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- I've heard a lot of pithy personal finance advice over the years, but one tip from a financial planner really stuck with me: "Life is short, but it's also long."
- The phrase is about balance - you have to spend some of your money to enjoy life, but you also have to prepare for the future.
- After hearing this advice, I decided to take a once-in-a-lifetime trip to Ecuador with a friend, even though it was only two months away and I would normally plan for months before taking a trip that significant.
- A financial planner can help you enjoy your money now and save for the future. Use SmartAsset's free tool to connect with a qualified professional today »
The world of personal finance is rife with pithy pieces of advice: "Pay yourself first," "A penny saved is a penny earned," "Buy low, sell high," "You can't take it with you," and so on.
We hear these phrases so often that they can eventually become meaningless background noise. But a few years ago, I heard a bite-sized piece of financial advice that changed how I make financial decisions from that point onward.
"Life is short, but it's also long."
The source of this wisdom was Nancy L. Anderson, a certified financial planner with Key Private Bank. For the past seven years, I've had the pleasure of editing her column in Forbes.
At its core, the phrase is about balance
You have to spend some of your money on things that bring you joy, because life is short and none of us know how long we'll be here.
But you also have to sock money away for the future, because life is long (78.6 years on average, for an American), and unless you're one of the lucky few who have a pension, you'll have to save enough to support yourself in retirement.
Most people have a finite amount of money coming in every month. Once it hits your checking account, it's on you to decide where that money is going to go.
Some people take a "life is short" approach to their money. (See "You can't take it with you" above.) They know that there are no guarantees in life, so they spend more to live in a nicer apartment, wear the clothes they like, travel to a bucket-list city, or whatever is important to them.
On the other side of the coin are the "life is long" folks. They're hesitant to spend anything on fun, preferring to save as much of their cash as possible for the future. (I've fallen into this category myself in the past.) Anderson calls these people "super savers."
As with most things, the best strategy is somewhere in the middle of these two extremes.
Here's how you can find the right balance in your life:
Determine how much you should be saving for the future, and take steps to get there
If you find yourself in the "YOLO" camp, take the time to figure out how much you need to save for the future. Then make a plan to ensure you're putting that money away each month.
"You do only live once, but that life could last 94 years!" Anderson said.
"While cases differ, I recommend saving 10% of your income during your working years to provide income for your retirement years," she said. If you can't get to that 10%, at least save as much as your company will match, she added.
You can also run a few different scenarios through a retirement calculator. You can tweak the values based on your current income and lifestyle and what you'd like those to be in retirement.
Finally, automating your retirement savings is a great way to "set it and forget it" and avoid spending your funds for the future today. Anderson said she recommends setting up automatic transfers to your retirement accounts and emergency savings accounts the day your paycheck hits your checking account.
"With retirement and emergency savings automated, the balance of your paycheck can go toward food, shelter, and fun," she said. "Enjoy life today while saving for a rainy day and your future."
Budget for the fun stuff
If you're more likely to squirrel cash away for a rainy day than to splurge on something to enjoy right now, you may find yourself ahead of many of your peers come retirement.
However, while saving for the future is absolutely critical, it's true that there are no guarantees that any of us will live into old age. So it's important to enjoy the journey, which often costs money.
Anderson said she recommends that super savers set up a special savings account where the money is meant to be used in the next 24 months.
"Make a list of things that you want to do, have, and experience," and use this money to make them happen, she said. This will help you live in the present rather than just in the future.
This advice has changed the way I think about my financial decisions
"Life is short, but it's also long" has been a frequent refrain in my mind since I first heard it. It's helped me to keep things in perspective when making decisions about my money, both in the future and in the here-and-now.
For example, a childhood friend of my boyfriend's recently invited us to come and visit him in Quito, Ecuador. We'd split our time between the city and the jungle, where the friend works building solar boats to provide transportation for indigenous people. It sounded like an amazing experience, by every measure.
The catch? The trip was only two months away, and therefore too close to really save up for in advance like I like to do with any international trip. Add to that the fact that I'd recently gone fully freelance after the startup I was working for went under, and I just wasn't sure I could justify the trip.
But then I remembered the "life is short" part of my favorite piece of advice. I broke down the numbers:
- Both my emergency fund and my vacation savings account are stocked.
- Accommodation in Quito is very affordable.
- I could cover the flights with travel points.
- I have plenty of leads for both full-time work and freelance gigs.
After weighing my options, I decided to go on the trip. Life is long, but it's also short.
Speak with a financial planner today about your spending and saving. Use SmartAsset's free tool to find a qualified professional »
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