When it comes to financial planning, it seems many people look at it as a black and white issue. Either you save your money today for a better future and suffer now, or you save nothing and live a great life now. The catch though is when you are older, you won’t have any money to retire on. I am here to tell you that the issue isn’t so black and white. In fact, it is gray. You can save for your future while still enjoying live to the fullest today. How do you go about this? Read on to find out.
Living And Saving
In order to live for today and also save for tomorrow, you are going to have to put some thought into things. Don’t worry, this exercise isn’t difficult at all. In fact, it is pretty easy. All you need to do is to take some time to figure out what is important to you now. Be sure to write everything down on a list.
Next, you need to think about what you want your future to look like. I’ll get into more specifics below, but for now, write down what this looks like for you. The best strategy is to divide a piece of paper in half and write your answers to each question on separate sides.
So let’s talk about the details for a minute. What is important to you today? Getting out of debt? Buying a house? Traveling? Whatever your answer is, when you create a budget, make sure you account for these things in it.
The catch is to not overly consume yourself with these things however. For example, when I was in debt, my #1 goal was to get out as fast as possible. So I took my budget and added up all of my essential spending. Of the amount that was left, I took $25 for “fun money” to last me for the month and the rest went towards my debt.
This worked great for a month. Then I rebelled. I hated not having any money to do things with my friends. After all, $25 isn’t getting you very far in a night, let alone an entire month! So I readjusted things. I allowed myself to have some more fun money while still paying off my debt.
When it comes to your future goals, know 2 important things:
- You need to be specific
- Your plans can change
Let’s talk about these both. Most people don’t save for retirement because retirement is too vague of a concept. Sure not working sounds like fun, but unless I really, really hate my job, I’m not going to be motivated enough to save a lot of money for something 30 years down the road.
When you get specific though, this changes. No longer are you saving to not work, you are saving to travel or work on a hobby you love. The more specific you get, the more motivated you will become.
As for your plans, they aren’t set in stone. If you want to travel the world when you retire but in 5 years realize you would rather just play golf, this is fine. Don’t stick yourself into a corner. Modify your plans as you go.
Saving For Today and Tomorrow
Now that you have your list complete, you can divide up your money to fund both. There is no set amount you need to save for either. Ideally though you want to take around 15% of your money and put it towards your retirement. If you can do this, you can rest assured that you will be able to afford retirement.
The catch to remember is that the 15% I am talking about above is your total income, not what is left over after all bills and other expenses are paid. If you earn $1,000 a month, 15% of that is $150. If on the other hand after all bills are paid you are left with $300, 15% of this amount is just $45. That’s a big difference.
As you can see, living for today or saving for the future isn’t an either-or situation. You can easily do both, especially once you take the time to figure out what is important to you. If you skip this step, odds are you won’t save for your future and you will spend most of your money today on things that aren’t really that important to you.
Take the time to figure out what matters to you and enjoy your life, today and tomorrow.