How do you choose where your money goes? How do you balance the needs of today (1 choice) with the needs of tomorrow (choice 2)?
To me, this is the first problem with retirement planning. I may feel like I need the money more today than I will in the future. Do I fund that IRA, or take the vacation to the beachside rental home? Enjoy dinner out tonight, or put $50 more in the Comfort-cash fund?
Life often presents us with choices that appear to be 2 sided—this or that. In reality, the choices are multi-sided in a surprising way– like a gemstone that has many facets. Turn it one way, and it glitters one color. Turn it another way, and it shines with a different sparkle and hue.
So, what about making choices for our money? How do we strike a balance that honors multiple goals? Let’s take my example of whether I should fund my IRA or take a special needed vacation.
Do you think the answer might be either/or, yes/no, have/can’t have? Let’s put on our sparkling gemstone-covered hat and look at some of the other angles.
- First, identify your needs and wants in the situation. You might even want to rank them 1-5 in order of importance or priority.
Ah, that’s pretty easy. I both need and want a vacation. Maybe it’s a #4 rank. I both need and want to contribute to my retirement fund. Maybe that’s a #5. Since both the numbers are high, that means I will want to satisfy multiple goals and do both somehow.
- Be creative. Brainstorm win-win solutions. Do some mind-mapping.
Maybe the IRA doesn’t get funded all at once, but I make a down payment on the $5,500 IRA limit per year. Maybe I look at my cash flow to see if there is a leaky trickle that can be stopped and sent to a better use. Perhaps additional work or selling an unused asset can help raise funds to pay for these multiple goals.
The vacation might have to compromise too. Put it off a month? Do a home exchange instead of a home rental? Go camping and/or stay with friends? Shorten the length of time for the trip? Explore ways to get that vacation feeling even if I don’t get away for a trip?
The choices we have are almost infinite. When we take the time to both feel and think about how to “have it all” the universe can open up with possibilities.
Retirement planning is especially prone to getting short-changed if we focus exclusively on the needs of today. Just remember your future self will have needs too, and may not be able to work at a job later. What you set up today will help pay for her food, housing and lifestyle.
Now it’s your turn. How can you satisfy the needs of your future self as well as your current life? Where are you feeling an either/or limitation with your money? How can you put on the sparkle cap and satisfy both your short term needs as well as your long-term needs?
Chartered Retirement Planning Counselor