Finding Your Balance: Live For Today and Tomorrow
Every now and again, a financial expert will go in the media and repeat the same old latte story. You’ve heard it dozens over times over the years: if you save just $4 every day on your morning coffee, invest it, and earn a 12 percent return rate (a rate that is likely unattainable over the long term) for a very long time, you will eventually become a millionaire. Perhaps even worse are the extreme methods that some people advise you to go through just to save a few dollars here and there.
The good news is that you don’t have to be on one extreme end of the financial spectrum or the other. There is room for grey on the scale between excessive saving and excessive spending. After all, money is a tool that is meant to be used.
Living frugally allows you to secure a better future, but it does not allow you to live in the present moment. Spending freely allows you to enjoy the moment but risks your financial future. The reality is that you could really burn out in both situations. You will either miss out on too much or put your financial security in jeopardy. How do you find a happy medium between frugality and lavish spending?
If you are ready to embrace a true balance with your finances, here are a few solutions to get you started.
Create a System for Your Finances
Budgeting might be the most hated word in the English language (or maybe the second most hated, after dieting). Financial experts are constantly telling you that you need a budget if you want to take care of your finances. You should really understand where your money comes from and, perhaps more importantly, where it is going. A budget is simply your system for building a better relationship with the funds that you have available.
Many people struggle to create a realistic budget and stick to it. If this describes you, it may be time for you to systemize and automate your finances. Before your paycheck even hits your checking account, plan for a portion of it to be automatically drafted into a savings account, retirement account, or brokerage account. You will never have these funds available in your bank account, and you will hardly even notice they are missing.
This automated system allows you to see exactly what you have left to spend at the end of the month. The remaining money in your bank account can either be tucked away for additional savings if you feel frugal or spent on splurge items if you feel less cautious.
Focus on the Major Costs And Purchases
Everyone has a handful of major expenses that they pay each month. This might be your rent payment, your mortgage, or even a very pricey car loan. These fixed costs aren’t likely to change anytime soon, so you need to plan to spend the rest of your money accordingly. Fixed costs like rent take up the lion’s share of your income, so you should really plan ahead for these fixed costs. Starting here and evaluating these costs in your initial budget can give you an excellent framework for how much money is truly left over at the end of the month.
You might also consider big one-time purchases a little more carefully before making a commitment. Investing in a new couch, vehicle, or even a new home can be extremely expensive. It is best to take your time and complete thorough research to ensure that you receive the best deal. Buying these high-value items impulsively can cost you hundreds or even thousands of dollars in the long run. You will need to purchase some of these big-ticket items at some point in your life, so start learning to shop smart and reduce your out-of-pocket expenses.
Save on the Small Things (Where It Makes Sense)
While you should focus on your major fixed costs and one-time purchases, that is not to say that you should ignore smaller spending. Small expenses like going out to eat, purchasing a morning coffee, or splurging on new clothes will eventually add up. However, these smaller costs are easier to modify and reduce compared to your major expenses. You have slightly more control over the smaller things you spend money on compared to the non-negotiable bills like your rent.
Instead of living on the extreme side of frugality and depriving yourself of the little purchases that might make you happy, you could allocate a certain amount a month after figuring out your income, savings, and expenses as discretionary income that is suitable to you.
Increase Your Financial Awareness
Which side of the spectrum do you err toward? Frugal savers might be tempted to nickel and dime their lives in hopes of beefing up their savings account. Spenders believe in enjoying the present moment, regardless of the overall cost. Both sides have their advantages, but the trick is to find a middle ground between these two extremes.
Being mindful of your money and increasing your financial awareness allows you to see just what you have left at the end of the month. Use this number to dictate what gets automatically placed in your savings account and which dollars are okay to spend. This balancing act can be extremely challenging at first, but it ultimately pays off. You can enjoy the one life you have to live without the fear of missing out on anything when you can save and spend appropriately.