Negative Savings ?!?
Probably being daft but I'm having a hard time getting my brain around the results of my Main Report. It recommends that we consume twice as much, which is good news and indicates we're living well within our means. It also suggests negative savings for the next several years and I understand that to mean ESP is suggesting we can afford to spend down some of our existing assets.
What I want to verify is that the software is suggesting that we could spend more to raise our current standard of living if we had the desire/need to do so (i.e., consumption smoothing, the whole point of the software). In other words, if we're perfectly comfortable with our current standard of living and don't dip into savings to consume more (as recommended), is ESP then just suggesting a greater likelihood that we will die with excess cash?
I must be turning into my father...it just feels heretical to even think about using savings...
Thanks!
James
RSS
ESPlanner is, indeed, recommending that you dis-save (spend some of your savings) in order to meet the standard of living calculated in the reports. All things being equal, if you don't spend it (and never touch these un-spent assets) they, plus interest, would wind up in your estate, unspent. If you're comfortable with the way you're now living, then you clearly don't need to spend anything extra just to do what a "dumb computer" tells you to. The good news is that if anything unexpected happens (or if you get a wild urge to do something expensive) you'll have some extra cash on hand to help out with the expenses. If worse comes to worse and you croak next year, your heirs will get a little extra money.
So it all works out. As long as you're "below" the smoothed consumption level you don't do anything with which you're uncomfortable. If you're above it, that's a different story. You would need to cut spending as quickly as possible.
Best,
Dick Munroe