Although Americans are criticized for putting work above all else, so much so that half of those in the workforce aren’t using all their vacation days, a new NerdWallet study suggests that we are prioritizing getaways — but it may be at the expense of long-term financial planning and overall satisfaction.
Around 37% of families say that vacations make them happy, so it makes sense that saving for a trip might be a priority for many Americans. However, this study found that, when surveyed individuals were asked about their 10-year financial goals, 31% said they were saving up for a vacation. Only 28% said their goals included either starting or increasing their retirement savings.
The fact that many Americans aren’t thinking of their finances in broader terms isn’t actually that surprising, considering that 71% of Americans express having financial regrets in regards to managing their money. Of those who expressed money-related regrets, 48% said they wished they had thought about money management sooner, and 39% said they have spent too much on non-essential items. Around 32% regret not having a budget in place.
There is some good news, though. Around 89% of Americans surveyed said they do have financial goals for the next decade and 88% said they’re currently taking steps to better manage their money. But some people are probably misinformed about just how important it is to start saving. Experts say that many workers believe that Social Security will be enough to live off of in retirement, even though statistics show this thought is completely misguided. Social Security is designed to replace only 40% or so of a worker’s pre-retirement income; however, most people need at least 70% of their former income to afford to live in retirement.
Although forgoing a relaxing vacation to save for retirement sounds boring, some data suggests it may actually make you happier overall. Studies conducted in the U.S., Ireland, Spain, and Norway have found that being financially secure is linked to higher levels of contentment among older people. Despite the fact that most people’s incomes will peak in midlife and decline into old age, elderly people were discovered to have high levels of financial satisfaction in these studies. Another U.S. study found that decreased debt and increased assets over time “contribute substantially to the life course pattern of financial satisfaction,” which can translate into greater life satisfaction overall.
So while saving for retirement might not be your idea of a good time, you may find that splurging on expensive trips in the here and now will cause dissatisfaction down the line. By putting away a couple of thousand dollars every year, you can conceivably afford to live in comfort in old age — that way, once you’re retired, you’ll know you really earned it.
Photo Credit: Jay Phagan