Saving for the future vs Buy now, pay later
Saving for the future often leads to a debate. This argument is held between thrifty savers and hard-core spenders.
The motto of the saver is “save today in order to live a better life tomorrow”.
In contrast, the motto of the spender is to enjoy today as much as they want. They let tomorrow look after itself (if tomorrow ever comes…).
There are both pros and cons of giving up a little today to save for the future:
Pros of saving for the future
- You will be able to support yourself in retirement
- You will be able to retire (and maybe retire early)
- You will be able to give to your children and grandchildren
- You will be able to help charity and worthy causes
- You will have the freedom to do what you want (rather than what you need) for years (in employment, business, life experiences)
Note: the last one is key – financial freedom
Cons of saving for the future
- All the pros are “you will”, and not “you are”. You lose out today for things you want in the future
- You might get hit by a bus tomorrow. The worry is that you have only spent your living days watching that bank balance slowly increase and not living life
- You may not be able to enjoy certain experiences when you are older (not many 70 year olds enjoy ski-diving)
A mixed approach
So, what does moneystepper advise ? Well, a little bit of both. It is integral that everyone is saving for the future. We never encourage people to “buy now, pay later”.
However, when saving for the future, it is important to still enjoy today. To do that, I follow a simple rule:
Don’t “buy now, pay later”; “experience now, pay now”!
The first part of the perfect approach to personal finance (in our eyes) is to restrict your spending to only experiences and not stuff. This is because experiences are more fulfilling. In short, they make us happier. We need to ditch unnecessary expenses in the short-term.
Many people see this as being “tight”. However, removing any expenditure which isn’t required in the short-term ensures that you can enjoy the things in life that truly make you happy.
- Ditching that daily coffee
- Taking a shower instead of taking a bath
- Never drinking bottled water
- Taking public transport
- Not buying airplane food
- Not eating out
- Exercising outdoors rather than gym membership
- Going to the cinema
The list goes on. And it might seem depressing giving up all these things. But, what you don’t have to give up is those things in life which truly make you happy. For me, these include:
- Travelling around the world
- Skiing trips
- Cycling trips
- Seeing friends and family
The second part of the equation is simple. Never go into debt to experience things today. Only pay for things that you can afford to pay for today.
Which do you choose?
If anyone had the choice between the two lists above (coffee vs friends & family), I’m sure they would choose the second.
And if you do them on a budget, you can enjoy life for the moment (and pay for it today), but also save the majority of your income to build up your net wealth in the long-term to enjoy and long and happy retirement.
Let me know which option you choose. Are there any other pros and cons that I’ve missed?