It's interesting hearing people talk about why they spend money the way they do. Often I hear that going into debt is worth it in creating great memories now.
Part of me understands what they are saying. They don't want to miss out on the present. But I do feel this can quickly turn into sacrificing the future for the present.
This idea caused me to think about what is more important? The present or the future.
Both Extremes are Bad
I think for most of us it doesn't have to come to sacrificing either the present or the future. Especially if we can get started at a point in the first half of our adult lives.
If we focus on the present, without any thought for our financial future, we most likely will have to work our whole lives. This means less time to do what we want with our time when we are older. We might be able to create more “good memories” in the present, but it ends up making us sacrifice the present for the future.
If we do the reverse, where we focus on the future, we miss out on all of the good memories that can come from the present. We are so focused on where we want to be that we don't enjoy life.
In both cases, we end up sacrificing the same thing: time.
Sacrificing Good Memories In the Future for Now
I dream of being able to spend more time with my kids and possibly grandkids when I'm older. If we focus on the present, this limits our options when we are older.
But it also becomes a math issue. The more we can grow our nest egg for the future, the faster these funds will build on their own. We not only save on interest charges by avoiding debt, but compound interest ends up working in our favor.
By investing in your future, you are setting yourself up to make happy memories later on. It would be a tragedy for someone to prioritize good memories over 10-20 years and have to scrape by the rest of their life because of these choices.
The Present is Not More Important Than the Future
I think it is great to want to create positive memories. Maybe you didn't have many as a kid, and you want to change that for your family.
But when we spend more than we make with the excuse that we are doing it to make good memories, we are spending future income.
Of course, the present is going to look more important until the future rolls around. And by that point, your options become limited. You either have to continue going into debt to make these same memories, or you have to commit yourself to work longer.
I also think it is a bit of a cop-out to assume the only way to make great memories is to spend massive amounts of money. Sure, going on a super expensive trip might be fun. But you are going to be paying for that trip well into the future if you are going into debt for it.
That is why thinking about your spending is vital. You don't want to cut back too much where you can't enjoy life. But you also want to save towards your future. And hopefully, the future looks bright; but if it doesn't, you provide yourself more margin in how to work through a job loss, health issues, etc.
In our case, we are saving money every month as part of our “vacation” fund. Some years we might take a more extensive vacation and increase this amount. Other years we might make smaller trips. But looking at our budget, we still have an incredibly high savings rate; which is what we want, as we try to build our net-worth.
Monthly Payments Limit Your Options
Would buying an RV allow us to create more good memories now? Most likely. But if we went into debt for an RV, the cost of the RV goes up tremendously. And this would end up taking a good chunk of money from our budget every month.
Example total cost of an RV:
- Purchase a new RV for $50,000 and put $10,000 down.
- Take out a loan for $40,000 at a 6% interest rate.
- Monthly Payment: $444.08/mo
- Total Cost of RV: $63,289.84
And these type of costs can end up having a domino effect. If we get an RV that we have to pull, we now need a vehicle that can pull it. We also have to figure out where and how to store the RV. Then you add the maintenance costs for all of this, and the numbers quickly add up.
I'm not trying to say that no one should buy an RV, but when we only look at the monthly payment, we ignore what this money could do on its own if we didn't have to pay interest. In other words, if you are going to buy an RV, it is better to pay with cash.
On top of that, RV's are depreciating assets. From my research, most new RV's are worth about 50% of their purchase price by the 6th year.
It seems Air Stream RV's hold their value for longer, but even those will usually end up losing value.
And if we decided to get an RV, we would have to prioritize our vacations around it. This idea isn't necessarily a bad thing, but I'm not sure we wouldn't rather do other types of traveling.
Balancing the Present with the Future
To me, it becomes figuring out how to get the most of life right now and set ourselves up for more options in the future.
We can do some fun things now and later on. We can take vacations and make fun memories when our girls are young and old.
Recently we just paid off a massive amount of debt. During that time, we took some pretty massive vacations that cost a ton of money and slowed down our progress. But it did allow us to work through this process.
Now that we are at the other end of paying off debt, we have even more room to think about how we want to spend and save our money. It can get overwhelming with what we would like to do:
- More vacations
- Outdoor furniture
- Hot tub
- Signing the girls up for extracurricular activities like swimming, basketball, and softball
- New couch
- New furniture throughout the house
- Possibly getting an RV
The main thing we are prioritizing at this stage is anything we do needs to avoid credit card debt. We'll still use our credit cards, but the balance is set to auto pay off at the end of each month.
So if there is something we both agree that we want, we need to create a budget item where we can save cash for that item. For some these, that could take a while.
We are still having active discussions in which of these things is most important to us, and what we want to do with our budget.
Figure Out What Matters Most
As I've written previously about figuring out what matters most, this is key in figuring out the balance between the present and the future.
There might be times when you decide to spend more money on dining out — or going on more vacations. Or setting aside some money towards your kids' education.
Don't let anyone make you feel guilty with whatever you decide. As long as you are being intentional, and balancing the present vs. the future, that's what matters most.
Can money buy happiness?
In a sense, money can't buy happiness directly, but it can give you more options. Going on more vacations can provide you incredibly happy memories you will be grateful for the rest of your life.
It is true if you have a limited budget, you won't have as many options in what you can do with your time. But that doesn't mean you still can't create great memories; you just have to get more creative.
Having credit card debt can sour your mental state of mind and hurt the relationships that matter the most to you. It becomes harder to go on a needed vacation since you know that money can pay down your credit card debt.
This year I've noticed that I still have the same gut feelings when we go on vacation; that we are “wasting” our money that could grow into a much larger amount. But it is different than in the past because we don't have any credit card debt. To help us get the most out of these trips, we are budgeting larger than normal amounts, so we don't have to worry about money too much. This plan gives us a break from our usual budget. It's a way we are “treating ourselves” with where we are at, and I can tell the family has more positive experiences because of it.
I am working on changing my mind and gut reactions to spending money. I want our family to enjoy and relish the moments throughout life. It's one of the ways we are balancing the present vs. the future.
Everyone Is At a Different Spot
I challenge you to take a close look at where you are at to test to see if you are keeping a healthy balance between the present vs. the future.
Especially if you are married or have kids: is everyone always stressed out about money?
I don't want to develop a gut reaction in my kids to spend as much money as they can, because their childhood was full of “cutting back”. I do want them to be cognitive of their spending, but not to the point where they get paranoid about spending any money.
And that is what this article is about — finding the right balance to optimize life. Sometimes, that balance is hard to maintain, and no one is going to handle it perfectly. But we need to do the best we can.