Wanting to live well in the moment while saving for an enjoyable retirement can be a financial conundrum. The good news is, it is possible to do both. Balancing these two needs simply means making sure you are keeping your financial house in order while you are enjoying your lifestyle. Individuals can learn to balance these two often-conflicting aims—lifestyle goals and retirement goals—by using the following four-step process:
1. Assess Your Situation
Begin with analyzing the way you live now. One way of doing so is to make a list of questions to ask yourself. This simple test might be called the "happiness barometer." Examples include the following:
- Am I happy with my current lifestyle?
- Do I feel I have enough financial resources to sustain my lifestyle?
- Am I enjoying life?
- Are there things I want to be doing, but have not yet begun to pursue?
- Am I living where I want to live?
- Am I driving the kind of car I would like to drive and, if not, how important is that?
Then take a look at your finances, and add questions to your list such as:
- Am I saving enough for retirement?
- Am I able to pay my bills on time?
- Do I have enough disposable income?
If you answer "no" to a number of these questions, then you may need to revise some of your goals, change your lifestyle, or both. These revisions should focus on needs versus wants in your life.
- In order to assess your financial situation, ask yourself questions about how happy your current lifestyle makes you and how you're handling your money.
- Develop a new lifestyle and retirement goals if your current ones are incompatible.
- Design a strategy for ensuring our goals can coexist, and be sure to check and update your plan every three months.
2. Develop New Goals
If you find a disconnect between your lifestyle goals and your retirement goals, it very likely means you need to either develop new goals or revise your existing ones. Make sure that these goals are realistically based on your financial resources. Again, you will need to distinguish your wants from your needs.
To help you keep on track with your lifestyle goals, make a written list of the things you want to do—a list of things that could make your life more pleasurable. This "pleasure list" can include, but is not limited to: hobbies you'd like to pursue, places you'd like to go, restaurants you want to try, places where you want to live, the kind of car you want to drive, and charities you'd like to support.
Review and assess your retirement goals to determine whether you are on track with your projected financial needs and objectives. This includes reviewing your budget and making any necessary revisions.
If you have not yet established retirement goals, now is the time to do so. If you need help with this, seek out a qualified financial planner.
3. Devise a Plan
Once your lifestyle and retirement goals are in place, the next step is to determine whether they can coexist. Incorporate the two sets of goals into your budget and add dollar figures for each lifestyle goal. This is one of the key areas where you will begin to make any necessary adjustments by cutting out non-necessities.
Do not jeopardize your retirement goals. Instead, cut back on less-important budget items. For instance, a lifestyle goal may be to play golf one Saturday each month. If your finances fall short of allowing you to enjoy this hobby, don't remove it from your list. Look elsewhere in the budget for a source of funding. For instance, you may find that taking leftovers to work instead of buying your lunch two or three days a week could increase your disposable income.
Review each lifestyle goal and determine what it is you need to do in your budget to make this goal achievable. The idea is to make your budget work for you and not vice versa.
4. Monitor and Reassess
After you have put your plan into action, check at least once every three months to ensure the plan is on track, and then reassess your goals, objectives, and budget at least once each year to determine whether you need to make any changes. Monitoring and reassessing may need to occur more often if you are falling short of your goals and objectives.
Make sure to determine what went well, what didn't, and what you need to change. As you go through this process, you will find that your lifestyle and retirement goals may also change. Be willing to adjust, but be hesitant to abandon important goals. Be persistent in going after what you want.
The Bottom Line
To balance living well now with retiring well, begin with an assessment of your current situation. Then develop a new set of lifestyle goals to achieve what you want. Put a plan in action by determining how you can achieve your goals within your budget, and finally, monitor your plan on an ongoing basis.
Over time, if you're sticking to your goals and objectives, you should find that your quality of life—and the comfort factor of knowing you'll have enough to retire—will improve.