The other day, a reader asked me a very interesting question. He wanted to know how to balance the quest for financial independence while still trying to live and enjoy life in the present as someone in your 20s and 30s.
On Twitter, my bio says: “Trying to balance living a good life now and saving for later.” I feel like those who have specific financial goals all experience this and it’s a process.
I can now confidently say without a doubt that my end goal is financial independence (FI). I’m not so sure if I’ll retire early since I love the work I’m doing, but I do want to get to the place where working is optional and I wouldn’t have to if I didn’t want to.
Financial independence sounds pretty darn cool and it’s the ultimate level of freedom. There’s just one problem. For many of us, financial independence isn’t today, tomorrow, next year, or even in 5 or 10 years.
It can be much later down the road and seem like a distant dream at this point. FI is a great goal to envision and dream about, but you can’t solely focus on it nor base your happiness and future on it since the present is the only thing that’s promised.
So what do you do? Work hard, then twiddle your thumbs and wait for your assets to reach their peak? Nope! That’s no way to live. I don’t always like using the words balance or multi-task, but that’s basically what you need to do. Have your goal of reaching FI in the background while you focusing on living and enjoying your life now.
Here are a few tips to help you move forward with this hybrid goal.
Determine What You Need In Order to Reach FI
Envision what financial independence looks like to you and what do you need in order to reach that point. Obviously, you’ll need to consider how much your assets will add up to in order for you to feel financially stable enough not to work.
To figure this out, many people recommend multiplying your annual desired income during retirement by 25. If you want to live off $40,000/yr, you’ll need $1,000,000. Also, consider any lifestyle changes like if you expect your home to be paid off or would prefer to travel around the world instead.
Related: 10 Ways to Afford a $1,000 Vacation
Determining your FI puts a lot into perspective especially when it comes to knowing how much you need to save so you can put that in the back of your mind instead of worrying about whether you’re meeting your goal or not.
Then, Build a Goal Ladder
I’d highly recommend building a goal ladder because you’ll need to ladder your savings and choices on your journey. Thinking about amassing $1 million can be a daunting thought but you need to break it up into smaller chunks especially if you feel it’s likely that you won’t reach that goal for several years.
I’ll be revealing my first FI goal ladder in just a few weeks and it will include my savings/investment plan for the next 5 years. I’ll also work on other smaller goals on the side like throwing a little extra on my mortgage and building up my emergency fund.
Think of it as your own DIY version of Dave Ramsey’s Baby Steps. You won’t be able to do everything now and you shouldn’t because it can get too overwhelming. But if you start small, you can increase your efforts over time once you hit your first few goals.
Create a Detailed List of Your Values
Sit down and really ask yourself what you value and what brings joy into your life. Happiness comes from within, but it can also be influenced by external factors so be aware of that.
For me, I value things like health, my family, travel, and exploration, trying new and delicious food, reading books, and having creative outlets. Be sure to make your list as specific as possible then hang it up somewhere prominent.
Give yourself permission to spend time and money on your values so you can enjoy your life now. For example, I’m not going to put off vacationing and going to events with my friends and family just because I’m seeking financial independence.
If however, my friends invite me to do something that I’m not really interested in or doesn’t fall in line with my values, I feel comfortable saying no and suggesting something else for another time.
Live Well Below Your Means
Well duh, right? It’s obvious that you need to live below your means if you want to reach financial success, but this doesn’t mean you have to deprive yourself from enjoying your life now.
The best tool that’s helped me has been setting a realistic budget and sticking to it. My budget doesn’t limit me but rather, it allows me to plan out how I’ll spend the money I already have and make the most of it.
I include budget categories for things I value like entertainment, dining out, fitness, and travel. I even have a small miscellaneous category for extra knick knacks that might pop up during the months because they always do. This category is only $50/month and while it does at up to $600/yr, it gives me peace of mind knowing that my budget is not so tight and structured to the point where I’ll feel guilty about buying my son a new outfit for his school concert.
I can do small things like this on a whim without feeling guilty or being drawn away from my financial goals.
Automate A Good Chunk Of Your Finances
Finally, you’ll want to automate a good chunk of your finances so it’s out of sight, out of mind. While I do advocate for everyone being involved and aware of their situation, thinking about finances too much can lead you to become obsessed with it.
You don’t want to be so worried about the future that you allow the present to pass you by. By automating some of your finances, you can free up time and energy to dedicate to living in the present.
You can automate your finances by setting up 401(k) contributions. If you have an IRA or another brokerage account, set up automatic transfers from your checking account to occur monthly so you can treat investing like a monthly bill.
Sign up for automatic bill pay for most of your monthly bills and expenses and even connect your savings account(s) to your checking account so you can make automatic transfers there as well.
It’s a great time to be alive and enjoy each day to the fullest and you don’t have to have a YOLO (You Only Live Once) mindset to do this. You can still plan for the future and enjoy the now without being obsessed with either.
Have you found it a challenge to work toward a better financial future and still enjoy the present?
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