When it comes to financial planning, finding the right balance between saving for the future and enjoying the present can be a challenge. In my family, I have seen polar opposite approaches to financial planning, with my father and father-in-law taking vastly different paths.
Both men were highly successful at what they did for a living. My father was a surgeon whose analytical mind would lead to overthinking situations, resulting in no action or a very conservative approach when it came to his financial decisions. He worked hard, lived modestly and always worried about putting away a portion of his income for a rainy day. His attitude toward financial planning was one of caution, built upon his worry about the future. And while my father had a substantial nest egg to fall back on in his retirement, he was never able to enjoy it.
On the other hand, my father-in-law lived in the moment. He worked in the entertainment industry and lived large without worrying about the future. Instead of saving, my father-in-law splurged on luxuries like cars and entertainment. He enjoyed life to its fullest and was known for his generosity, but he did not consider the long-term consequences of his spending. As a result, he did not have the savings or investments to support himself later in life, which left him to struggle financially.
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The contrast between my father and father-in-law’s approaches to financial planning highlights the importance of finding the right balance between saving for the future and enjoying the present. While balancing between these two extremes can be a challenge, it is crucial for long-term financial stability and personal fulfillment.
While there’s no one-size-fits-all approach to spending and saving, there are several best practices that can help you navigate the balance.
Create a basic budget. Every financial plan requires a budget. One classic approach to budgeting is the 50:30:20 method — spending 50% of your money on day-to-day necessities, 30% on discretionary costs and putting 20% into savings.
While this can be a suitable place to start, it does not work for everybody. That is where a wealth adviser comes in. These professionals can help you determine the right approach for your lifestyle and help you stay the course when markets are volatile or if you start to dip into old spending habits.
Start saving early. When it comes to saving, you will often hear people say, “I wish I had started earlier,” and it is true. As soon as you enter the workforce, you should start putting away funds for your future. The earlier you start contributing to a 401(k) or other qualified retirement plans, the more comfortable you will be down the line.
Prepare for what-ifs. Life is filled with unexpected changes, and with that top of mind, always consider the “what-if” scenarios. There are many outside influences that can come into play as you work toward your goals, so you must be prepared for how to manage them as they arise.
Creating an emergency fund can provide peace of mind and ensure that you are not devastated by healthcare or financial situations. In addition, think through whether you have the appropriate life insurance and long-term care coverage to address unexpected health issues.
Collaborate with a financial planner. To put these best practices into action and address more complicated needs, it is OK to ask for help. It can be difficult to be objective about your own spending behavior. A financial planner can propose strategies to meet your short- and long-term goals.
Whether it is buying a home, paying for your children’s education or saving up to purchase your dream car, there are many ways a planner can help you achieve these goals by crafting a customized plan that accounts for a range of possibilities.
Living in the moment while carefully planning is possible — but do not go at it alone. A financial adviser or financial planner can help you live the life you want today without impacting your tomorrow. Citi also has some helpful financial planning tools.
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