One of the great things about personal finance conversations is that the continually provide me with new inspiration for new blog posts. One conversation, in particular, happened a couple of weeks ago with a friend. We were talking about travel, investing and the like. And I was amazed by how many different places he was going and the like. Part of the reason he was able to travel so much was because of his travel hacking abilities (which I envy and will bring up in another blog post) but it was also as he put it the idea of “living for now versus living for later.” And that really got me thinking about how people think about saving for retirement, etc.
It is no secret that we have a retirement and savings crisis in America. For example, 69% of Americans have less than $1000 in their savings accounts. Last year we set a record for the amount of household debt in the United States, which in some respects is good because people are buying more cars and homes. Generally, people have a pretty positive feeling for the economy, which of course is great in general.
But when you add to the fact that over 1/2 of Americans have no access to a retirement plans and people’s net worth doesn’t even get to the six figures by the time we get to about a decade before retirement I think we need to maybe rethink this proposition.
What Does That Mean?
So as I think about this issue what does it mean to live today versus living for tomorrow? In some respects, it is also similar to YOLO (you only live once) which some people use as a justification to do wild and crazy things. To me, living for now versus living for tomorrow means a couple of things.
First, you aren’t conscious about your savings. Now I know that a lot of people don’t have access to retirement plans and the like. However, I know so many of my students who get out of school who do have access to a retirement plan and do NOTHING with it. For them, retirement is too far away. They think they have plenty of time and they don’t worry about their lives 40 years from now.
Second, I need to enjoy life now because responsibility will knock soon. A lot of my students and even people in their 30s, 40s, etc put off making some life choices about finances because they don’t have to deal with them. For example, they don’t have kids, they don’t necessarily want to buy a house, they aren’t married so then why should I worry about life insurance, saving for retirement, saving for a house, if I don’t even know when I have those things. Why not enjoy myself now because I will deal with those things when they come. Many of my students, friends, and co-workers believe that this responsibility will come, but it is far into the future (10 years from now) I will deal with it later.
Finally, it is just too difficult to deal with. Let’s be honest going over the details of 401k plans, retirement, saving for college, mortgages, life insurance, and the like sounds really boring. In fact, for many it might as well as be in some foreign language that you don’t understand. So if I don’t understand it I don’t have to deal with it. I will get to it later. I don’t have the background for it so I will let others make the decisions for me. Trying to figure this stuff out is like watching paint dry. Or I have plenty of time to figure it out I will do it later.
Now let me say before that the friend I was talking with is not irresponsible. He does have some retirement savings. He is well-educated. I am not trying to rip off of him. And I certainly understand that I am stereotyping a bit above. Not all people are like that. A lot of people pay attention to savings, are worried about debt, and want to have a plan to fix it.
More importantly, I think the live now vs. live later argument is a false choice. I don’t buy it. And frankly if you have to choose between “living for now” whatever that might mean for you I would encourage you to err on the other side of the coin. In other words, I would live less now and so that you can live as much later on. I don’t think you have to sacrifice future financial gains so you can take a trip to Tahiti in your 20s.
Part of that belief is the reason why this blog exists. I love being a teacher. I love when people get it. I love when the lightbulb goes on. I think a lot of what we don’t do or fear comes from our own financial illiteracy. Some of this is by our own choice. Some of this is by it not being taught to us.
Financial literacy is like learning a new language. At first it is hard, but the more you learn the easier it gets. And living for later is an absolute responsibility for those who can. In my humble opinion there really is no reason not to think about that future. I know it is a long-way off, but if you have the means to contribute to a retirement plan or save money it should come before you wanting to buy a new handbag or car or whatever. By not doing that I think you are shirking part of your responsibility as a human being and a citizen. The sad truth is that no one is coming to save you. You have to save yourself.
Now I know that might sound like a bit of a rant. But the living for now versus living for later is a false dichotomy. And I am not suggesting my friend was creating one. However, I do think a lot of us do so. I do think that we often create those dichotomies because things are too complicated, I will deal with it later, or I want to spend my money on “fun” stuff and worry about other things later.
If you have the means at your disposal (e.g. putting savings in a retirement plan) then you have an obligation and responsibility to start doing so right away. Not 5 years from now, not 10, but now.
And if you don’t understand this gobbledeegook then hopefully this blog and others like it (because there are much better ones other there) that can help you.
Sit down. Read. Make a plan. There are some great sites out there. People spend more time planning vacations than they focus on the “living for later.” It is time we do more of that. No matter your age and where you are in life.