Tuesday, May 25, 2010

Be Moderate In Your Finances

Tip #258 - Be Moderate In Your Finances. In several areas of life many of us try to categorize ourselves on one end of the spectrum or the other - "I'm a Democrat. I love the scariest amusement park rides. I hate corn-on-the-cob. I'm a morning person." Maybe being middle-of-the-road does not define us enough. Or we think it's boring to be there. I don't know.

I find the same thing is true when it comes to people and their finances. There is the frugal camp - saving every dollar for future enjoyment or a rainy day. And there is the "live life" camp - we don't know what tomorrow will bring so why not spend our money and enjoy life today? There are the high rollers who want to undertake high risk to get high returns. And there are the conservative investors who put all of their money in guaranteed interest accounts.

I read several financial forums, and there always seems to be some healthy banter about which way is the correct way to go about living financially. But why does it have to be one extreme or the other? Why can't it be somewhere in the middle? Well, it can. And being moderate in your finances is probably a good place to be - saving for a rainy day but still enjoying life today. Undertaking some risk to increase your reward but being conservative with some of your money, too. Being frugal in some areas of your life but splurging in other areas. If we approach our financial life with balance and moderation, we will be more likely to get the most out of our money.

In Real Life (IRL) - We have a family friend whose parents had a business. Their business started to do quite well, but they never changed their lifestyle. They saved everything they made. If you were to go to their house, you'd think they were poor - worn carpet, walls that hadn't been painted in years, etc. They wore clothes that were in style years earlier. They didn't take vacations. What were they watitng to spend their money on? Who knows? But when the parents died in old age, we found out that they had stashed away quite a bit of money - as in they had several million dollars to their names. But they never enjoyed any of it! Instead, they passed it on to their children and didn't get to enjoy the fruits of their labor.

I know someone completely the opposite. He lives for today. He spends lots of money on things he loves to do - trips at the drop of the hat, business ventures that he hopes will take off. He invests in "hot tip" stocks that he thinks will earn him big money overnight. He laughs at the idea of being conservative with money, and when we explain some of our financial philosophies with him, he always seems to disagree and tells us why taking risks is the way to go.

While I tend to fall on the side of the line that makes sacrifices today for enjoyment tomorrow, I don't want to leave the world before I experience things that I wanted to do. None of us know how long we will be on this earth. The man saving all his money for retirement could die tomorrow. And the man spending everything can live to 103. Since this will almost always be an unknown, why not take the middle road? Enjoy what you can . Splurge on things that are important to you, But also plan for the days when you will likely not be able to work for money. Strike a balance between saving and enjoying. When investing, keep some money safe, but take on some risk. It doesn't have to be one end or the other. The middle of the road might just be the right path for you. For other financial ideas check out life as mom.


Jennifer said...

Middle of the road is a good place to be. I have a child that is extreme in everything he does. He doesn't get being in the middle on anything. Drives me crazy!

Olivia said...

Good tip! My hubby is on one end and I'm on the other, so after nearly 9 years of marriage, we're finally beginning to balance out!