In the world of financial planning, we often talk about building a retirement strategy that stands the test of time. We want to plan with longevity in mind because you never want to be without cash flow - even if you live to be 100+! However, financial planning has an often-untold side: spending is just as important as saving. Even though we want to plan with longevity in mind, that doesn’t mean anything if we deprive ourselves today and pass away unexpectedly tomorrow.
When we save, it can become all-consuming. This is especially true as we inch closer to retirement. Some people start to panic, and they’re willing to cut all unnecessary spending to reach a retirement savings goal. But sometimes we forget that while saving is important, it shouldn’t come at the expense of living our lives.
If we focus too heavily on saving, we’re doing ourselves a disservice. We work hard for our income, and when we penny pinch too much to reach savings goals, we run the risk of leading an unfulfilling life right now.
Recently, I had a conversation with someone who was very ill. There was a big chance that she wasn’t going to live much longer than 5-10 more years. She was feeling disheartened that the amount of advice she read online about how to save for the long-term, when she wasn’t really going to have that same option.
Nobody wants to think about a worst-case-scenario where we don’t get to live until 110 years old. But, sometimes we’re faced with a harsh reality: we may not live as long as we’d like, and if we deprive ourselves in the moment to get there, we might never get to see the fruits of our labor. Of course, this isn’t all to say that we should start overspending on everything we’ve ever wanted tomorrow. As with all things, we need to find a balance.
Financial plans work best when they strike a balance between saving and spending. If you’re focused on making exceptional financial decisions the vast majority of the time, it doesn’t always make sense to deprive yourself unnecessarily. The key is to be intentional about your “splurges” so that they don’t become a willy-nilly thing that negatively impacts your retirement saving strategy.
Life’s short - buy the shoes you’ve had your eye on for forever, and take the vacation with your spouse that you’ve been dreaming about for years. Just do those things in a way that’s budgeted, so that you don’t later regret being unable to live comfortably during retirement.
It can also be helpful to set meaningful goals for both saving and spending. For example, if you know you’re saving to purchase a beach-side cottage in a cute East Coast town, you may be less likely to spend too much on clothing you don’t want or need. You can budget to save for a bigger, more meaningful “spend” while still saving traditionally for retirement, and you’ll be notably more fulfilled.
Of course, striking this balance on your own isn’t always easy. We’re all human, and we all make mistakes when it comes to our money. Having a financial planner who can help you build a budget that focuses on living a little now, while preparing for a rock-solid financial future, can bring you peace of mind as you get closer to retirement. Are you looking for help building a savings strategy that doesn’t leave you feeling overwhelmed and deprived? Contact us today. We’d love to help.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.