They say that nothing is certain but death and taxes, and even those can be manipulated or at least influenced by the choices you make.
If anything is certain, it’s that the future is uncertain. It’s unknowable, and unless you have a heavily modified Delorean with a functioning flux capacitor, the future will always be unknowable.
Some people, like those in the YOLO (you only live once) crowd, take that as a good reason or excuse to spend freely while putting little thought into what tomorrow will bring.
Others feel that a future that could bring all sorts of unforeseen changes is a great reason to save now. It’s best to be prepared for the many surprises that life will undoubtedly bring.
How do reconcile these two disparate approaches?
Argument: Spend it All
Tim McGraw is always telling people to live like they’re dying. Actually he says to live like you were dying, but the past tense makes no sense to me in this context, but you get what you get with country music.
Having seen people die, I see this as a recommendation to have at least one large-bore IV, some IV fluids and possibly pressors running, perhaps a breathing tube and/or tube feeds, and of course, visits from family, clergy, respiratory therapists, nurses, and physicians.
That’s not at all how I want to live, but I think what the guy really means is to live as though your days are numbered. Next week may not arrive, so do all the “once in a lifetime” stuff now or you may never do it at all.
It would be a shame to continually postpone every item on your bucket list because now is just not a good time. That Tesla isn’t going to drive itself! Wait, yes, it will, actually. But you’ll never experience autopilot unless you bite the bullet and make that purchase or at least get yourself a lease.
I get the mentality. You’re only young once. Even if you are lucky enough to live for many decades, how many septuagenarians do you see skydiving?
What’s the downside to the YOLO way of life?
Living like there’s no tomorrow can become a self-fulfilling prophecy. Taking unnecessary risks can lead to an early demise.
You only live once, so you decide to climb the highest peaks. You learn to fly small aircraft. You race high-performance vehicles at speeds most cops have never driven. It may be an amazing experience; it could be your final experience.
There’s also the obvious financial aspect that spending it all leaves little for later. I personally challenge high-income professionals to live on half of their takehome pay, a feat that is incongruent with the live like there’s no tomorrow mindset.
I’m not saying you can’t live an exciting, fulfilling life while saving for rainy days, but when you live as if you may not see your next birthday, there’s no incentive to save for a future that may never come.
This puts one on a hedonic treadmill that can be very difficult to escape. Maybe it’s better to live like we’re living and not like we’re dying, after all.
Argument: Sock it Away
A prudent person puts an emphasis on saving for that unknowable future.
Do you realize how much money one needs to save up to live the good life indefinitely? Using the 4% rule of thumb, a lifestyle spending $100,000 to $200,000 a year requires $2.5 Million to $5 Million. That’s a lot of money!
The better you are at earning and saving, the more quickly you’ll reach your financial goals. Then, after years of thoughtful thrift, you can consider spending a bit more on yourself.
Is two-and-a-half to five million dollars enough, though?
What if inflation continues at 8 percent? What if the vasectomy fails and you have triplets? What if you lose your job, your spouse, or your left arm?
Certain insurances, attorneys, or prosthetics could lessen the financial blow of these calamities, but these hardships are going to cost you some money, not to mention mental and/or physical anguish. All the more reason to save for many tomorrows. The future is scarily unknowable.
Living with an unhealthy fear of what next year could bring can absolutely help boost your savings rate and lead you to financial independence sooner. But what kind of life are you living before that day comes?
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Clearly, both approaches have their flaws.
The ardent YOLO crowd doesn’t have financial goals, let alone a plan to achieve them. Their life choices could even result in an abrupt life-changing or life-ending disaster.
The supersaver who always prioritizes the future never gets to enjoy today, and if that pattern never changes, life will never truly be enjoyed.
Few people fully embody one way of life or the other; most of us tend to identify more with one camp, but ideally we incorporate the best elements from both.
What are the best elements?
One of the best elements of the “Spend it All” philosophy is the enjoyment of the present. Luckily, there are ways to be happy in the present without spending every dollar that comes your way.
Spend time doing things you like doing with people you want to be around. Take time for yourself and treat your body well. Get some exercise, eat reasonably healthily, but take some time to relax and eat some of your favorite junk food, too, because you never know when you might get to enjoy it again.
The “Sock it Away” philosophy is future-focused, and the odds are that you’re going to have a long future. A 40-year old can be expected to live into his or her 80s, on average, if not longer.
Live and save as though a long life is the most likely outcome, because it is. Keep in mind, though, that if you’re miserable in the present, something’s got to change.
Take care of yourself. Take care of your future self. You never know what that future you might want or need. After all, the future is unknowable.
Who do you treat better? Your current self or future self? What has helped you achieve a healthy balance between living for today and saving for tomorrow?