Life is Short- Spend for Today vs. Save for Tomorrow
Can you believe how much of your life has already passed? F-word, man. Summer has for sure faded and we’re smack dab in the middle of fall. This time of year always gets me thinking, usually about random stuff like the eternal expanse of space or wondering what the ancient Egyptians were really like but sometimes I think about money questions. Questions like should we be in camp spend for today or camp save for tomorrow? Tomorrow isn’t guaranteed and life passes us by at breakneck speeds, even if we are lucky enough to make it to this mythical tomorrow.
Mrs. Burrito Bowl and I have a solid life routine down, at the moment. Mid-December that all changes when Baby Burrito Bowl makes her long awaited arrival. For now, though, we have a solid routine. Each day mirrors the previous day almost to a T. Whether I’m closing the curtains as the last thing I do before getting into bed or opening them when the 5:30am alarm starts ringing, I’m always surprised how quickly each day and night goes.
The Days are Long but the Years are Short
I’ve heard it said that the days are long but the years short. This scares me because, while I do feel like the years are short, I also feel like the days are short. I feel like life is passing at 1.25 speed. As of now I rarely have to clean up poop so maybe that will make each individual day feel longer.
As each day passes and we go from weekday to weekend and back again, I’m cognizant of just how quickly my life is passing. Are we doing what’s best for our short time here on earth? Are we taking full advantage of this crazy wonderful stressful beautiful life? Should we err on the side of living in the moment or hedge our bets on saving for tomorrow? Are the Patriots going to beat the point spread this week? You know? Big life questions.
Benefits of Spending for Today
I don’t blame people who choose to live each day to the fullest but ‘live like each day is your last’ is a stupid slogan. Who the hell would go to work on their last day of life? There is no practical way to live each day like it was your last, unless you just want to eat at Sizzler for literally every meal. I don’t know what to do when people give me that advice other than rob them.
Assuming you don’t live each day like it was literally your last, but instead just enjoy each day to a slightly elevated level, let’s look at what that looks like. If you’re spending for today it means you’re going on the big trips you’ve always wanted to, whether you can easily pay for them or not.
You can’t take money with you so you might as well spend it, right?
Who knows if you’ll even be able to travel when you’re older. If you dislike your job you’ll be a lot quicker to quit and find something new. Life is too short to work in a job you hate.
Spending for today means more eating out, ordering a cocktail or two with dinner instead of just water. What difference is that extra $20 really going to make in the long run? Shoot, get dessert while you’re at it.
If something happens and you die young you’d be really happy you took this approach to life. How depressing it would be to have saved and saved your entire life only to die right before you got to enjoy the fruit of your labor.
Spending for today is a lot of fun. You get to immediately scratch that itch that says, “I want THAT!” It’s not all pizza and ice cream, there are drawbacks to the spend for today strategy.
Drawbacks of Spending for Today
The main drawback of spending for today is eventually the day comes that you actually have to pay for all your spending. Usually that day is not the day you got the enjoyment. Sure you had to pay for your cocktails and fancy dinner out as soon as you were done but you didn’t really have to PAY for it until you paid off your credit card and noticed you were in the red.
The other drawback of spending for today won’t catch up to you for several years, maybe even decades. It happens when you’re older and can’t muster the same workload you used to be able to. Some will want to retire, or at least cut back on work, but can’t. They don’t have nearly enough saved for retirement because saving wasn’t a priority. Being able to pay the bills is a good start but we need to get around to setting some aside for tomorrow.
Most people don’t worry about retirement because they have more pressing matters today, and tomorrow is decades away. Until it isn’t.
One day you’ll wake up, open up the curtains like you always do, and notice that you’re not as young as you once were.
One of the scariest drawbacks of spending for today is if you don’t die young. What happens if you live to the age when you’re ready to take it easy, but instead of spending the next thirty years of your life traveling and playing bingo, you’re stuck in a fast food drive-thru handing out chocolate shakes because that’s all you can get hired to do?
