Here's the latest post in the Rockstar Finance Money Match-Up series where two money bloggers argue opposite sides of an issue. Today's issue features a unique debate -- should you live your dream life now or later? We'll begin with Janet from My Twenty Cents who thinks you should live your dream life now...
Why You Should Live Your Dream Life Now Instead of Waiting For Retirement
I consider myself a frugal person and I try to save money whenever I can. However, when it comes to expenses related to living my dream life, I don’t try to save money at all. I am willing to dish out extra cash in order to live a better lifestyle now, rather than waiting 30 years down the road for when I finally retire. Here’s why: 1. Travelling is more meaningful when you’re young Many people dream of travelling the world once they retire. I argue that people should travel when they’re young, even if it means using up their savings. You can always earn the cash back later, but time is something you can never get back. If you wait until you’re retired to travel, your expenses will get really high because you’re used to another level of comfort. When you’re in your teens or early 20’s, travelling is cheap and easy. You don’t mind sleeping in a dirty hostel with other smelly backpackers. But, once you’re retired, can you really imagine yourself staying in one of these establishments? Chances are, you’re going to want to stay in a pretty luxurious (or at least comfortable) hotel. And those luxuries come at a premium price. Further, travelling is about making connections and trying new experiences. Travelling has played a critical role in helping me discover who I am and make sense of what the meaning of life is (sounds so profound, doesn’t it?). When I travelled when I was younger, I tried so many new (and slightly dangerous) things such as skydiving, surfing, and hiking active volcanoes. I imagine it would be pretty tough to convince my 65-year-old self to do the same thing. Not to mention, at 65, my body just won’t be as energetic and robust as it once was. 2. It’s harder to learn new skills when you’re old A lot of people are waiting until retirement to pick up new skills or hobbies, things like learning a new language, musical instrument, dance, or some DIY craft. I believe it’s better to pick these skills up when you’re younger, even if it means spending a little extra time and money now. Why? The earlier you learn a new skill, the more years you will have to benefit from it. For example, I learned French when I was 8 and I have used it practically my entire life. My parents also sponsored me to do an exchange to Paris where I perfected my French. My French skills have come in pretty handy whenever I travel. It’s also helped me to find jobs and relocate to Europe. If I had waited until later to learn French, then I would have missed out on some pretty awesome experiences. For one, I would never have been able to achieve my current dream life of living in Switzerland! Also, it’s been proven that as you get older, it gets tougher to learn new skills. Your brain takes longer to process new information and reaction times get slower. Save yourself the trouble and start learning now! 3. You can never truly plan for the future You never really know what the future has in store. Sure, you can plan to retire at 65, but so many uncertainties come into play. Most often than not, your plans will get sidetracked. The only certainty you have is your current life situation and decisions that you make now for the immediate future. Also, not to sound cynical, but there’s always a chance that you may never live to see retirement. I don’t know about you, but I’d rather die having lived a life full of memories than sitting on a pile of cash. 4. Life is too short to be unhappy Making sacrifices now in order to save for retirement will leave you unhappy. Every time you think about the dream vacation that you’ve put on hold or the dream house that you didn’t buy, feelings of dissatisfaction and unfulfillment will come up. These feelings only get stronger and stronger with time. I think that’s the main reason why so many people have mid-life crises. Because they waited too long to realize their dreams. If you start living your dream life when you’re young, you can avoid your mid-life crisis altogether! 5. Lastly, living a life of regret sucks There are a handful of things in my life that I regret, and all of them have to do with the fact that I forewent an opportunity in order to save money. I still remember when I didn’t go on my eighth-grade field trip to Quebec just because I wanted to save $500. Now, looking back, $500 is chump change. But I will never be able to go back in time and share those memories with my classmates ever again!
I’d like to end off with a quote: “Our biggest regrets are not for the things we have done but for the things we haven't done.” – One Tree Hill Live your dream life now and worry about the rest at retirement ;)! ------------------------------------------------------------------ Now let's hear from Jerry at Peerless Money Mentor who thinks you should wait for your dream life...
