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How to Balance The Future With the Present

This article was written by in Wealth and Affluence. 6 comments.


Financial self-help gurus, professional financial advisers, and bloggers who write about personal finance as a hobby or a job all tend to agree on a few basic tenets. One of these is that saving today can generate more financial freedom in the future. Financial freedom is important because it allows you to pursue activities you’d most like to pursue, whether that involves spending or giving, without barriers related to money.

There are many variations on this theme of delayed result. Some writers and advisers propose extreme savings today to reach financial independence as fast as possible, while others propose gradual but persistent savings with the goal of being self-funded by the time retirement age arrives. Some offer advice on investments, entrepreneurship, or building real estate empires as methods of enhancing progress towards the goal of financial independence.

All advice, but especially the advice that’s presented without any knowledge of each specific reader or listener, is based on a number of assumptions. For instance, financial planners want college graduates entering the work force this year to immediately begin investing a portion of their incomes in retirement plans like 401(k) plans and Roth IRAs. This isn’t necessarily bad advice, but it’s based on the assumption that not only is any particular student going to live to retirement age, but also the assumption that the retiree will continue to live a number of years in retirement to make use of those saved funds.

Assumptions like these are based on averages, and science has shown that actuarial tables, which predict the chance of any individual dying within the next year, are useful for these predictions. As a 37-year old male, I have a 0.1807% chance of dying in the next twelve months, and I can expect to live another 41 years. In reality, I may live longer or shorter, but on average men my age will live to 78. This is based on the IRS’s actuarial table.

For the most part, that’s the best advice-givers can offer: assume that everyone’s experience will fall close to average. Generic advice will be best for most people. And even many advice recipients who don’t consider themselves “average” will end up close enough.

Whether I live another 41 years or not, money is only useful when used. When I die, I can leave any remaining wealth to descendants or to causes I believe are worthy, but until then, I want to live my life. And I want to do a better job of that than I have so far. I’m looking for a balance between my present and future that’s a little more biased towards the present than the future than it has been.

Here’s how I plan to re-evaluate my balance.

Spend more, while still maintaining financial solvency. One of the most common pieces of financial advice is to spend less than you earn. I first encountered this phrasing of the concept over a decade ago when I was learning about money management primarily by reading message boards, particularly the “Living Below Your Means” message board on The Motley Fool.

It’s hard to find fault with the concept of spending less than you earn. Some writers have even called it the only thing you need to know about managing your money. It prevents you from borrowing money from other people or businesses like high-interest credit cards, and not having to pay interest keeps more money in your pocket. Interest you pay eats away at your ability to reach the point of financial independence and delays your life-long goals further.

While I was building my business, I managed to spend less than I earn, and when the business was earning its most profits in 2011, I couldn’t even imagine spending that much. Eventually, I sold the business, and I recognize that it’s unlikely I’ll ever personally earn that much income again.

My retirement is probably safe at this point, but my income from working is the lowest it’s been in five years. It’s not a desperate situation because I saved a good portion of what I’ve earned, but it does point out how I let my lifestyle creep slightly higher when I was earning more money. I’m still spending less than I’m earning overall when I include income from investments, but the numbers are more volatile and some months, because I actually don’t see reinvested income from investments, my cash balances dwindle.

I’d like to say I’m spending that money wisely, enjoying experiences for myself that improve the quality of my life, but I’m not sure that’s always the case.

The reason I feel comfortable thinking about the present is because I’ve already taken care of my future. Even if an emergency situation exists later in my life, I should be able to manage while maintaining a good amount of my net worth. It’s time to start thinking about the present. But it’s worthwhile to remember that, regardless of your financial situation, life is only lived “today.” You have to make the most of your time because, although actuarial tables may tell you one thing about how much time you have left, you never know what your personal lifespan will be.

This is not an excuse to be reckless, but it is a reminder that personal finance is about more than putting all of your income away for the future.

Plan for the future but live in the moment. Once you’ve planned for the future, you’re in a better position to be concerned about making the most out of every day, but you can live in the moment without sacrificing your future. While you’re accumulating wealth to meet your long-term goals, enjoy life frugally. You don’t need to spend a lot of money to have a good time. But as your future becomes more secure, you can safely begin shifting your spending towards the present. Find a balance that doesn’t leave you in the cold later, but allows you to make the most of your saving efforts while you still can.

How do you balance your future needs with the idea that you are only alive today?

Photo: Flickr/Cooperweb

Published or updated December 11, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 6 comments… read them below or add one }

avatar Lisa Woodley

It’s amazing how hard it is for many people to do something as basic as spending less than we we earn. I like to think of saving money as “paying myself first”. Viewing saving this way has helped me a lot in finding gratification in NOT spending my money.

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avatar Matt

You’re totally right, its finding that right balance. The tenet of living below your means can mean so many different things. I think the biggest challenge is finding that balance because why not enjoy the money you’ve made. If you’ve gotten to the point of being semi-retired at the age of 37 then you should take advantage of the fact that you’re still young enough to enjoy the fruits of some of your labors. But at the same time you need to keep in mind you might be alive for more than 40 more years and as you get holder there will be medical costs…So its a fine line.

Personally I think if you can still keep saving and stay reasonably close to what your investments are returning in the long run you should be ok… but again that will depend on your lifestyle.

Love to hear more about what you end up doing.

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avatar Leslie Tayne

It’s really hard to strike a balance and live within one’s means. On the one hand, you would like to have the financial flexibility to live well but on the other hand, that same money is needed for the future. Like the article says, plan for the future but live in the moment!

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avatar DonnaFreedman ♦90 (Newbie)

I doubt I can ever retire, but I have finally learned to start enjoying (some of) the fruits of my past and current labors. Fortunately I do that in a frugal way so that such money as I do spend goes a lot further.
It also helps that I have a partner whose lack of interest in spending mirrors my own. ;-) We live pretty well although we spend very little — but that’s because we know what really matters in life and are thrilled to be enjoying those things.

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avatar Ceecee ♦53 (Newbie)

What an interesting article. I am one of those people who actually has trouble spending money, even when it is available. It is hard to break the frugal mode once it has become a lifestyle. I was recently eyeing a necklace in a local store. After a few weeks, I went there to buy it only to find that it was gone. At first I was disappointed, then I was ……relieved. It is hard to learn to spend freely and enjoy it when you haven’t always had that luxury.

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avatar Ivan Widjaya

I really liked how you put it when you said that you first save with your future in mind. Then as that becomes more secure, you can now focus more on the present. I love the idea.

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