Clients with financial means often fall somewhere on the spectrum between saving everything for the future and enjoying life as if there is no future. However, when it comes to planning for retirement, it is important to strike a balance between enjoying life today and saving and investing for tomorrow. Following are six tips to help you find a balance between enjoying your wealth in the moment and planning for retirement.
#1 – Understand your spending habits.
Gaining an understanding of how you currently spend money is the first step toward enjoying your wealth today without sacrificing your future. Start with a full review of your spending over the last few months. Where does your money go? Are there any surprise or unnecessary expenses? How can you improve your spending habits to free up more cash flow for both spending and saving?
Once you have an idea of how you currently spend, it is easier to identify opportunities to increase your savings and spend in a more purposeful manner.
#2 – Articulate your financial priorities.
Take time to identify and articulate your financial priorities, both in the moment and in the future. Keep these priorities in mind as you make financial decisions. For example, is driving an expensive car important to you? If so, is it more important than going on vacation with your family or retiring when you are 55? If buying that car ranks at the top of your priority list, by all means, go for it! However, if buying a luxury car gets in the way of more important priorities, consider driving a less expensive vehicle instead so that you can save for, or spend on, more important purchases.
It may be helpful to keep a list of short-term and long-term goals. Short-term goals are the things you want to enjoy along the way as you plan for the future — hobbies, vacations, dinners out, time with friends and family, your home, your car, charitable giving, etc.
Long-term goals are those you wish to accomplish in retirement or at another point in the future — purchasing a second home, traveling the world, joining a country club, giving gifts to family members, paying for a grandchild’s college education, leaving a financial legacy, etc.
Focusing on your financial priorities can help you be more deliberate in how you spend and save your money. In turn, you can free up more resources to live how you want in the moment while also planning for your future goals.
#3 – Eliminate excess expenses that do not bring you joy.
Before making a purchase, ask yourself, “Will this bring me joy?” Similar to prioritizing your spending, this simple question can help you avoid unnecessary expenses. Of course, not every expenditure will bring you joy (you will still need to pay your taxes!), but focusing your discretionary spending on things that make you happy can go a long way toward allowing you to enjoy life, both today and in the future.
#4 – Focus on experiences.
Life is all about experiences. Years from now as you look back on your life, you will probably never say, “I wish I had not taken my family on that vacation,” or, “Why did I take time off work to attend my son’s baseball games?” Experiences with your loved ones add a richness and joy to life that cannot be duplicated by any material purchase or a growing account balance. Yes, compounding interest is important, but deliberate spending in order to live life in the moment is so much more important.
You will never regret special moments with your loved ones, especially when your kids are young and when you and your spouse are healthy and active. Spend the money to make the memories. You will be glad you did.
#5 – Automate your savings.
Take the guess work out of saving for retirement by designating an amount from each paycheck to be directly routed to your retirement and/or savings account. This can be a great strategy for both under- and over-savers. It allows under-savers to avoid the temptation to spend more than they intend, and it gives over-savers the freedom to spend guilt-free, knowing they have already covered their savings.
#6 – Give yourself flexibility.
Some of the best life experiences arise unexpectedly, which is why it is important to set some money aside in an account purely for spontaneous expenses. Use this account to make fun purchases (such as concert tickets, a last-minute weekend getaway or that new pair of boots you have been eyeing) as opportunities present themselves. Having designated funds for fun expenses is a great way to enjoy all that life has to offer without sacrificing your future.
If you are looking for an advisor to help you establish saving and spending targets, we would love to have a conversation. To learn more about how United Capital Financial Advisors can help you plan for the future, please contact us.
