Protecting the Future, Celebrating the Present

“Long-range planning does not deal with future decisions, but with the future of present decisions”

– Peter Drucker

When envisioning the future, we often think about big goals – buying a house that fits a growing family, taking a vacation to a new country, or planning for a comfortable retirement. The challenge is that when we decide to save for one of these goals, we are making a simultaneous decision to not spend this money in the present. Much of traditional personal finance focuses on the future. While this often has significant benefits, it can also miss the reality that financial decisions are made in the present. 

A balanced perspective and good planning can build security for your future self while still enjoying intentional spending on your current self. Saving and spending are both important, and they don’t have to be at odds. 

When people think about different financial archetypes, two commonly come to mind: spenders and savers. Many of us identify more strongly with one or the other. Within a relationship one person may tilt in either direction when it comes to household finances. In reality, we are all a combination of both saver and spender, and we are constantly balancing these two motivations.

We tend to think of savers in a more positive light since they approach personal finance with a cautious perspective that focuses on protecting their future through careful expense management. A commitment to saving is an important component of any financial plan, however, at times, this can lead to missing out on personal or financial opportunities in the present. Within a saver’s mindset, there is always a good reason to sock money away. Effective saving requires forethought – it’s different than just not spending. With an intentional plan, you can allocate funds to emergency reserves, pre-tax and post-tax investment accounts, and toward your long-term goals, while still creating room to spend in the present. Sticking to a savings plan can be hard, but it is easier when you have a deep understanding of what you are saving for and how much you’ll need to get there.  

Being deliberate with how you spend is just as important as being intentional with how you save.¹ For those who identify more with the spender mindset, spending can create the same sense of comfort and security that saving can. The key is being intentional in this process. A mindful approach can allow you to take advantage of present opportunities that are aligned with your values and goals – the chance to travel with an aging parent, or spend additional time with your kids while they’re young, or take a friend out to dinner when they visit unexpectedly.

Knowing what you’re spending your money on or saving for, and importantly why, can allow you to balance the future and present and allow you to find real fulfillment in the purchasing choices you make. Being conscious of when and why you spend will go a long way toward giving you a sense of control over both your today and your tomorrow. 

Making spending decisions that are aligned with your values can bring joy and feel meaningful in the context of your life – even when they are not strictly the best financial decisions. Sometimes non-financial factors are more important when considering a specific decision.

Think about the immense joy our pets bring us. If we only consider the cost, then adopting a puppy doesn’t make financial sense. Their vet fees, training, food, boarding costs, and insurance add up quickly. However, for those of us with pets we adore, we know how immeasurably these companions add to the quality of our lives, and we’re more than willing to spend on them in the now.

Similarly, a saver may hesitate when considering the cost of taking a trip to Hawaii with the entire family; accommodations, car rental costs, and meals-out can add up significantly. Yet, in the current moment, many people may feel they’re making up for lost time since the pandemic put ongoing obstacles in our path over the last 3 years. Taking a trip like this can amplify feelings of connection and joy in your family.

How much should we spend on “extras” such as a vacation? One way we can get to this answer is by asking more questions: what is the value of this activity to me? What will this mean to my family, or my partner now and for years to come? And once I know what they are, will the financial trade-offs be worthwhile and fit into my long-term plans?

While taking this more mindful approach to spending can balance the future and present, it is also important to caution against overspending. Spending funds you don’t actually have now puts you farther behind in planning for both your short-term and long-term goals. If taking that aforementioned trip to Hawaii requires you to reduce your 401k savings or carry a credit card balance, then a decision to book it anyway should give you pause.

How do we find a balance of mindful spending and saving? Working with a financial planner offers one path toward understanding the potential trade-offs of spending now versus saving for later.

When our North Berkeley team works with clients, we utilize scenario planning to look at the potential impact that a present decision may have on their financial future. This collaborative process can be helpful when making major decisions such as selling a primary home, considering a career change, or understanding your ability to retire with confidence. Planning can help create clarity about whether the decision to enjoy a sabbatical is worth the extra three years that you’d need to work before retiring, or conversely, whether you’re comfortable with reducing long-term expenses in exchange for an earlier retirement. There is no one-size-fits-all answer to these questions, and a better understanding of the trade-offs is an invaluable part of the decision process.

As financial decision-making partners, our role is to guide our clients as they evaluate scenarios that align with their vision of who they are now, as well as what they want their future to look like. Each person’s plan is unique to them. This collaborative work allows clients to put our tagline of “Invest in Living” into practice as they balance spending and saving to protect the future while still appreciating and celebrating the present.

¹ Intentional Spending