How to Find the Balance Between Spending Today and Saving for Your Future

When it comes to financial planning and decision-making, a key question that you need to answer over and over again is, “how should I use my next dollar?” 

In other words, you have a lot of choices to make and goals to achieve, but only so much money to use toward any one of those options. The solution is to find the balance between spending on something today (or a short-term goal) and saving for your future when you may no longer earn an income and will need to find other ways to fund your lifestyle in retirement.

Here’s how to discover that balance in your own financial life.

Know Your Numbers

Before you can make better financial decisions about how to allocate your money across various buckets for spending, saving, and investing, you need to know what these areas of your financial life look like as-is.

What are you currently spending? How much do you save, and to what accounts do you contribute savings dollars?

You have to get to know your cash flow on a very close level, and be able to track every single dollar that comes in and goes out. If you’re not doing this yet, start here. 

Track your spending for two to three months or review your spending from the past few months. You don’t have to make any changes yet; the goal is to simply understand where you currently spend money on a normal basis and how much, if any, you have left over each month. 

Once you have a history of your transactions, go back and evaluate how you used your money. What was necessary and what did you spend on that was more discretionary? How much money did you have left at the end of each month? Did you feel satisfied with your spending or stressed that your purchases didn’t get you closer to your goals?

Knowing the answers to these questions will help you understand if you need to save more money to achieve your short- and long-term goals -- or if you actually have some wiggle room to spend more on discretionary items or fun experiences right now.

Understand Where You Need to Go

To know if you’re saving enough, you also need to understand what you want to do in the future. Of course, that’s much easier said than done; no one has a crystal ball and trying to imagine your life in 5 years, let alone 10 or 20, is extremely hard.

But one thing is for sure: life will still cost money in the next 10 years and over the next few decades. If you’re not saving for it now, you may not have enough available when you need it then.

Setting specific goals and incorporating those into your plan will help you know what you need to do today to get to those points in the future. You can reverse engineer your goals to know what you need to save on a yearly (and therefore, break things down further to a monthly) basis.

Then, prioritize your savings each month. Make sure that contribution to your future goals happens, and if it does, you’re a little more free to spend the remainder on what you want in the present.

Develop a Financial Plan, Then Follow It

Setting goals is part of your financial plan, which you should build out entirely to help guide you as you make decisions about how much you need to save for the future (and therefore, how much you can spend today without worry).

Your financial plan is a living document and should be continually updated as you make progress, hit new milestones, and update your goals or timelines.

Tracking all aspects of your plan can help you see how far you’ve come and what you still need to do to achieve future goals. If you are behind on reaching a goal, then that can provide useful feedback that tells you it’s time to cut back on spending today so you can free up money to contribute toward achieving that particular aim of yours.

On the other hand, checking in with your plan can help you see that you’re very much on track and doing well -- which could mean you have more flexibility with the money you spend today. It’s your choice to accelerate progress toward goals, or enjoy more of your spending power right now. 

Don’t Be Afraid to Redefine “Balance” Over Time

As you progress through life, your priorities will change. You will change, too, and this is not just okay… it’s expected!

There’s nothing wrong with updating goals, evolving your priorities, or redefining what is important for you over time. But you may need to be mindful of how shifting your goals from your originally-stated plans may require you to make tradeoffs.

Again, there’s nothing wrong with that. It’s just important that you capture those changes somehow, update your plan, and acknowledge what tradeoffs need to be made (if any). As your priorities change, you might realize that you’d much rather work 5 years longer than not be able to do something that’s truly important to you today.

Only you can ultimately define what the right balance between using your money on your life right now and saving it to use in the future looks like.

Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

BRANDY BRANSTETTER, CFP®