Doctors tell us in order to stay healthy we need to eat a “balanced” diet. Families struggle to find the right “balance” between work and home life. Coaches need the right “balance” between offense and defense.
And financial planners tell their clients they need to strike the right “balance” between living for today and saving for tomorrow.
This may sound simple, but it’s not always so easy to achieve. The day-to-day grind of everyday life can be overwhelming and we can easily lose sight of the big picture. How much of a mortgage can I afford? Can I buy that expensive car? Should I take a vacation? Should I pay for my child’s education?
These are all questions that many of us find ourselves asking today. As we get older, we start to ask additional questions like: Am I saving enough for retirement? Should I be putting more into my 401K? What age can I afford to retire? Am I going to outlive my money?
All these are excellent questions and they are all about striking the right balance between spending now and saving for the future. We’ve all heard about people who suffered tragedies, such as premature death or a disability at a young age. These stories make you wonder about living life to the fullest and enjoying life NOW. Sometimes it makes you forget about the future and causes you to live in the moment. So why not buy that expensive car, or take that dream vacation? That tragic story, after all, could have easily been about me, and all that hard work and money would be for nothing.
But what if the worst case scenario doesn’t happen to you? Suddenly you’re approaching retirement and realize your 401K is more like a 101K. You don’t have enough money to retire. You now regret having bought that big house instead of saving more, because now you feel like you’re going to be working for the rest of your life!
The answer comes down to not one or the other, but finding the right balance between living for today and saving for tomorrow. How do you find it? A good start is putting together a realistic budget (using at least a 10% savings rate for retirement). Once the budget is completed, you can evaluate each expense item and ask “is this something I truly need?” It’s okay to have a few extras, as you need to enjoy life along the way. Just don’t overdo it, or you’ll pay the price down the road.
Take the case of one client. Bill is 58 and Donna is 56. Their plan is for Bill to retire at 63, sell the house and move to a more affordable home in North Carolina. They want a retirement that will allow them to travel regularly, frequently visit children and grandchildren, and not worry about every dollar they spend. When they recently called about whether they should pay for their daughter’s medical school education, which will cost approximately $250,000, I told them they needed to make a choice: they could continue to follow their plan and have their daughter take out a large part of the tuition in student loans, or pay it and extend Bill’s retirement date several years.
It often comes down to such choices. You can spend money, but don’t lose sight of your plan. Sometimes life can be too short, so make sure you don’t stop living life in the NOW. At the same time, keep an “eye” out for the future because if you have too much NOW, there may not be enough for tomorrow!