The Balance Between Living For Today and Planning For Tomorrow
By: Richard C. Salmen
Tags: Financial Planning, Relationships, Living With Purpose, Goals, Finance

Photo by Brendan Church on Unsplash

One of the financial challenges most individuals and families have to deal with is finding the balance between living for today and planning for tomorrow. If you put everything away toward the future while living on beans and rice today and then end up dying young you will have forgone quality of life in your quest for security. But, if you spend everything you make today plus 10% more you will never have a financial future.

As a fiduciary financial planner we help our clients strike this balance. People’s lives have become more and more financialized. They are faced with money decisions almost daily that have an impact on whether they are focused on living for today or looking toward the future. Since almost all of our clients are middle or upper-middle class, they do not have enough financial resources to fully fund every choice. Compromises have to be made!

Suppose your children are 8 and 10 years old. Do you spend $4000 on a family vacation this year or do you put $2000 into each of their college savings plans to fund their future education needs? The difficulty is that there is no manual to go to for the right answer. There is no right answer. All financial choices involve tradeoffs. Be wary of anyone who says they have the correct answer to these types of questions.

This is why it is very important that whoever you are going to for financial advice asks the questions necessary to get to know you well. I always tell new, prospective clients that we do not need to know every deep, dark secret in their lives but frankly we do need to know most of them. Without understanding your dreams, your goals, your priorities, and your resources it is difficult or even impossible to help you navigate these hard choices.

A few examples may help to illustrate challenges and opportunities. In the early 2000’s a client couple I had been working with for about ten years came to me with a question. One of the partners in the relationship had been diagnosed about five years earlier with a progressive, debilitating disease that would eventually leave them wheelchair bound. They were only in their early forties and had talked during previous goals meetings with us about the desire to take an Alaska cruise at some point in the future when their finances were more secure. They wanted to know if they could find a way to take the trip now while they both had the mobility to enjoy it.

We discussed the likelihood that if the trip was not taken in the next 18 months that mobility issues would limit how much it could be enjoyed. We also analyzed the financial picture and told them that retirement might happen a year or two later than planned due to the diversion of money to the trip. Ultimately, they chose to take the trip later that year and created lifetime memories for a life that ultimately ended much earlier than planned.

How about the client couple whose seven year wedding anniversary fell within a few weeks of their annual goals meeting. This couple had three children during this first seven years of marriage and the husband was very focused on maximizing their retirement savings. As we were discussing goals, the wife expressed concern that they had not had a trip by themselves since their honeymoon seven years earlier. It was obvious she thought this was an important goal but he was not hearing her. I talked with both of them about the fact that I knew a number of couples who got divorced after their children were grown and left the house because they had not put the time, energy, or money into maintaining their own connection. I reminded him that the fastest way to more than cut your net worth in half is to get divorced! They left the children with parents and took a trip together.

In the mid 2000’s a client couple in their late 50’s came to us to discuss their desire to retire then and spend the rest of their life traveling as much as they could. They were by no means wealthy and we were concerned that retiring so early and then traveling would deplete their resources to the point that they would need to go back to work or drastically cut their lifestyle. Since they were adamant that this was their goal we helped them develop a monthly spending goal that we believed would keep their funds from being depleted. They chose to retire and have been travelling regularly for almost 15 years! I have never met anyone who was better at traveling on the cheap than this couple. They took on the challenge of staying within their budget and the plan has worked. Every goals meeting they take pride in sharing with us how little each trip has cost them!

Let’s finish with the story of a client who wanted to retire in 2010 and move to the mountains in Colorado. They had found a house they wanted to buy and were ready to make the purchase. The wife sent her husband to the meeting with me by himself because she was sure they were not in a financial position to make the transition yet and did not want to see the disappointment on his face. She was right. We were very concerned that they were going to make a financial commitment that had a high probability of failure. They chose to let that house go and continue to work. Then, a few years later they came back to us again with another house they wanted to buy and that time we were comfortable the numbers would work. They are happily retired to their mountain home and still talk about how grateful they are that we convinced them to wait.

Bottom line, every situation is different. Health challenges, financial resources, goals, dreams, and reality all have to come together when you are making decisions between living for today and planning for tomorrow.