When Can We STOP Saving Money?

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The last few posts had me thinking – When can we stop saving money? Do you ever feel saving fatigue? I don’t really feel it at this point because most of our saving is automatic. We contribute to both our 401k plans through paycheck deduction. I’m also deducting 5% with my company’s Stock Participation Plan. Then at the end of the month, we squirrel away whatever is left into the saving account. I’m not feeling any saving fatigue because we have a pretty good lifestyle and still have some money left over at the end of the month. Frugal fatigue, maybe, but not saving fatigue yet.

The question still stands though. When can we stop saving? I’m sure everyone has a different take on this and I would love to get some opinions. Let’s put down the 10 levels (steps) of wealth as I see it. I don’t have a definite amount because even if I had a million dollars, we would still need to continue saving.

Level 0. Humungous debt due to credit card debt, student loan, home mortgage, new car, failed businesses, and general living expenses. Net worth = large negative number. Monthly saving is negative.

Level 1. Saving = 0. Income is just enough to cover expense and debt service. Net worth = negative number. No real monthly saving.

Level 2. Saving = 0. Income is enough to cover expense and to pay down debt. Net worth will approach 0 at some point. Still not enough money to save.

Level 3. Saving = positive. Income exceeds expense and debt service. Net worth will turn positive if this continues. Yay! Saving will start to build up.

Level 4. Income growth due to promotion and passive income from investment. The saving rate should start to pick up at this point as long as expense is under control. Unfortunately, I think many people already have fallen prey to lifestyle inflation by the time they get to this level.

Level 5. Passive income can cover expense and debt. Active income can all go into saving and investing.

Level 6. Passive income can cover expense. No debt. Saving will be a breeze here. Is this financial independence?

Level 7. Passive income can cover expense and inflation.

Level 8. Passive income can more than cover expense + inflation, and you have a lot of money. I think most people would call this “rich.”

Level 9. Death. So what’s the point? (This is Mrs. RB40’s sleepy & cranky contribution.)

* saving = income – (expense + debt)

*income = active income + passive income

OK! Did I miss anything? Give me a comment and I can update the post.

Where do you think you can stop saving? I think we can stop saving money when we get to level 6. If passive income can cover expense and you have no debt, then you don’t really need to save anymore. It’s time to live the good life and enjoy spending some money! You’d better watch the lifestyle creep though. Once you start spending money, you’ll get use to it and expense will grow. The passive income may not be able to cover it after that. What’s your take on this? Of course, you’ll have to take into account the fact that you can skip to level 9 on any given day…

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