Why You Should Live your Dream Life Later
If you are not financially independent, I believe you should live your dream life later. Delaying living your dream life now can allow you to live a life few get to live later. A debt free life, where one does not have to worry about money. A life where your FU Money cup runneth over and you can choose what projects you want to work on. A life where you are free to cruise the world for a few years, if that's what you choose to do! If this sounds like a dream life to you, then you must make some sacrifices in the present. I know, 'sacrificing" sounds like you will have to give up all your fun. While I do believe sacrifices have to be made, I believe you should enjoy life while living below your means. This mean avoiding lifestyle inflation as much as you can. And saving and investing money to become wealthy. Investing money means you are using the power of compound interest to your advantage!
Avoiding Lifestyle Inflation
Lifestyle inflation - choosing to increase your spending as your income rises. Those at the bottom of Maslow’s Hierarchy of Needs can use some lifestyle inflation. But for the rest of us, we can choose to minimize lifestyle inflation. Choosing Now A person who wants to live their dream life now welcomes lifestyle inflation with open arms. Whenever they get a raise, they give into the temptation to purchase the following:
- Brand new dream car
- Brand new phone every year
- Trips they cannot afford
The person above then wonders to themselves, "Why can't I get ahead?" Financial freedom seems elusive to them, reserved for a privileged few. But if they took some time to really think about it, their financial freedom is right under their noses. Sitting in their garage. In the palm of their hands. Or they traded it in for that once-in-a-lifetime trip to Dubai. Choosing Later On the other end of the spectrum, we have the person who chooses to live their dream life later! Instead of welcoming lifestyle inflation with welcome arms, they choose to defiantly fold their arms. "Lifestyle inflation will not steal my financial freedom," they say to themselves. The car they purchased (if they purchase one at all) is used. They say no to upgrading their phones every year to the "best ever" model. Instead of taking that once-in-a-lifetime trip to Dubai, they create a vacation fund and choose an affordable trip. They consider the opportunity cost of purchasing things they cannot afford. Instead of purchasing depreciating assets, they choose to save and invest to build lasting wealth!
Saving and Investing
Choosing Now A person who wants to live their dream life now does not save and invest for the future. They have a literal interpretation of the expression, "Let us eat and drink, for tomorrow we die." Their myopic vision prevents them from seeing all the living they have to do before they die. This way of thinking leaves them vulnerable to financial ruin. When an emergency occurs, they reach for their Chase Freedom card. Sadly, their chase freedom card keeps them from achieving financial freedom. Choosing Later The person who chooses to live their dream life later chooses a different path. A path laid out by the personal finance community that involves saving and investing! Instead of saving less than 5% of their income, they choose to be different than most Americans. With each pay increase, they choose to allocate more of their income towards savings and investment vehicles. Some of the things they choose to save and invest in are:
- Health Savings Account
- Emergency Fund
- Retirement Account
- Real Estate
- Index Funds
- Opportunity Fund
Whenever they have an emergency, they have access to an emergency fund. Having an emergency fund prevents them from relying on credit cards. This saves them from having to pay interest! Being frugal as opposed to frivolous with their money allows them to unlock the power of compound interest!
Power of Compound Interest
The person who chooses to live their dream life later has special access to the power of compound interest. By diligently investing in the market, their wealth grows substantially over a long period of time. For example, if you invest $500 a month into an investment account for 30 years with a rate of return of 7%, you would end up having $574,078! *Above example assumes 2.9% inflation rate and 15% tax bracket. * Now imagine taking on a side hustle to invest more money into the market. You could speed up your journey to financial independence and/or early retirement. The person who is busy living their dream life now does not have that option!
Living your dream life later rather than now is a wise money move. Don't be that person who chooses to live their dream life now, only to end up Broke Phi Broke later. Instead of giving into the temptation to live beyond your means, choose to save and invest more today. Use the power of compound interest to your advantage. Your future, wealthier self will thank you later! Choose wisely. :) ------------------------------------------------------------------ So, those are the two sides of the issue. What do you think?