Why Big Earners Need to Save Too

May 16, 2018

Planning & Saving

The money was finally rolling in, and Mrs. Dina Turner was thrilled—and concerned. Her husband Shmuel’s career as a mortgage broker was booming, and he enjoyed spending their rapidly expanding income on everything first-class: vacations, luxury cars, clothes, and food. The topper was to be their purchase of an expensive lot upon which they would build a huge, beautiful home. Though the house would require a million-dollar mortgage, Shmuel was confident that his income could easily cover it. Dina, however, wasn’t so sure that their recent good fortune was sustainable.

Is Mrs. Turner’s concern justified? Do high-earning families also need to regulate their spending?

Engaging in thoughtless spending is never a good idea, regardless on one’s income. Instead, it is crucial to focus on saving and planning for the future. There are several reasons why saving money is essential; I have listed a few primary ones here.

Reason to Save #1: Booms Become Busts

While there are ruchniyus concerns with regard to unrestrained spending on luxuries, one doesn’t have to be a mashgiach to recognize its other potential pitfalls. The most obvious problem with not saving for the future is the risk of an income slowdown. All businesses experience ups and downs, and the real estate industry is especially cyclical. Come a recession, and Shmuel may wish that he had a substantial cash cushion to fall back on and a much smaller monthly mortgage payment. Boom times, which can bring forth tremendous wealth, retreat drastically every 10 years or so. While it may be hard to picture during times of plenty, the inevitable downturn leaves the unprepared in the dust. Shmuel should heed the words of Yosef Hatzaddik (and his wife’s!) and use the fat years to store up for leaner times.

Reason to Save #2: Everyone Is Looking

Another problem with living the high life is the effect this can have on children. While Shmuel views his upgraded lifestyle as an extra, his kids, who are growing up in the lap of luxury, will come to need the extravagant home, cars, and vacations. Beyond the questionable chinuch aspect, spoiling his kids can prove very expensive, even unaffordable, for Shmuel over time. As they get older, his aristocratic children may have their own ideas about how his money should be spent. When they get married, they will probably expect costly weddings and to be supported in style. And when his grandchildren come along, Shmuel’s married children are more likely to look to him to cover any shortfalls in their incomes. It’s one thing to support five kids in style; doing so for 25 (or 50 plus!) grandchildren is beyond the ability of all but the truly wealthy. While children might become spoiled in any family, the Turners’ are more likely to have unrealistic and unsustainable expectations.

Shmuel is also ignoring Yaakov Avinu’s advice not to flaunt wealth in front of strangers. Even in today’s modern society, displays of extravagance invite unwelcome attention from overeager journalists, government officials, and prosecutors who love to nitpick and find fault with those who show off their wealth. Criminals are also attracted to where the big money seems to be, and the obviously rich are forced to worry much more about security for their properties and loved ones.

In addition, by living way above the standards of his community, Shmuel’s flashy lifestyle may even bring an ayin hara on his family. Although it’s wrong, some who struggle to pay for mundane necessities can’t find it in their hearts to be happy for those who are living so well. Being sensitive to the optics of spending is smart living.

Reason to Save #3: You Need to Build Wealth

The main reason for the Turners to live below their means is so they can build up significant wealth. Instead of spending richly, Shmuel should focus on purchasing income-producing assets that will over time make him truly rich. With cash on hand, Shmuel can take advantage of excellent investment opportunities that arise from time to time. The Gemara’s advice to keep a third of assets easily available is for this reason: to have cash available for worthwhile investment opportunities (see Rashi, Bava Metzia 42a). By living comfortably instead of lavishly for several years, the Turners can eventually be earning more from their business and real estate investments than from Shmuel’s job. Attaining that level of affluence will make a huge long-term difference in their lives.

Big Hat, No Cattle

In Texas, people use the expression “big hat, no cattle” to describe someone who dresses the part of a wealthy rancher but has no cattle (the asset of choice in non-oil-producing parts of the state). By spending all their money on stuff, the Turners give up on building up their “herd of cattle.” Today, when it is so easy to borrow money, many who live in large, new homes and drive expensive cars have very little wealth or even a negative net worth. Conversely, many gevirim choose to live simply while channeling their extra funds to support good causes. Shmuel should think deeply about the wisdom and ramifications of raising the financial bar.