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When Can We STOP Saving Money?

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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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, the job became too stressful and Joe retired from his engineering career to become a stay-at-home dad/blogger at 38. Today, he blogs about financial independence, early retirement, investing, and living a frugal lifestyle.

Passive income is the key to early retirement. This year, Joe is increasing his investment in real estate with CrowdStreet. He can invest in projects across the U.S. and diversify his real estate portfolio. There are many interesting projects available so sign up and check them out.

Joe also highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help DIY investors analyze their portfolio and plan for retirement.

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{ 64 comments… add one }
  • dividend lover February 22, 2015, 10:05 pm

    Thing is, once you reach level 8, “rich”. You will be saving more money than you have ever saved before.

    Simple reason is you are making more that ever before.

    After you have the big house and fast car, quarterly vacation and weekly fancy restaurants. Unless you are planning to spend on ridiculous things and be wasteful with youe money.

    You end up saving a lot. Which leads to more passive income and even more savings.

  • Lanell Beckles October 5, 2012, 5:44 am

    The scale was pretty enlightening. Where did you get it? I understand frugal fatigue, but don’t you ever reward yourself every once in a while for being so good. Yes, delayed gratification is great, but a small reward lets your mind know that it’s doing good and will keep up that habit FOR the reward. What do you think?

    • retirebyforty October 5, 2012, 8:55 am

      I just made it up. 🙂
      Yes, we do reward ourselves once in a while with small splurges like eating out. We like to travel too, but usually only do it once per year. It’s all about living a lifestyle that’s sustainable so you don’t feel like you have to have big splurges. I guess kind of like having a good sustainable eating plan.

      • Lanell Beckles October 6, 2012, 4:51 am

        Great stuff then. Your scale is even better. Love original content.

  • Debt Management Plan November 14, 2011, 4:24 am

    Really very interesting post and you divide the saving in leaves which is very interesting. I thing always saving is the best option for you because you save money to make your life easy or save money for your bad time. If you have balance income (spending and earning are equal) then try to reduce your spending from your bills and other daily spending. Save money, save money and save money 🙂

    Jessey Ellen

  • Credit Card Processing August 10, 2011, 6:33 am

    That was great article on finance……..

  • Lisa @ WalletWatcher.com.au July 19, 2011, 2:51 pm

    I think a lot pf people would like to hit level 6 but most adults plan to live frugally well into their golden years for many reasons. The economic downturn has given many a “depression-era” mentality, where the fine art of saving comes down to strategy on how to simply survive. Good article – kudos to you!

  • Paula @ AffordAnything.org July 17, 2011, 8:07 pm

    Level 6 is “financial independence,” in my book. I hope to get there, but I’m stuck between 3 and 4 right now (at 3, trying to reach 4)!!

    I notice that within the levels, you’ve got passive income even while you’ve still got debts. I’d tell someone to pay all debts first, unless they have debts that they’re strategically keeping open for investment/growth reasons (like buying rental properties).

    • retirebyforty July 17, 2011, 8:35 pm

      Good luck on getting to level 4. 🙂
      Most people still have a mortgage even when they have passive income. That’s where we are right now. It would be great to have no debt at all, but it’s difficult. I guess it depends on your investment philosophy.

  • Buck Inspire July 16, 2011, 6:42 am

    Nice breakdown on the levels. Sometimes I feel like Mrs. RB40 and Level 9, haha. Great point to keep in mind, need to enjoy our savings journey as well!

  • Invest It Wisely July 15, 2011, 8:13 pm

    Level 6 doesn’t cut it for me. I would consider enough capital to be when I have enough to provide for my basic needs without working. That’s probably a rather large amount, but that just means to me that before then I’ll still need some side-income. Even then I would still save because I probably wouldn’t consume all of the growth each year.

  • Spruce Up Your Finances July 15, 2011, 6:08 pm

    I’m in level 3 right now and would love to reach level 8. Hopefully, I can get some of those passive income going. As for now, I am still dependent on work income.

  • Hunter July 15, 2011, 1:53 pm

    I’m at level 4ish, and looking forward to a long time at level 8…level 9 wait.

    I wonder how they find comparables for the Gates mansion? It is very unique I believe. Their driveway is heated, the house is 66,000 sq feet, and they named it Xanadu. Cool.

  • Jen @ Master the Art of Saving July 15, 2011, 1:44 pm

    I don’t think we’ll ever be able to stop saving money the way our income is right now. 🙁 Hopefully we’ll be able to increase it over time—but I still don’t see us ever stopping.

  • Ginger July 15, 2011, 10:49 am

    I’m at level 4, as most people commenting. I agree it is hard to get from 4 to 5 but I am only 26 so I have time to get there. I am aiming to get to get to level 5 in 10-15 years.

    • retirebyforty July 17, 2011, 4:38 pm

      It’s great to hear that you are starting early. You’ll get there in no time.

  • Niki July 15, 2011, 7:38 am

    I hope to be at a four very soon (a month, YAY!). Four to five is going to be a difficult one, but doesn’t mean I am not going to try!

