The Battle between your Present and Your Future Self

by Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

Determining your financial priorities is like having a battle between your present and future self. Decisions that make your present-self happy and content might have dire consequences for your future-self.

Conversely, you don’t want to torture your present-self for the chance to be happy and prosperous in the distant future.

We’re raising a young family and with that comes a host of competing financial priorities to balance today. It’s easy to think we can put off saving for retirement, or even the next big purchase, until later in our working years when we’re more established in our careers and the pressures and impact of child care is lessened. But that means screwing over our future selves – making life more difficult tomorrow due to our choices today.

Related: How much of your income should you save?

What are we struggling with? A mortgage, car payments, rising grocery bills and insurance, to name just a few. Not to mention prioritizing paying down the mortgage faster while contributing to our retirement plans, squirrelling something away inside our TFSAs, and saving for our children’s education.

And after a demanding week at work, coupled with a hectic schedule of kids’ activities, we want to unwind with a glass of wine (or three) and find something not too terribly expensive for the family to do on the weekend.

Come summertime, with the kids out of school, we’re ready for a holiday. Our Facebook feeds fill up with pictures of friends enjoying exotic vacations and trips to Disneyland. There’s pressure to compete, but we’re content with a week renting a cabin in the Rockies, which is more our style.

I often wonder how others seem to be able to do it all. The big house, two new cars, maybe a boat or an RV, kids in multiple activities, dining out two or three times per week, plus a time-share or vacation property to boot. Present-self must be elated.

We make some difficult choices with our discretionary spending, often foregoing certain activities such as a concert, an impromptu trip, or an expensive meal, because we simply can’t make it work financially.

20 to 25% of income committed to Future Self

But then I remember that we’ve already made a deal with our future selves by committing 20 to 25% of our income toward saving and paying down debt. That money is earmarked in our budget just the same as any other fixed expense, like the mortgage, utilities, and insurance.

Related: Financial Independence – why I pushed it back five years

So while we have to compromise on how to spend the rest of our income, it’s comforting to know that we’re not just spinning our wheels. Our financial plan is moving us forward to help us reach our goals, even though it sometimes feels like we’re struggling to get ahead.

We make savings a priority because we know tough choices will always be there when it comes to our discretionary spending. Let’s be honest – if we didn’t prioritize some money for saving, and suddenly had an extra $2,000 per month unaccounted for, we’d probably find a way to spend it (while still wishing we could afford that trip to Europe, or a cabin by the lake).

The Power of Paying Yourself First

This is why the pay yourself first concept is so powerful. We have this amazing ability to adapt our spending to the income coming into our accounts. Sure, we’ll spend every penny in our account once it’s there, but usually no more. So if you’re in the habit of automatically whisking away 5 or 10 per cent of your paycheque into savings or extra debt payments, you’ll barely notice that your account is a bit lighter at the beginning of the month – you’ll simply adjust your budget, either mentally or on paper, and carry on.

It’s a tall task to strike the right balance between your present and future needs. It’s not really a fair fight either because your present-self is in control today. Having a written plan helps, as does automating your savings with the right amount to match your goals.

As for the rest, spend and enjoy it. If you’ve made future you priority number one, your present-self deserves some love too.

In addition to running the Boomer & Echo website, Robb Engen is a fee-only financial planner. This article originally ran on his site on May 17th and is republished here with his permission.