Living Now, Saving for Later
Finding your balance
Part 5 | Reading Time: 5 minutes
Welcome back! As most of you probably know, it can be a balancing act when deciding whether to spend or save your hard-earned money. Well, never fear! I’m here to help! Let’s dive into this topic and explore where to start and whether saving, spending or a combination of the two fits your goals and lifestyle.
Yep, start with a budget
When starting, it’s essential to have a budget in place. Knowing how much money you have coming in every month and how much you need for your basic expenses will give you a clear picture of what you can spend or save. Creating a budget doesn’t always have to be intimidating – even starting by tracking how much money you make and your expenses for a month or two will help you understand where your money is going. It gives you a good idea of how much money you have left over after each month.
If you don’t have any money left over that’s okay! A lot of us have been there or are there right now, and it’s totally normal. This gives you an opportunity to reevaluate your current expenses and what you are currently prioritizing. After you’ve reevaluated your current spending habits, if you have any extra, you can then decide what you want to do with that money.
Saving is important if financial security and your future goals are priorities for you. Start easy by setting one specific savings target you may have. This may be for an emergency fund, a down payment on a house, or a specific retirement goal. Having a goal in mind will motivate you to keep it consistently. Grab some mirror paint and write it on your bathroom mirror. Even if manifestation isn’t really your thing, having a constant reminder will keep your goals at the top of your mind. There are also ways to make this easier on yourself, like automating your savings by setting up automatic transfers to a separate savings account. This way, you won’t need to do it manually. Just make sure any auto-draft bills are taken care of before you transfer anything to savings.
Saving example:
Just starting small, years down the line, can lead to something much bigger than anticipated. Let’s say you can put $100 into a high-yield savings account per month (4% interest on average).1 While this may not seem like a ton of money, by 2030 this will leave you with $9,478 saved, although inflation will make it feel like a bit less (see example from the 3Nickels app). This demonstrates that you don’t need to put everything into savings. Just a tiny positive habit of saving $100 a month can set you up for the future that you want with small preparation.
Regarding spending, it’s okay to treat yourself occasionally and enjoy the fruits of your labor. Everyone deserves to relax and spend money how they want. However, it’s essential to be mindful of your spending habits and prioritize your needs over wants. When making a purchase, ask yourself, “Does it align with my priorities?” Avoid impulsive purchases; instead, take a step back and consider if this purchase is worth it to you. The occasional impulse buy is bound to happen, but if you start making the habit of considering the impact of your “want” purchases, your impulse buys will become minimal.
Spending example:
For even a budget-friendly short trip to Italy, you are looking at around $1,644 for two people.2 This includes travel, food, housing, and excursions you may want to do while there. While this may seem like a lot, it will vary from person to person; whether this is worth it depends on whether the memories you create going on vacation to Italy will be more valuable to you than adding more to that high-yield savings account.
One more thing to consider is balancing short-term enjoyment and long-term financial well-being. Fewer than 1 in 3 adults in the U.S. say they are completely financially secure.3 Enjoying the present and treating yourself for your hard work is okay, but it also can’t hurt to plan. This means finding ways to enjoy life without sacrificing your long-term goals. Look for cost-effective alternatives or creative ways to have fun and indulge in experiences without breaking the bank. This could be an at-home movie night, hike, game night, picnic, or many more options that can apply to your specific interests. Remember, it’s not about ultimately depriving yourself of enjoyment but making intentional choices that align with your financial picture. It is more than just sticking to one path. For another example, if you want to go on vacation but still want to add to your emergency fund or savings fund, try removing some unnecessary items from your weekly expenses, and instead add to your savings funds. Be mindful of your financial goals, always keep track of your spending, and make conscious decisions that align with your priorities in life.
Be easy on yourself
Lastly, be easy on yourself if you make the occasional financial slip-up. We all have those moments. The key is learning from them, adjusting your habits if necessary, and moving forward. So, my friend, take a moment to reflect on your financial goals, consider your current needs, and make choices that bring you both joy and stability in the future. You’ve got this!
Resources
1 Burnette, Margarette. “Best High-Yield Savings Accounts of July 2023.” NerdWallet, www.nerdwallet.com/best/banking/high-yield-online-savings-accounts. Accessed 25 July 2023.
2 “Cost of a Trip to Italy & the Cheapest Time to Visit Italy.” Champion Traveler, championtraveler.com/price/cost-of-a-trip-to-italy/. Accessed 25 July 2023.
3 Foster, Sarah. “Survey: Average American Feels They Need $233k a Year to Be Comfortable.” Bankrate, www.bankrate.com/personal-finance/financial-freedom-survey/. Accessed 25 July 2023.
2 “Cost of a Trip to Italy & the Cheapest Time to Visit Italy.” Champion Traveler, championtraveler.com/price/cost-of-a-trip-to-italy/. Accessed 25 July 2023.
3 Foster, Sarah. “Survey: Average American Feels They Need $233k a Year to Be Comfortable.” Bankrate, www.bankrate.com/personal-finance/financial-freedom-survey/. Accessed 25 July 2023.
