Why do you save

[Anne]

I never needed a reason.

Bought everything I wanted and saved/invested the rest. I didn’t think about what it was for. Who knows, life can bring on many surprises—it’s for the choose your own adventure book that is life. When I start getting too excessive with my spending I start to feel wasteful. I don’t like that feeling. That feeling has probably guided my saving/spending habits more than anything else.

[spiritrider]

So as high earners why do you save? Esp as most of us will likely never spend even 50% of what we save

Usually, I am a big fan of movie quotes, but in this case I will quote Wilkins Micawber from Charles Dicken's David Copperfield;

"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

I dispute your basic premise. I find far more retired high income professionals with less than comfortable retirements, than ones with far too much money. The biggest causes were/are; living the high life with insufficient retirement savings, gross underestimation of retirment basic living expenses, taxes, health care expenses including Medicare means testing (IRMAA) and gross over estimation of the percentage of income needs provided by SS and portfolio size at and returns during retirement. I still see far too many rosy scenarios in portfolio long-term return projections.

To paraphrase another expression; "Better to have too much money and not need it, than need more money and not have it.

[AR]

Because my ability to earn well outstrips my ability to spend and give well.

It sounds like you're just not trying. I guarantee that if you really focus and apply yourself, your ability to spend and give well can outstrip your ability to earn. You can do it!

[VagabondMD]

I save for a rainy day…in Paris.

[White.Beard.Doc]

I just like to work, and build, and be productive. It seems to be inherent to my DNA.

[Hatton]

Paranoia.

[CM]

I still see far too many rosy scenarios in portfolio long-term return projections.

Because my long-term return projections are decidedly not rosy.

[StateOfMyHead]

Because my long-term return projections are decidedly not rosy.

This surprises me. Would you mind elaborating?

[Panscan]

So as high earners why do you save ?

Esp as most of us will likely never spend even 50% of what we save

? Not true. What's the point of not spending it. Will def donate whatever is left at end of life. Hate the idea of generational wealth.

[CM]

This surprises me. Would you mind elaborating?

I've written about prospective returns many times on this site. CliffsNotes:

Equity returns are comprised of dividends, growth (i.e., earnings or cash flows), and the change in valuation over the investment horizon of interest.

The recent prospective S&P 500 dividend yield is 1.31%. Historical real earnings growth has been something like 1.25%/year (Siegel, Stocks for the Long Run), 1.55% (Shiller's online spreadsheet when I did the calculation some years ago), or perhaps even 2ish%/year (read that somewhere but forget the source). If the past is prologue then the intrinsic real return might be as much as 2.3% or so (i.e., dividends plus growth).

The change in valuation has been called the speculative return by some, including the late John Bogle. The current PE is about 39.72, i.e., 99th percentile historically. https://www.multpl.com/shiller-pe Note that it was about 6.6 around 1982. That rise in valuation, or speculative return, accounts for a large percentage of returns over the last 40 years. I think the valuation is much more likely to be lower in the future than higher, probably very much lower. The valuation would have to fall by more than 50% to reach the historical average, but secular bear market nadirs are often (usually) far below the mean.

10-year TIPS paid 4-4.5% real at the last bubble peak in 2000, but the entire bond curve provides negative real returns now. https://www.treasury.gov/resource-ce...data=realyield In other words, there is no historical precedent for the current combination of high stock and bond valuations.

If we had 150 years of data conditional on current valuations, the historical safe withdrawal rate (SWR) would undoubtedly be much lower, and the success rate lower for any given withdrawal rate.

[VentAlarm]

? Not true. What's the point of not spending it. Will def donate whatever is left at end of life. Hate the idea of generational wealth.

I’ve never understood the concept of hating generational wealth. If I earn something, it’s mine and I choose to do with it what I please. My kids are still young, but I suspect I will trust them to do good infinitely more than any nonprofit and especially moreso than government.

I feel like this statement typically comes from a place of not liking that others have inherited.

[VentAlarm]

I've written about prospective returns many times on this site. CliffsNotes:

Equity returns are comprised of dividends, growth (i.e., earnings or cash flows), and the change in valuation over the investment horizon of interest.

The recent prospective S&P 500 dividend yield is 1.31%. Historical real earnings growth has been something like 1.25%/year (Siegel, Stocks for the Long Run), 1.55% (Shiller's online spreadsheet when I did the calculation some years ago), or perhaps even 2ish%/year (read that somewhere but forget the source). If the past is prologue then the intrinsic real return might be as much as 2.3% or so (i.e., dividends plus growth).

The change in valuation has been called the speculative return by some, including the late John Bogle. The current PE is about 39.72, i.e., 99th percentile historically. https://www.multpl.com/shiller-pe Note that it was about 6.6 around 1982. That rise in valuation, or speculative return, accounts for a large percentage of returns over the last 40 years. I think the valuation is much more likely to be lower in the future than higher, probably very much lower. The valuation would have to fall by more than 50% to reach the historical average, but secular bear market nadirs are often (usually) far below the mean.

10-year TIPS paid 4-4.5% real at the last bubble peak in 2000, but the entire bond curve provides negative real returns now. https://www.treasury.gov/resource-ce...data=realyield In other words, there is no historical precedent for the current combination of high stock and bond valuations.

If we had 150 years of data conditional on current valuations, the historical safe withdrawal rate (SWR) would undoubtedly be much lower, and the success rate lower for any given withdrawal rate.

I understand your argument, but the speculative component may go up not down given the growing availability of individuals to participate in the stock market, further driving up PE. Also, I sometimes think this logic is similar to when people in the past said everything that could be invented already has been - we are standing on the shoulders of giants and I expect (and hope for) good returns.

[Panscan]

I’ve never understood the concept of hating generational wealth. If I earn something, it’s mine and I choose to do with it what I please. My kids are still young, but I suspect I will trust them to do good infinitely more than any nonprofit and especially moreso than government.

I feel like this statement typically comes from a place of not liking that others have inherited.

You do you, I'll do me. I meant hate as in for me personally. Others are free to do as they wish with their cash.

I don't think paying for everything for your kid's life is generally good for them, you may disagree.

I suspect there are many causes in the world far more noble than handing the cash to a doctors kid who is likely raised in a wealthy suburban upbringing. There are millions of people starving in the world that could be tangibly affected by that money you spend on buying the kids house. Or people who never have access to education, such as the basic ability to read and write. Obviously this can continue to absurdity but I just find this concept of " I trust my kids to do more good than any nonprofit or government," to be quite silly. There are real organizations that you can donate money to that will significantly improve/save lives.

[childay]

Nice thread. I think it has shifted somewhat. Early on in career more of a familial learned behavior along with massive student loans which we set out to destroy. Now it's more just habit/autopilot. I can't imagine trying to spend all this income. At least not with two doctors working full time with small kids. I had to jump-start my 10yo 2 seater today though I did enjoy driving it briefly.. If I had more free time to travel etc then might be a different story on the spending. We live in VLCOL. So aside from building some crazy mansion not too much to spend on. Hopefully not an RV..

[Dewangski1]

This covers some of it: https://youtu.be/mQPjKSVe1tQ

But basically, life is easier with money.