Back in my 20s, when saving for retirement was something I’d just started doing, I found myself in a tough spot every time a travel or concert opportunity arose. I knew full well that money spent on something fun was money that couldn’t go into my long-term savings. But I also felt the need to indulge my 20-something self at a time when retirement was so far away.
These days, I’m a lot older than 20-something, though not really close to retirement. And yet the battle of “spend now or save for later” still rages on in my head.
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I’m constantly faced with situations where I need to balance a near-term want with the need to have long-term savings. So, I often find myself contemplating things like:
- Do we take the more expensive beach vacation this year or put it off?
- Do we update the furniture that’s seen better days or sock a few extra thousand dollars away in an IRA or 401(k) plan?
Sometimes, the YOLO mentality will get the better of me. If friends are going on a weekend getaway and my family is invited, I’ll be tempted to say yes, even if it means putting less money away for retirement. After all, who knows when I’ll have that opportunity again?
Other times, I’ll get in the mode of prioritizing retirement savings above all else. That could mean needlessly missing out on an event when I could’ve found a way to make it work.
Striking a balance between the present and the future is not an easy thing for me. And it may not be an easy thing for you, either. But there’s one strategy I’ve learned to adopt that you may find helpful.
Set a goal, prioritize it, and spend more freely from there
I really try hard not to go to extremes in the context of spending money versus saving it. I don’t think it’s wise to save nothing in the course of living for today, and I also don’t think it’s smart to save for retirement to the point of denying yourself all forms of near-term happiness.
How do you strike that balance? For me, it boiled down to setting a yearly goal, putting the savings process on autopilot, and then allowing myself to spend my money more easily beyond that point.
Let’s say your goal is to save $6,000 a year for retirement. Things like vacations and electronics could easily get in your way. Don’t let that happen.
Set up an automatic transfer to your IRA so that $500 lands in that account off the bat every month. Or, sign up for your employer’s 401(k). That plan should get funded out of your earnings automatically.
Once you know your account is being funded, you can spend the money you don’t need for essential bills on the things that bring you joy. And you won’t have to feel bad about spending on yourself.
A reasonable compromise
Neglecting your retirement savings could put you in a really unfavorable spot later in life. But denying yourself all the fun things life has to offer could leave you with a world of regret once retirement rolls around. After all, what’s the point of retiring with $3 million when you spent much of your younger years unhappy because you didn’t allow yourself to do any of the things you loved?
That’s why your best bet is to come up with an annual savings target you’re happy with, set yourself up to meet it, and spend more freely from there. It’s a compromise that works for me, and I’m hopeful it’ll work for you as well.
