A question I often get is “Jared, can I live my best life today while also planning for tomorrow? There are so many things I want to do, now. But, I also realize I need to plan for the future. Is this possible?”
The quick answer is “no”. Sorry.
Simply put – you can’t have your cake and eat it too – at least, not entirely.
The fact is, there is a battle between two sides of the lifestyle spectrum, and you have to make a choice of where you want to be along that spectrum.
THE “HERMIT” VS THE “Y.O.L.O”
This is an analogy I came up with to try and articulate to people how they need to think about the pull between spending and saving.
Imagine there is a spectrum of lifestyle choices.
At one extreme, you have a person who is going full Y.O.L.O. – “You Only Live Once.” They are fully embracing the saying “Live as if there is no tomorrow” and they spend every last penny they have – going on trips to Europe, weekend parties in Las Vegas, and buying all the latest technologies and apparel they can find.
Because of this lifestyle, they save none of their money, have no investments, and aren’t moving any closer to financial freedom. Sure, they are “living it up”, but at a cost – their future is going to be incredibly difficult, financially.
At the other extreme, you have a person who is fully embracing the “hermit” mentality. They never go out, they spend as little money as possible, and are constantly worried if they are saving enough and investing for their future.
Because of this lifestyle, they don’t get to experience life, at all. They never spend time with friends, unless it is doing something that is for free. And they never indulge in any of their desires to travel, buy new stuff, and experience life.
The one thing about your spending and savings I can say with certainty – You shouldn’t be either of these people!
Neither is a prudent lifestyle, and both should be avoided.
FINDING YOUR PLACE ON THE LIFESTYLE SPECTRUM
So, if you shouldn’t choose either of the extremes, where should you try to land?
In reality, there is no definite answer to this question. It’s a personal answer that is loaded with variables like psychology, behavior tendencies, lifestyle desires, income levels, and much more.
Two people can have drastically different feelings about money, and how they spend it.
I recently met two girls at a networking event. They are both recent graduates and looking to transition into the working-world.
We had a long conversation about career goals, networking, finance, and living your best life.
One of the interesting things I took away was how upfront both of them were about how they view money.
One was noticeably uneasy about even discussing the idea of spending a lot of her hard-earned money. She made a statement at one point that if she were “receiving a $500 paycheck, she’d save all of it!”
The other girl admitted that she was the exact opposite. She said she has a problem with spending, and experiences difficulty saving money. One of her recent revelations was how much she was spending at Starbucks each month, and she stated she was no longer going to get coffee there. It just wasn’t worth it, for her.
This interaction made me immediately think of my “lifestyle spectrum” analogy. These two girls seemed like they were close to being at opposite ends from each other.
Why? That’s always a difficult question to answer. It can be rooted in childhood upbringing, experiences they’ve had, or ways they were taught to handle money.
So, how can you try to readjust and put yourself at a good spot on the spectrum?
YOU FIRST NEED TO REALIGN YOUR SPENDING
The first thing you have to do is realign your spending habits to match up with your values and morals.
The way to do this is to ask yourself what you truly care about. Do you love experiencing new cultures, and traveling is a big part of your life? Or maybe you’re a foodie and love going out to try new restaurants.
Once you figure this out, it’s all about making sure that your money is going toward those things you truly care about, and not toward other things that you don’t.
In order to do that, you need to understand where your money is going by doing a spending analysis.
[Budgeting Sucks! Instead, Do A Spending Analysis]
This will allow you to fully understand where you’ve been spending your money, and then start to shift it.
DECIDE ON A SAVINGS RATE
OK, so now you know what you truly enjoy spending your money on. The next step is to set a goal for savings and make sure you aren’t spending ALL of your money before you plan for your future.
General rule is to set 10% of your income as a goal for retirement savings.
[Should You Be Saving 10% Of Your Income For Retirement?]
But what about things that aren’t retirement?
You’ll have to think about any other goals you have, like saving for a vacation, buying a home, or planning for a future wedding.
The more goals you add, the more you have to set aside for savings. And, thus, the less you get to spend on your current lifestyle.
And this is exactly how you move up and down the lifestyle spectrum.
DON’T GET FIXATED ON ONE POINT
The main thing to remember is that there is no perfect point on the spectrum.
As I said before, you certainly don’t want to be at either end – but, that doesn’t mean that there are any optimal points I can point to for everyone.
For every goal you have in the future, you need to make sacrifices today. And for every experience you want to enjoy in the present, you’ll have to either give up on a future goal, or realize you might not obtain it until much later.
It boils down to your own mentality and what you are most comfortable with.
So, if you aren’t sure where you’d like to be, don’t worry about it. Just start moving up and down the spectrum until you find a spot your most comfortable with. You can always adjust as you move through life. In fact, you’re almost guaranteed to have to adjust.
As the saying goes, “the only constant in life is change.”