Money as a Non-renewable Resource

This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35.  Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.

Last week, I tried to understand why some people spend everything. I think they see money as a renewable resource, something that they’ll always have more of (assuming they continue to work). That’s not how I see money, however. I tend to view my money as a non-renewable resource. When I was young, my parents gave me money and were careful to show me that I could either spend it, in which case it would be gone, or I could save it. I learned early that I couldn’t have my cake and eat it, too.

As in classical economics, I see my time and money as limited resources. I cannot ever get back time that has already been spent. Likewise, after exchanging time (and effort) for money, I can never get back the money that has already been spent. If I were to never spend any of the money that I earn, I would still have it all, piling up like Scrooge McDuck. On the other hand, if I spend all my money, I won’t have anything left in the case that I want to buy something special. I really see life as a series of tradeoffs. This attitude causes me to save a large portion of the money I earn.

Because money is produced in exchange for my work, I have trouble viewing my source of money as unending. I know that I won’t live forever; I know that I won’t work forever; I know that I won’t always be healthy. Because of the limits on my ability to earn income, I prefer to save my money for future use. This pool of savings moves me toward the day when I won’t have to depend on my work to produce income. It also offsets the risk of me not being able to work, due to illness or injury. In this way, I address many of the risks inherent in my and my family’s dependence on my ability to work.

Since the supply of money I have to work for is limited, I prioritize how the money will be used. I see life as risky, so the first goal is financial independence or not having to rely on others (or myself) to be able to maintain my lifestyle. My next priorities align with my values: I eat healthily and I do fun things with my kids. When a spending decision comes up, my wife and I tend to view it in relation to our goals. Sure, we could buy a new car or go on an expensive vacation or buy an iPad, but that would delay our goal of financial independence, and it wouldn’t really make us and our kids any happier. On the other hand, horseback riding lessons is something that’s not cheap, but that us and our kids are happy to spend time at together.

When the inflow of money is limited, it affects the way we relate to money. Since it’s a resource that is limited, we apply it only to our highest priority goals. We are careful with how we spend it, and we stockpile as much as we can for the future, when we won’t earn any more. We also save some for interruptions in my earning ability. Some people wonder how those with a goal of early retirement can save so much. I think the answer is that we are more worried than average about the limit to our ability to earn income.

Do you tend to relate to your money as a renewable or a non-renewable resource? If you save, what are you saving for: a goal, or a feeling (eg. security)?

6 thoughts on “Money as a Non-renewable Resource”

  1. Money is definitely non-renewable. You earn some because of what you did, and yes, as life goes by, the less you can do… On the other hand, some expenses are worth losing some (or a lot) of it. I like savings, but my major goal is not putting it all aside. It is more enjoying the most I can now AND doing it in a responsible way so I can also benefit from it later. As almost everything else in life, balance is the key for me.

  2. Right on! I looked at life the same way. It has been great being retired and I have been retired since 1983. Balance is the key but don’t forget most people are not sick and do not collapse in a heap at 68. Mind you driving the wife around during Christmas shopping can bring on the great tiredness. Still keep in mind your old much longer than you are young so keep on heading towards your goal. Life really is better living on unearned income.

  3. @David Snelgrove,
    Of course, we get old much longer than we are young! This is why another of my goal is trying to stay in shape as long as I can. And yes, that also brings the need to have enough savings. As you well said, this is why unearned income is the greatest!

  4. I love spending money – wish I didn’t, but that’s the way I’ve always been. So I pay myself first to make sure some gets saved – I save 40% of my income, pay my expenses, then have a blast spending the rest. Could I save more and retire earlier? Yes, but then the journey would be less fun for me.

  5. Great perspectives, everyone. Tara, thanks for sharing how you deal with your preference for spending. Since you’re saving 40% of your income, I don’t think you have good reason to feel no guilt spending the rest.

  6. Money is non-renewable. When it’s gone, it’s gone. And, now that you ask, my goal of saving x amount to acquire a net worth is tangible, but the results – the “feeling” of security – is intangible, but it’s what I want!

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