Finding balance between saving and spending

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It’s not easy finding the balance between saving and spending.

On one hand we work hard for our money and really feel that we deserve to enjoy it (which we do!). On the other hand though, we need to save for the future and for emergencies as we don’t know what tomorrow will bring.

Before we get too far, let’s consider this for a moment.

There are two types of saving

Saving towards a short-term goal such as an overseas trip is really “deferred spending“. The same goes for saving towards clothing, school fees, car maintenance or even an emergency fund. This isn’t saving or investing for the future, it’s simply not spending money this month so that you can spend it next month. In the finance world “short-term” usually refers to 2 years or less.

Then you get long-term savings. This could be saving or investing towards a goal that is 5 or more years away. Perhaps you want to buy a car for cash or put down a good deposit on a house.

Long-term savings is also deferred spending (as you are planning to spend the money at some point) but it’s a more conscious saving and actively putting things off for now so that you can enjoy them in a few years time.

Of course you get medium-term (in the middle) but for now I’ll lump that into the short-term category too.

Let’s refine the question

With this new added knowledge, let’s redefine the initial question.

Instead of asking how to find balance between saving and spending, let’s rather look at how to find balance between living for the now (the short-term) and saving up and looking forward to the future (long-term).

It’s hard because we can’t afford to buy everything we want now. So we have to save towards the future. But, we also have to enjoy life now and find happiness and contentment with our current situation.

We can’t always just be chasing after the next “perfect thing” that will give us happiness as we need to find the happiness within. But, there certainly are things that will make us happier, more comfortable, less stressed and bring some joy.

How to find balance between living for the now and saving for the future

Here are 3 tips to help you find the balance.

Track your money

Unless you actually know exactly how much you spend each month, and on what, you won’t be able to plan properly. You need to understand your current situation and know where your money goes.

This will help you to decide whether you are spending money on the right things (your priorities) and it will help you decide on a strategy to enjoy life now and know that you are on track for future savings.

Help! Where's my money gone?

Help, where’s my money gone workbook

Discover what you value

This is a HUGE task and could take years of self-exploring. And, you will change over the years so you never quite finish the task.

It’s important though to understand what it is that you value. What’s important to you?

  • Do you value family time and time with your kids?
  • Is travelling super important to you?
  • Do you have a hobby or sport which is really important to you?
  • What is your ideal job?
  • Where do you find joy, motivation, stimulation, etc?
  • What do you want to do more of?
  • In what situations are you really happy?

Big questions!

Great consequences!

Knowing what you value and what is important to you helps you decide where to focus your money.

Think of it this way, if traveling is really important but you spend most of your money on takeaways, then you should spot the risk.

If you’ve always wanted to learn photography but don’t have the money (because you spend too much on something else), then perhaps your values and spending habits are misaligned.

Create a financial strategy

Once you know where your money is going to each month and you know what you value, you can plan.

No plan is perfect, and it’s impossible to plan your life out. But you can set a course. Start with a general direction, a small goal and assess things as you go.

In my post about “A Retirement Plan in Uncertain Times” I cover the concept that several outcomes may end up being good for you. And as you live life and constantly reassess things, you may find that you change your course (financially) but you can still end up in a good position.

Agile Retirement : A plan for retirement in uncertain times
Agile Retirement : A plan for retirement in uncertain times

There is definitely not a single plan and single course of action that is correct. It’s more of a long-term project.

Enjoy the journey

Although life may be tough at times, it doesn’t always need to be.

Look for the small things that you can be happy about. Enjoy the current moments and live in the present.

Life is a journey, and money is only one aspect of life (an important one, yes). But enjoy where you are at and enjoy the journey.

Please share your thoughts