That’s an extreme example, obviously, but what is the long term plan for those who don’t get around to saving any money?
Benefits and Drawbacks of Saving for Tomorrow
The polar opposite of the spend for today crowd is the save for tomorrow crowd. They basically have the opposite life approach from the spend today crowd so I’ve combined this into one section. Team save for tomorrow is mostly the camp Mrs. Burrito Bowl and I are in. Nobody is 100% on either side of the fence, well actually, nobody is 100% on the save for tomorrow side of the fence. Plenty of people are more than 100% on the spend for today side.
If you save for tomorrow it means you’re cooking more meals at home, even though you’d rather eat out. When you do eat out you’re thinking hard about the value you’d get out of a cocktail or a dessert compared to how much time it will take you to earn that money. You’re taking fewer vacations and when you do you’re trying to optimize the money you spend.
Fun Fact: If you’re saving for tomorrow you are much more likely to be able to afford a more expensive vacation.
The benefit of saving for tomorrow means that when tomorrow eventually comes, you’ll be ready for it. Not only that, but if you’re hardcore about saving for tomorrow, it will come years earlier.
Why People Choose to Spend for Today
So if saving for tomorrow is clearly the smartest way to live long term, why do so many people spend for today? A big issue with most people is the timeframe is just too large to fully grasp. The spend for today crowd tend to think the save for tomorrow crowd won’t start to see any real benefit from their savings until decades from now when they are old and feeble. Who cares what life is like at that point? I would be very tempted to be in the spend for today crowd if I thought saving for tomorrow wouldn’t start paying off until I was pushing seventy.
The truth is, saving for tomorrow starts paying off right away. Mrs. Burrito Bowl and I no longer have financial stress in our daily lives. We don’t have to seriously worry about losing our jobs. We can put food on the table and pay rent for a long time even if we stopped working right now. We’ve skipped enough vacations and cooked at home enough times and saved enough pre-tax money that if we never invested a single penny again (as long as we don’t tap into our retirement accounts) we’d be set financially by the time we reach traditional retirement age.
This alone is such an enormous benefit that even if I do end up dying young I still think saving for tomorrow was the smart play.
Nice restaurants are fun but so is not being stressed out about paying the bills.
The other huge benefit of saving for tomorrow is that tomorrow can come much quicker. We don’t plan on working at a job we dislike until we’re sixty-five. We plan on either retiring completely or, more likely, finding work that fulfills us even if it doesn’t pay very much by the time we’re in our early forties. We’re working hard at saving for today so that tomorrow comes sooner.
We want to be able to go to our kids’ games and recitals and be there when they get home from school. I’m happy to skip out on as many lunches at Applebees as it takes to make that happen.
Most Spend for Today People Don’t Think They Are Spend for Today People
I would venture a guess that the average American doesn’t really consider themselves frivolously spending for today. Most people are doing everything they can just to pay the bills. It takes a lot of self-reflection to recognize the parts or our lives that we are venturing into spend for today territory.
Even if you don’t have dual incomes, or a high paying job, you can sock some money away. Every little bit counts. That voice that tells you spending $20 on cocktails won’t make a difference is wrong. We develop habits that, if left unchecked, continue throughout our lives. It’s not $20 on cocktails one time. It’s $20 every time you go out to eat.
Maybe for you it’s $160 here and there whenever you see a cute pair of boots you don’t want to pass up, or a new power tool that you just have to have. It all adds up. You don’t have to deny yourself at every turn but you do need to deny yourself when what you’re about to purchase won’t actually make you any happier.
Tangible Ways to Save for Tomorrow
Maybe you don’t want to retire early or you find that goal too unrealistic to even bother considering. You’re still going to grow old. So what can we do to make sure we are at least prepared for tomorrow?
The first step is to pay yourself first. Even if you don’t plan on retiring early it’s absolutely critical that you put money away for when you’re older.
1. If you work for a company, ask about their employer match.
Many companies will match your 401K contributions up to a certain percentage. Usually 50% of the first 6%. For the love of all things good and holy, please contribute at least that amount.