  • 101 Centavos July 15, 2011, 4:09 am

    I don’t think we’ll ever stop. Even as we get older, our savings will shift into assets we can pass down to our kids.

  • John Border July 14, 2011, 9:54 pm

    Till you retire, You should be saving money. the way the economy is going you will every cent of money you have and enjoy a safe retired life.

  • Financial Samurai July 14, 2011, 9:15 pm

    I think when we’re about 53 and 28 days old, we can stop and just wing it until death!

  • Everyday Tips July 14, 2011, 7:41 pm

    I guess I can’t picture being at a point where I am not trying to save. I have watched a couple relatives have their savings totally used up for home health care, so I don’t know if I will ever feel safe enough. For me, the question is more when I can stop being as cheap perhaps. I guess I will always try to take in more than I spend, but I might try harder at some times than others if that makes any sense.

    If my nest egg gets too big, there are plenty of places that could use it, so I will never feel it is too big!

  • SB(One Cent At A Time) July 14, 2011, 7:17 pm

    A lazy guy was sitting on a couch, day and night, every day doing nothing, watching TV and reading books.

    His friend asked him why you don’t work? earn money? Lazy guy relied with a question “Why i should earn money?”

    friend said, “To enjoy Life”.
    Lazy guy smilingly said “I am enjoying my life already!”.

  • [email protected] July 14, 2011, 6:01 pm

    We are retired (in our 60s) but never got beyond level 4 until we retired. Now we live only on passive income: social security, pension, 401k, savings. We haven’t touched the 401k yet. We don’t save much anymore except for travel. We already have put money aside for our daughter’s wedding. We never had much lifestyle inflation because we paid for 4 kids undergrad educations. Now that we’re done with that we have a little extra money & feel rich!

    • retirebyforty July 17, 2011, 4:49 pm

      It’s great to hear a success story! Hope you fun traveling and enjoying life.

  • Squirrelers July 14, 2011, 3:54 pm

    Wow, Level 8 would be great. That’s the dream, right? I’m quite a ways off from that. Best to aim high and go from there. Just a middle level guy for now….

    I suspect that many people who get to Level 8 will still find ways to save, because it’s habit by that point. How else did they get to that point? I think I’d turn toward more of a giving mode by that point, but like I said that level’s a dream for now:)

  • mugwump July 14, 2011, 2:27 pm

    We are beyond level 6. Whether we are at 7 or 8 is a matter for discussion. We still put aside a hefty amount for savings. It tends to get spent on longer-term spending projects, such as travel or home improvement projects. When I get earned income, I add to my Roth or use the extra money to pay for taxes for a partial Roth transfer from my IRA.

    So you never stop saving, as such, but you put money aside for different things, and you stop obsessing so much about retirement, and you start thinking about other things. I am thinking about lowering my tax burden at age 70, for instance, and how to fund more international travel.

    • retirebyforty July 17, 2011, 4:48 pm

      That’s great to hear. That what we would love to do someday as well. We’ll put money aside for travel, but I don’t think of that as saving. You’re planning to spend that money right?
      Enjoy your travel!

  • Joe Plemon July 14, 2011, 5:54 am

    I think one should always spend less than he brings in. This being said, I also believe in setting a nest egg cap. Not doing so can turn saving into hoarding. My goal is to maintain a reasonable lifestyle, keep a decent nest egg and give away everything above my cap.

    BTW…this is a very relevant topic for my wife and me … we are currently discussing just how big that nest egg cap needs to be.

    • Max July 14, 2011, 8:22 am

      I never thought of the fact that savings can lead to hording. You are absolutely right. There should be a cap and you should use some cash to enjoy yourself and life. Otherwise whats the point right?

  • Robert @ The College Investor July 13, 2011, 8:42 pm

    I’m at level 4, but I don’t think I will ever stop savings. It is so natural. Plus, if you get to “rich”, are you really going to spend it all?

    • retirebyforty July 13, 2011, 9:25 pm

      If I get to rich, I’m sure I can find a way to spend all the passive income. I would definitely preserve the capital though. I don’t want to that to dwindle.
      My dream home cost $3 million dollars! There is no way we will get in there unless we win the lotto with a big jackpot.

  • LifeAndMyFinances July 13, 2011, 5:16 pm

    I’m not sure I’ll ever stop saving. If I die with $2 million dollars, so be it. That will be a lot of money for charities that are near and dear to my heart.

    • retirebyforty July 13, 2011, 9:23 pm

      That’s an excellent attitude. You can join Bill Gate’s millionaire club!

  • ?(´??)? July 13, 2011, 4:11 pm

    If you don’t mind living a simplistic lifestyle, you can stop saving any time. But to secure a prosperous future you can never save enough because you can always increase your expenses to match your income (^_~)

    • retirebyforty July 13, 2011, 9:22 pm

      That’s why we try so hard to be frugal and keep our lifestyle somewhat frugal.

  • Financial Success for Young Adults July 13, 2011, 2:09 pm

    Ha! I literally laughed aloud at number 9. I think you should never stop saving. Even when you are generating passive income it is still good to put that money away for your children’s rainy day.

