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How Present Spending Affects Your Financial Future

Life gets busy. It’s tempting to procrastinate on making a financial plan. “I’ll worry about that tomorrow… “ is a common refrain for people who are just trying to stay afloat in the now. But your present spending—and general attitude toward money—inevitably affects your financial future.

Taking the time to assess your personal financial situation now can pay off big time in the longer run. Only then can you make changes that will help you meet your goals and achieve financial security.

Budget for Now—and Later

A general rule of thumb when it comes to personal finance is that there’s always something you can do to streamline. Even if you’re living within your means, there’s always something you can adjust to set yourself up better for the future.

A budget is a useful tool in the now. It allows consumers to track their spending by category, so they know where to make changes. But a financial plan goes beyond that to map out where you’re going. Here are a few of the key areas your financial plan can address:

  • Income
  • Expenses
  • Taxes
  • Insurance
  • Estate planning
  • Retirement
  • Education costs

Create a budget to guide your day-to-day financial decisions; create a financial plan to guide your overarching ones.

Make Decisions Now Based on Future Goals

Keeping your future goals in mind will help you optimize your behavior in the present. Ask yourself periodically: What am I working toward in life, and what will it take to get there? Envisioning your goals will help you stay motivated as you make changes in the short-term, even if they’re challenging.

Here’s what debt expert and Freedom Debt Relief co-founder Andrew Housser does to stay on track: “Ask myself, ‘Where do I want to be 1, 3 and 5 years from now?’ Then try to take actions to help make that a reality.”

Goals are as varied as the people who have them, but most all require some financial commitment. Someone who’s renting an apartment might aim to become a homeowner, which would spur them to start setting aside money for a down payment now. A consumer facing significant debt may have a goal of becoming debt free; in the present, they could research available debt relief options. Someone nearing the end of their career may decide to make lifestyle changes so as to maximize retirement savings leading up to the big day.

Your goals will depend on your life circumstances, but it’s always a prudent idea to tailor your current lifestyle to suit your future goals.

How an Emergency Fund Can Make or Break Finances

Many experts recommend consumers save about six months’ worth of living expenses in a designated emergency fund. The idea is that people only touch these funds if an unexpected, essential cost crops up—a broken-down vehicle, medical bill, job layoff, etc. Despite this recommendation, Bankrate found that only 29 percent of adults have the recommended emergency reserve. And, according to the same survey, nearly a quarter of American adults have no money earmarked for emergencies.

Emergency savings, or a lack thereof, can make or break financial health. Why? Because it can be the determining factor in whether or not you have to take on debt to shoulder unexpected expenses. The best way to build up your emergency fund is simply setting up auto-deposits, much like you would to beef up your regular savings account and retirement fund.

Understanding how your present spending affects your financial future is the first step in making wise choices that will help you attain the outcomes you desire.

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Susan Paige

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