IT’S FREE MONEY!
Your employer is just giving you extra money just for taking the initiative and saving some of your own money. Plus, it’s pretax. If you don’t save it for yourself, the government will take it off your hands.
2. Contribute to your IRA.
IRA stands for Individual Retirement Account. We use Vanguard for our IRA accounts but there are a bunch of places you can go to open one. With an IRA your two choices are Roth and Traditional.
Roth vs. Tradional IRA Just Real Quick
You have two choices with an IRA- ROTH or Traditional. A Roth IRA is after tax. Your paycheck gets taxed and you contribute that after tax money. That money grows tax free. You can take out the amount you put in at any point tax and penalty free but you can’t take out the gains until age 59 1/2, unless you pay the penalty. Traditional IRA is before tax so you get to contribute pre-tax money. The downside to a Traditional IRA is you’re taxed when you take the money out after age 59 1/2. Unlike a Roth IRA you cannot take the amount you put in out until age 59 1/2 or you’ll have to pay the taxes in addition to a penalty. For 2018 the contribution maximum is $5,500 for either Traditional or Roth IRAs. You can do all into one account or a combination of the two. To max out your Traditional IRA you’ll need to earn $5,500, since it’s before tax. To max out your Roth IRA you’d need to earn closer to $7,000, depending on your tax bracket, because that $7,000 is taxed down to the $5,500 you’re contributing.
That’s it. That’s all you have to do to protect future you. First, contribute up to the company match on your 401K. Next, max out either your Roth or Traditional IRA. If you just do those two things, every year, you’ll have plenty of money whenever you get to traditional retirement age. This is assuming you start putting money away in your early thirties or sooner.
If you’re already in your late thirties or older, and haven’t contributed anything to retirement, you’ll need to play catch up. Don’t feel left behind, most people need to play catch up.
3. The next step is to max out the rest of your 401K.
In 2018 you can contribute up to $18,500 pre-tax into your 401K account.
If you start contributing just $6,000 per year at the age of 30, you’ll have over $829,000 by the age of 65 assuming a 7% interest rate compounded annually.
If you don’t start until you’re 40, you’ll need to contribute about $13,200 per year to reach that $829,000 mark by the time you’re 65.
“I can’t afford to contribute $6,000 per year! That’s a lot of money Burrito Bro…”
First of all, it’s Burrito Bowl, bro. And, look, I get it. Finding $6,000 dollars to invest is a lot of money. Very few people just have that much laying around unless they’ve been very intentional with their spending and earning. Here’s the deal, though. Tomorrow is coming.
Not contributing to your retirement because you can’t afford it is like not paying your heating bill when it’s January and you live in North Dakota or not plugging a hole in your boat because you’re too busy fishing.
Not doing fun things because you have to save money is not ideal but having your boat sink is even less ideal.
Tomorrow is coming whether you’re prepared or completely unable to handle it. It’ll be winter soon whether you have heat in your house or not. Do whatever you have to do to make sure you’re hitting that $6,000 per year goal. That’s $500 per month. Pick up a second job, work extra hours at your regular job, find ways to spend less. Do whatever you have to do to make sure you’re putting something away for the future.
Places to Save Money
The average American household spends just over $3,000 per year eating out, $500 per year on alcohol, $3,000 per year on entertainment, $1,000 per year goes to random miscellaneous and nearly $11,000 per year go to taxes. Driving around costs the average American over $9,000 per year. Eating at home costs a fraction of what eating out costs. Driving a reliable but used car saves thousands per year over buying new. Contributing to pre-retirement accounts means you pay substantially less in taxes.
You don’t have to sacrifice everything in order to save for tomorrow. Eat out less often or consider sharing a meal when you do go out rather than each getting an entire dinner. Don’t waste $12 per cocktail when you could easily make it at home for about $2. If you get a lot of joy out of ordering a cocktail at a restaurant just have one, not six.