    • retirebyforty July 13, 2011, 9:18 pm

      Hahaha, I’m glad Mrs. RB40 can make you laugh. I’ll teach the kid to stand on his own and be financially responsible. I think that’s a lot more valuable than leaving him a lot of money. I would help with the education as much as I can though.

  • Krantcents July 13, 2011, 1:56 pm

    I think you can stop saving in retirement! After a lifetime of saving can I switch off and start spending? I don’t know! I guess I will prepare for it and practice along the way. Saving is a little like a diet, too restrictive you can not stick with it,

    • retirebyforty July 13, 2011, 9:16 pm

      I don’t know either. My mom has always been frugal and she is still frugal after she quit working. It’ll be difficult to change a lifetime of habits. Having too much money is a great problem to have though. 😀

  • Jeff @ Sustainable life blog July 13, 2011, 1:42 pm

    I dont think I’d ever want to stop saving, but stage six seems like a great cutoff – and I think it sounds like FI to me as well – something i’d love to reach before 30.

  • youngandthrifty July 13, 2011, 11:49 am

    I think I’m getting some saving fatigue too. I think I would stop saving when I get consistent passive income and have money saved up for retirement.

    I think I’m getting saving frustration! You have to save for a house down payment, you save to pay off the mortgage faster, you have to save for your children (future children), etc. etc. It never stops! 🙁

    • retirebyforty July 13, 2011, 9:14 pm

      I know how you feel. We have been saving for a long time and it sometime feels like we’ll never get to enjoy the fruit of our labor. We’ll have to figure out when to say enough is enough and enjoy life a little bit. Once we get to level 9, money wouldn’t make much of a difference anyway. 😉

  • No Debt MBA July 13, 2011, 8:17 am

    I’m a level 4 right now, but I don’t know where I’d land during business school. I’ll have a positive net worth, hopefully no debt, but income will NOT exceed expenses (I wish). After graduation I’ll hopefully be a 4 again and swiftly move to 6 and 7 🙂

    I’d say you’re right that you can stop saving around 6 or 7, but I worry that if I were still bringing income in one year but not in another that my spending one year would cause lifestyle inflation that I couldn’t support the next year. Not sure how to handle that.

  • Alex | Perfecting Dad July 13, 2011, 7:32 am

    I like the different levels. I would say that rich is when you don’t need to look at prices or control your desires — you can walk into any store and say “I want that and that and that”. Hard to get rich by saving 🙂

    • retirebyforty July 13, 2011, 10:30 am

      By your definition, a devout Buddhist monk is rich too. This monk can walk into any store and say he doesn’t want any of those item and he doesn’t even have to save at all. 😀

      • Victoria February 23, 2012, 3:42 pm

        And he would be right… The richer person is not he/she who has the most, but the one who needs the least… 😉

  • LLF July 13, 2011, 7:20 am

    I think saving should be a lifestyle and not a financial fad diet. If you are at lvl7 or above, the passive income could disappear and you’ll need some back up. If you are in a habit of saving, then you don’t have to worry about diving below lvl3 too much. By saving, I don’t mean that you don’t spend money on things that you’ll enjoy, but maybe spend it at around 75% of your net income.

    • retirebyforty July 13, 2011, 10:32 am

      Hopefully, if you’re at lvl 7 or above, you’ll have enough knowledge to preserve the capital. You’ll need quit a bit of fund to generate enough passive income unless you are a trust fund baby right?

  • cashflowmantra July 13, 2011, 6:38 am

    I, too, believe that you should never stop saving. Savings implies that you are spending less than income whether earned or passive. That should always be the case. If you want to give the excess to charity, that would be a good idea.

  • Little House July 13, 2011, 6:29 am

    I like how you separated the steps into level. I’d agree that by level 6, your money is working for you. Right now I’m playing a game with my summer class called Cash Flow for Kids. To win the game, their passive income must exceed their expenses. It completely makes sense, and they are actually learning something. Now if I can only get this working for me in real life, I’d be golden. 😉

    • retirebyforty July 13, 2011, 10:28 am

      I love it that you play Cash Flow with your class. All the teachers probably need to play that game too. I know some teachers who are not very good with the whole cash flow thing.
      You’re right about real life though, it’s a lot harder when you have to do it. 😉

  • First Gen American July 13, 2011, 6:29 am

    I think we’re a solid 4 right now but with the constant temptation for lifestyle inflation. In fact that’s the plan, to move to a more expensive area some day but hopefully we can stay in level 4 long enough that we can do it without regressing back to step 3 when we make that change.

    • retirebyforty July 13, 2011, 10:26 am

      I think going from 4 to 5 is one of the most difficult step. We are at 4 now as well, but are working really hard to get to 5.

  • Moneycone July 13, 2011, 4:30 am

    I don’t think we should stop saving. Bill Gates apparently fought his home assessment (could be urban myth, but an interesting one if so!)!
    Even if not for him Gates saves for his charity!

    You can always find a good reason to save (and hundreds more to spend unfortunately!).

    • retirebyforty July 13, 2011, 10:22 am

      I bet his home assessment increase is bigger than my total property tax bill. 🙂
      What about if you know you have only a year left to live? Then isn’t it better to go ahead and enjoy your fund?

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