If someone were to ask you what the most important item in your budget is, what would your answer be?
Here are a few options:
- Mortgage or rent?
- Car payments?
- Commuting costs?
Did you ever see Ridley Scott’s The Martian, which came out in 2015? The movie grossed over $600 million worldwide and was nominated for 7 Oscars. (Spoiler alert) Matt Damon plays the part of astronaut Mark Watney who is stranded on Mars and presumed dead from an unexpected sandstorm that sent the rest of the crew escaping to safety in their orbiting ship. Alone on the planet, Watney needs to find some way to survive on the remaining food supply until the next planned mission to Mars, which isn’t for another four years. He counts out the limited food rations and realizes that this food—even if divided into extremely meager portions—will not last long enough for him to be rescued. Desperate to survive, he tries to “grow” potatoes on the red planet, even without sun, water, or proper soil. (If you want to know how it ends, check it out on a money-saving Netflix-and-Chill night.)
So is “food” the most important line item in the budget? (Eric says yes, but he also has gained a few lb from launching this site.) No, that’s not the answer. But here’s a hint: The food supply that Watney had was a limited and fixed amount. He could ration it to stretch it out, and he could use a portion of it to try to grow more food, but he needed to make it last for the duration of his time on Mars.
Now back to Earth for a moment (Eric’s note: Ummm…without getting all metaphysical, I’m sure our ONLY moments have been here on Earth.) Suppose a 30-year-old with an annual salary of $40,000/year stays at the same company until age 65 and receives a 2% raise every year. The total amount earned over that time span (35 years) would be just under $2 million ($20 short of $2 million). That money (after tax of course), plus any growth from investing, doesn’t just have to cover all expenses from age 30 to age 65. It has to last from age 30 until the person’s final days on Earth, which could be well into the 90s or beyond.
The money you earn during the time you are able to work has to cover not only all your current expenses but also all your future expenses after you retire. It is in the second half of that sentence that many people come up dry.
When you are in the workforce and earning money, it’s easy to get caught up in the earning and spending game, mindlessly spending everything you take in every year (even if you earn more than you truly need). In your 20s or 30s, you may think retirement is so far off into the future that you can deal with it some other time. Or you might think that this is the age to enjoy yourself and try new experiences, and you need money to do that. In your 40s or 50s, you might find that your expenses are growing faster than your salary, making it even harder to save money. You can find an excuse at any age. But the fact of the matter is that the money you earn over the span of your working life needs to support you throughout your entire life, not just your working life. When you stop working and there’s no new money coming in the door (other than Social Security) (Eric: which millennials are told will not be there for them…queue the populist uprising), you’ll wish you had started rationing and growing those potatoes (à la Mark Watney) sooner than you actually did.
Your assets in retirement are like Mark Watney’s food supply: a fixed amount that needs to last a long time. But unlike Watney, you know about this in advance and can prepare for it now by saving the resources that you’ll need later on.
So what is the most important part of your budget?
- Paying yourself first.
- Saving for your future.
- Saving for the time when your resources are fixed, but your expenses are not.
- Saving for the time when you might be forced out by a mandatory retirement policy or when you might not want to work anymore.
- Saving to make sure your money outlives you, and not the other way around.
So be like Mark Watney: Count your potatoes. Don’t eat them all in one sitting. Use some of them to grow more potatoes. Don’t consume more than you need. Budget them out so that they last for all your days on this Earth.