You get the most joy of the first one, less out of the second, and by the third cocktail you hardly notice a blip on your happiness meter. Each one still costs the same $12 though. I enjoy having a beer when I’m out at a restaurant, but when you can buy an entire microbrew 6-pack for the price of one shitty domestic brew at a restaurant, it becomes a clear value judgement.
People find ways to pay for things they want.
Maybe it’s a lift kit on a pavement-only truck, or a four-bedroom house when it’s just one person and a cat. Other people spend their money on yearly vacations to Hawaii when they haven’t even maxed out a single retirement account. Do you want toys now, or a secure retirement later? Come on people!
You can do it. It’s incredibly important that you plan for tomorrow by making small changes in your daily life.
Tomorrow is Coming
Set. Slap. Some. Slap. Money. Slap. Aside. Slap. For. Slap. Tomorrow. Hug.
I’m not very passionate about much. I’m super passionate about trying to get people to save for tomorrow. The thing is, a lot of the people I love the most are entering into that tomorrow stage of life. They aren’t old and feeble, they’re just a little bit older than they were yesterday. They want to travel and relax and eat steak just as much as I do. Their desires for the good things in life don’t wain just because they can no longer run a 7-minute mile.
Some of them are prepared for this stage of life, and some of them aren’t. The idea that you’ll just deal with how to make ends meet when you’re older is asinine. You’ll have the same desires you have now but you might not have the energy or ability to earn the money needed to go on those trips or drink those fancy cocktails. You might not even have the skills needed to pay for your basic necessities. Then you’re really stuck.
I can’t imagine what the work force will be like when I’m seventy. There’s a good chance my skill set will be virtually obsolete.
Give yourself a fighting chance at having a successful future. Start saving some of your hard-earned dollars today so that you don’t have to worry about handing out milkshakes to teenagers with mullets when you’re older.
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I think another part of the problem is people don’t think saving long term will benefit them at all. Now you get the BIL story. Many years ago my one BIL was complaining how he couldn’t save any money and would have to work forever because he couldn’t save enough to retire. “Can you save $25 a week?” I asked. He thought about it for a moment, wondering what I was getting at, then said, “Yeah, I can.” “That’s roughly $100 a month or $1200 a year. It will be enough to get you started.” “Phfft!” he scoffed, “that’s not real money, I can’t retire on that!” He pretty much ignored anything I had to say after that, going off to talk football with other family members. Five years later, another big family gathering, and he is again complaining how he has no money saved and won’t have anything for retirement. “Can you save $25 a week?” I asked. “Yeah,” he replies, then adds “Hey, didn’t we have this conversation before?” “Yup,” I said, “and had you listened to me back then you’d have over $6000 in the bank today.” “Phfft! Still can’t retire on that, that’s not real money,” he said. “Okay,” I said, “you aren’t hearing me. The point isn’t how much in a single year, or ten years, it’s how much in 30 or 40 years. On top of that there is no law saying you can only save $1200, that’s just a start point. Add $5 a week, or if you get a 3% raise, add 1% towards the saving, and after five or ten years you’re saving much more than just the $1200 a year.” “Still can’t retire off that,” he said stubbornly. I sighed. “Look, you can retire with nothing but social security, or with something, your choice.” Just then something exciting happened in the other room, a touchdown or turn over in the game being watched, and he promptly broke from our conversation to pursue more immediate things. Twenty years later, he still has no significant savings, but is now really getting scared because he turned 50 recently. He never connected that saving or paying off the credit card for that $4000 Plasma TV, or the $2000 Guitar he wanted, is really no different than saving for retirement just over a longer time span. At its simplest it’s making payment towards your future over the long haul. $1200 a year at 5% over 40 years is around $145K. He would have stubbornly claimed he couldn’t retire on that. I would point out that having being 65 and having $145K is better than being 65 and having 0 in that it gives you some options.
Yes! It’s so frustrating talking with people who refuse to save ANYTHING because they can’t save EVERYTHING. It’s the same with exercise. People don’t want to get started because they can’t commit to exercising two hours every day. You don’t have to become Mr. Olympia but if you start taking care of your body you’ll be better off than if you don’t. Thank you for the comment!
