting thought, right?
But that extra push may put your monthly cash flow management at risk. And at that point, your savings rate is no longer sustainable.
You’re better off waiting for a clear savings opportunity to arise. Or, give yourself a little grace. If you’re willing to work an extra 11 months before you retire, you don’t need to worry about pushing your savings rate further than you can handle at the moment.
Author and financial advisor Ben Carlson argues that neither saving nor spending money should feel tooeasy. But light-intensity exercise isn’t exactly easy, either. You can, however, sustain that pace for a long time.
And you may actually maximize your lifetime savings by aiming for “good enough.” Then stick with that solid pace until the day you stop earning income.
When you push your savings rate to the limit, you may feel, briefly, like you’ve won the financial game.
But as Morgan Housel points out, over time, you’ll be lapped by the person who “casually jogs each day way below their potential, who can sustain their training and build a body that can adapt and recover for the next day.”
You’d probably love to save more money. You also may love the thought of exercising more often. Progress in these areas likely won’t come through pain.
The gains come from lasting long enough to complete the race.
Hi, I’m Kevin. I’m a financial advisor in Washington, DC. I’m also the founder of Illumint, an independent financial planning company in the District that specializes in financial planning for Millennials like you. I empower our generation with the confidence to invest an inheritance, financial gift, or extra savings. If you’re new to Financially Well, welcome – you now have access to the leading finance podcast for Millennials. I encourage you to read, watch, or listen to the ideas I’ve shared about making your money work for you. And then when you’re ready, please send me your thoughts & questions!
