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April 18, 2014



Financially Balancing Your Future, Family, and Fun

It can be tough being an adult.  You can’t play all day, you need to stay fully dressed while you’re out in public, and perhaps worst of all, you have all sorts of responsibilities.  You have work, family time, house work, keeping up on the news, and occasionally, maybe even some fun.  It can be exhausting.

It can also stretch your budget pretty tight.  The cost of raising a child can easily reach six figures ($222,360, according to the USDA), even before you start looking at the cost of college.  Building up a nest egg of your own also looks pretty daunting; to withdraw $40,000 a year at the 4% ‘safe’ withdrawal rate, you need to have a cool $1 million dollars saved when you say goodbye to your job.  (And that’s assuming that you are retiring in the near future; for those of us with decades to go before we can say goodbye to the working world, inflation is likely to multiply the amount needed for even a middle-class life several-fold.)  Even fun is starting to become expensive; when was the last time you went to the movies without your eyes bulging at the cost of tickets (and popcorn, and sodas…)?

Maybe the tickets wouldn't cost so much if the theaters weren't so fancy

With all these competing priorities, it can be hard to know what should take the highest ranking on your ‘To-Do List for Life’.  As you might imagine, there’s quite a few different theories on the subject, as with most things important in the world.  Here are some of my thoughts on the subject; while your approach might not agree completely, it should make a good starting place for prioritizing your own goals:

1. Don’t Spend All of Your Money Having Fun Now: It’s mighty tempting when you get that paycheck every two weeks (or whatever your pay schedule is) to look at it as your ‘fun money’, and want to spend it all enjoying yourself.  But try to look at the big picture: You want to retire, right?  Help your children pay for school?  Maybe get a nice home on a beach, so you can spend all day lounging in the sun?  If you want to do all these things (and any number of other dreams I don’t have time to mention), you’re going to need money, and that means you need to control yourself in the here and now.  Rather than thinking of all the ways you can spend your money now, try to think about what you can do with that money (and the investment returns you can make on it) by saving and investing it.

2. Saving for Your Future Should Be a High (If Not Your Highest) Priority: There’s a reason that ‘Pay Yourself First’ is such a common piece of personal finance advice: you are increasingly in charge of your own retirement.  Pensions are all but a thing of the past, and Social Security, while not likely to disappear as some have argued, will likely have to cut back payments in the future.  If you hope to have a decent retirement, you’re going to need to make sure that you put saving for your future at the top of your priority list.  This means cutting back on your expensive toys, your fancy trips, and possibly even saving for your children’s college; try not to worry too much about your children’s college, though…

2. Help Your Children, If Possible, But Know They Have Other Options: If you’re a parent, or even just want to be a parent in the future, you probably want to help your children build up funds for college (or other goals that they might have); I know that I do, when I have kids of my own.  For many people, though, there’s simply not enough money in the budget to save for college and retirement at the same time.  If that’s the case, you should always opt for your retirement first.  Your children will have lots of options available to fund college (if they even decide to attend…), from scholarships and grants to yes, student loans.  While it is noble to want your children to start their professional lives without student loans dogging them, it’ll be better for both you AND them if you don’t have to come to them after your retirement and beg for money.  (Plus, if you teach them well, they should hopefully look at paying off their student loans as a challenge to show they are truly mature, not a burden you saddled them with.)

4. Don’t Forget to Have SOME Fun: You might think that, with everything I’ve just mentioned, that I don’t want you to spend a single dime on things for yourself during your working years.  That’s not true at all; while I want you to watch your spending and not spend your money wastefully, I would never advocate skipping out on fun completely.  Indeed, if you did try to become a fun teetotaler, what would most likely happen is one day, you just couldn’t take it anymore, and would end up splurging on something that likely offset most of your progress to that point.  (Think of the people you know who’ve tried an extreme diet, only to end breaking it with some of the most fattening food they could find.)  If you make sure to include fun into your budget planning, you’ll be much better off, and less likely to get frustrated with your budget over time.

There you are, some tips to balance your future happiness, your family obligations, and having fun, all without going bankrupt in the process.

How do you balance all of your financial obligations?

Comments

  1. These are some very valuable lessons to be had in this article. As hard as it may be, I agree that saving money for the future should be near the top of your list of priorities each time you collect a paycheck. The only other thing I would put above it is your current personal health. As for enjoying yourself now, I also agree that you shouldn’t hesitate to spend a little during your working days to take advantage of some of the experiences that are available with those around you like friends and family. But one thing to keep in mind is that personal satisfaction and time off does not come with a price tag, it can be done for next to nothing when you find the right activities. Thanks for sharing!

  2. Since I max out my savings (403B, IRA, & Roth IRA) are a priority, I live on what is left. There is a lot of flexibility in doing that.

  3. @FP Genius: Keeping your personal health high is definitely a big priority, one I’ve mentioned more than once in other posts. I only skipped it here because it’s hard enough to balance savings, family obligations, and fun without adding health (or the myriad other priorities people have) to the mix. I do agree that if your friends and family are frugal as well, it shouldn’t take too much money to have fun with them, as long as you like the same sort of activities.

    @krantcents: That’s a very good plan; if you can afford to max out your retirement accounts and live on what is left over, you can ensure a pretty good future for yourself.

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