Today I rode a camel 🙂
Good work.
I think the key is realizing that you don’t need to spend a lot of money to be happy. It’s not spend today or spending tomorrow but rather realizing you don’t need to spend a ton of money now or later. Find the pleasures in life that don’t cost money and the more you find the less you’ll think about those things that do cost money. Turn on music, light a candle and cook a gourmet meal at home. It may be a whole lot more fun then subpar food at the restaurant you think you want to go to.
Agreed! I’m a sucker for a nice candle. Realizing you don’t have to spend money to be happy is the ultimate life hack
What is your preference? Roth IRA or Traditional IRA? Found your blog through Rockstar Finance today which had your article linked. I enjoyed the article a lot! Thanks
Thanks Oscar! We were just talking about Roth vs. Traditional IRA. The Madfientist has a great article detailing the pros and cons of each and he shows that you’ll wind up with way more money if you put it in Traditional IRA rather than Roth IRA. That being said, if you think you might want access to that money in the next several years you’d be safer to go the Roth IRA route. I think the general rule of thumb is if you think you’ll be making more money later in life when you’re ready to take the money out, and thus be in a higher tax bracket, it makes sense to go with Roth IRA since you get taxed now. If you plan on retiring early, or at least cutting back on work, and will be earning less money later on then you should go the Traditional IRA route and take the tax break now.
I know exactly how you feel with this. We must know some of the same people. I run a production facility outside of the pdx area and I have been trying for years to get my guys on board with the “save for later” idea and contribute at least enough to get the ‘FREE’ mtach and that has been so hard. I feel like doing your SLAP routine as well sometimes.
We had our first and only baby burrito a few years later than you two but I definitely think that your comment about the days are long and the years are short seems to happen. It definitely goes by quick. She is 9 already going on 13. We definitely changed a lot of things to Save for tomorrow after she was born and now we are in the same camp as you that we could stop contributing to our 401k and as long as we don’t touch we would be fine.
When I find good articles I print them out and give them to my crew to help encourage Save for Tomorrow. I am going to print yours off.
Thank you!
Thank you Steve that means a lot! I agree with you that it’s frustrating trying to convince people to save some of their money for a rainy day. That’s great that you’re taking an interest in the future of your workers! Keep it up, they’ll thank you one day for it!
(I am still chuckling over your “slap” statement). Have a friend that started work as a lawyer 2 years ago, her company doesn’t yet have a 401k set up, and she has NO idea what her budget is like. I want to sit down with her and go through it and have her start a ROTH IRA and IRA as soon as possible!
She’s my friend, is getting married in March- but has excess income.
She’s also a chocoholic, so I may do the carrot method, instead of the stick. “Jess, if you set up a ROTH and start funding it now with automatic withdrawals, i will make you this delicious french chocolate cake”.
Your point about 100%+ on the “spend it today” camp vs no one is on a 100% save for tomorrow camp is an interesting one-but now that I think about it, yes, you are right. 100% save for tomorrow would mean you literally are spending absolutely no money on ANY expenses today. That includes food and living expenses. Maybe the closest is a very young child. They have no money being spent. but sometimes have money coming in (gifts).
People outside of FI movement think that frugality=extreme deprivation. And are unwilling to change their frame of mind. Sadly, one day, they are likely to get to a point where fate will change it for them.
Yes exactly! If people don’t change their frame of mind with saving money eventually fate will change it for them. This is my big fear with those around me. Not saving now while the money is rolling in seems like a fine choice until the money stops rolling in. Thank you for the comment!
I was brought up in a family that was very good with their money and saving for me has always been easy, and then add on top of that once you have a family to provide for the whole mantras of spend all the money now kind of go out the window and you’re forced to think about tomorrow.
Thanks Sahd Fire! I’m really curious to see how our spending and overall life strategy changes when we have our baby. It does seem like having a baby is a good way to cure people of their terrible spending habits haha