How to Best Balance Saving for Tomorrow and Living for TodayInsights Behavioral Finance Purpose-Driven Money System Financial Life Planning Family Financial Planning
Creating a balanced approach to your finances can be a challenge. Competing goals can pull our attention in two different directions, which can cause stress. The good news is that setting and working toward your financial goals doesn’t have to be this hard. Let’s go over a few easy-to-implement ways to save for tomorrow while living for today.
- Create SMART goals to help you stay on track and take bite-sized action.
- Align your goals with your values to ensure that your finances and personal goals are in sync.
- Practice intentional spending habits to help your finances contribute to your overall sense of fulfillment and well-being.
- Save in ways that don’t limit your ability to enjoy life now.
Creating Your Financial and Personal Goals
Have you ever heard of SMART goals? SMART goals are:
- Specific & Significant
- Measurable & Meaningful
- Actionable & Attracting
- Realistic & Rewarding
Setting SMART goals in both your personal and financial life can help you to set goals with reasonable expectations and that is easy to stick with over the coming year. Too often, we set goals for ourselves that are so far out of reach or lack significant meaning. Think of the last time you set a New Year’s resolution.
“Reading more” or “getting back in shape” may have felt like they were closely aligned with your values and the lifestyle you wanted for yourself – but they were too vague to stick with, and there wasn’t anything motivating you to accomplish them.
Let’s look at an example of a few SMART goals that tie money and values together:
Joe and Kylie have been married for six years and have a toddler with another on the way. They are interested in making the best possible financial decisions for their family and have already “checked the boxes” on many of the to-do’s they should be doing. They contribute toward their 401k, have funded emergency savings, and have successfully knocked out their one auto loan.
Still, they often feel like their cash flow seems to disappear after each paycheck. Daycare costs, family activities, the endless need for more toddler snacks and groceries, and now medical bills for Kylie’s pregnancy all seem to add up too quickly.
They decide to set a few goals going forward that will prioritize their values (family, taking care of their kids, and getting involved in their community).
- College savings. Even though it’s a ways off, they decide to start contributing to two 529 Plans for their toddler and their new addition. They set a goal to contribute $1,200/year ($100/month) per child and automate this contribution from their checking account on the 1st of each month.
- Family time & Community involvement. Although travel may not be on the immediate horizon with a new baby due soon, they decide to set a goal that, 6 months after their new baby is born, they will attempt a family stay-cation at a local Airbnb. They put funds away in advance to visit several local community parks and events to have a small long weekend together!
Both of the goals that Kylie and Joe outlined for themselves are in addition to the things that they’re already doing. One is a long-term goal of helping to fund their children’s college education, and the other is a short-term goal to help them prioritize family time and community involvement in the not-so-distant future.
Having a balance of both short and long-term SMART goals can help you to protect your future without sacrificing a joyful life right now. Additionally, having several short-term goals can help you to spend your money intentionally in your day-to-day life. It’s easy to shortchange retirement savings or another goal in the distant future because it doesn’t feel real. Joe and Kylie are much less likely to overspend in other areas of their lives if it means jeopardizing a family trip they’re looking forward to in the next few months.
This strategy can also help you to prioritize your savings and organize your daily cash flow in a values-driven way. When you take a look at all of your savings goals, as well as necessary expenses, you can easily determine whether the cash flow you have left over will cover your current lifestyle. If it doesn’t, it’s time to prioritize! What non-critical expenses (eating out, etc.) best match your values?
For example, Joe and Kylie may find that eating out for lunch at work is a lot less satisfying than a less often but more-fulfilling date night where they get to spend time together amidst their hectic work schedules.
Beware: We’re All Master Justification Machines!
Regardless of what your goals are, it’s important to set a cash flow plan ahead of time to help yourself stay on track. We are all master justification machines! It’s easy to tell yourself that you need a fancy new SUV, even if it wasn’t in your budget because you “value your family” and they deserve to be comfortable. Having SMART goals set in advance, along with a cash flow plan and Purpose Driven Money System™, can help you to avoid some of these “on the fly” decisions that could derail your other short-term goals and delay long-term goals.
Reach out to us! We’d love to hear about your unique goals, and how your money can help you find fulfillment and connect you more closely to your values.