It’s hard to find the balance between saving for the future, and living for the now. You don’t want to lose out on the wonderful experiences that life can offer you right now; but at the same time you don’t want to end up in a dreadful financial situation when you’re nearing retirement.
So how does one know how much to spend and how much to save? And how do you decide what you can afford to do now and what will be worth it in the long run?
Well, there is no right answer! These decisions will always be tough and sometimes you’ll make the right choice, and sometimes not. The trick is to try and make the right choice more often than not.
Figuring it all out
It all starts with assessing your current situation and knowing exactly where you stand with regards any debt you may have, as well as commitments you have made. Debt is a bad thing, so take serious look at this! If you think that your situation is hopeless, have a look at this debt story from Tumi. It’s about how she got herself in to R172k worth of consumer debt; and what she did.
Also, you need to know exactly what you (and your spouse) bring in each month, and exactly how much you spend. It’s hard staying in control and that is why it’s good to assess your situation and set some goals! It’s this monthly spending where lots of problems come in. You cannot be spending more than you earn; this will cause unthinkable issues in the future and if that is currently the case, you need to fix it! Just stop spending on non-essential items, don’t eat out, don’t buy things you don’t really need, don’t be influenced by your friends to spend when you cannot actually afford to. Of course, it’s easier said than done.
When looking at your monthly expenses, think about the value of “things” versus “experiences”. Let’s say you often buy take-aways, think about what else you could use that money for? Would you enjoy to have a massage or go away for a weekend break? How many take-away meals should you substitute with a home-cooked meal in order to have these other experiences? This may help you see what you value and find the balance.
It’s not a bad thing to buy take-aways, provided you have budgeted for it. The point I’m trying to make is that money wasted could be used so much better! We all have a limited amount of money we earn each month and every single cent that we spend is worth something! We need to slow down on the spending and be conscious of what we are doing with our money.
Find the balance
So back to the beginning, how do we now how much we should be spending and how much we should be saving? Start with assessing your current situation, create a budget and decide on any financial goals. You may need to tweak your budget to make it all work out, but that’s exactly the point of a budget. Work out what you can spend now in order to achieve what you want to later on.
Challenge: Think before you spend!