From my viewpoint as a financial advisor, the Holy Grail of personal finance is finding balance between enjoying today while preparing for tomorrow.
While enjoying today doesn’t necessarily require spending money, let’s be honest that it usually does, and often a substantial amount – whether in larger, lump sums or smaller, frequent expenditures. It’s not even just about “fun spending” for hobbies and travel. In the modern era of busy, nonstop lives, we gladly pay for convenience, and sometimes relaxation and rejuvenation, just to keep going on the hamster wheel.
I get it. I really do. We all need help and enjoyment of various forms in our lives today. Otherwise, what is the point? Tomorrow certainly isn’t guaranteed, as anyone who has experienced the unexpected or premature loss of a loved one will emphatically tell you.
I think a lot these days about the YOLO concept. It stands for “You Only Live Once.” Embracing it can work to someone’s benefit or detriment depending upon their spending and saving tendencies. My fear is that it’s doing much more harm than good. Yes, we only live once, but there’s a high probability that the length of that lifetime will be long. And, you probably won’t be mentally or physically able to work for all of it.
Something has shifted in our culture over the past couple of generations. Most people born of the Depression Era were tremendous savers, having lived during a time when it was absolutely necessary to plan for economic challenges. Subsequent generations, well, not so much. Every statistic I read today about the average level of personal savings in the United States is absolutely frightening. It’s a reality that most people willfully ignore.
I’m not necessarily advocating for the austerity of yesteryear. That’s unappealing and unrealistic, even to me. But we desperately need better balance, i.e., less spending today so that we can save more for tomorrow. Paying attention to where money is going is a good step in the right direction.
At its root, this is a behavior change, which doesn’t occur easily or quickly. It’s often two steps forward, one step back. Thankfully the need for helping people with this facet of their financial lives is gaining traction, and there are more tools and professionals readily available than ever before. Somewhat different from a traditional financial advisor, money coaches and financial therapists serve as accountability partners, digging into the actual inflows and outflows of a personal budget and helping clients unpack the emotional baggage that accompanies their decision-making. Add in the very necessary ingredients of motivation and persistence, and the Holy Grail becomes attainable.
|Rebecca Kennedy, CFP®, has been in the financial services industry since 1999. She is a co-founder of IMPACTfolio, a wealth management firm that specializes in IMPACT investing and holistic financial planning for one flat-fee.