Money for the Rest of Us

I find that one of my problems as a young person trying to plan for the future is that I’m young and retirement (and even a real adult life with a house, family, kids) seems like such a long way off. How much of my fun here and now should I put off so that I am comfortable later on in life?

One of the first things that comes to mind is a quote from the book Tuesdays with Morrie (an amazing book, check it out if you haven’t read it):

“Life is a series of pulls back and forth. You want to do one thing, but you are bound to something else… A tension of opposites, like a pull on a rubber band. And most of us live somewhere in the middle.”

That is how I feel with my financial planning– sometimes I’m pulled towards saving as much as I possibly can so that later in life I will be financially independent and other times I feel like throwing caution to the wind and saying “screw it, I may die tomorrow so I might as well make the most of today.”

I think that many of us feel this pulling back and forth in our financial planning. But in order to come up with a plan we have to reconcile our options and figure out what we are comfortable with.

For me, that point of comfort is about 20% of my income. I could be saving more, but then I would be cutting some things out of my life that I just am not comfortable with. For instance, I love traveling. I love seeing new sights, meeting new people, immersing myself in new cultures, experiencing new foods. About 10-15% of my income each year goes towards traveling. And I would rather cut my food budget in half and eat ramen than cut down on my travels.

And that 20% of my income going into savings? I can justify that amount to myself, the amount that is not being spent on the here and now, because I plan to spend it on traveling in the future. That is my real financial dream. To have enough money when I retire to be able to take as many trips a year as my spouse and I want. And I will get there by saving 20% of my income now (which isn’t much these days, but will hopefully be more in the future).

Having goals that you can visually picture– such as a goal of visiting Australia– makes it much easier to justify saving than it would to have a goal that isn’t visual– such as being rich (what am I going to picture in my head, sitting in bags of money?). Think of what you love and set financial goals around these passions.

This post was written in response to this week’s Festival of Under 30 Finances:

“What are your real financial dreams? If you want to become rich, how do you actually plan to get there. Will you still be young enough to use that money or will you be too old to really use it?”