Tuesday, May 26, 2009

Personal finance for today's objectives

As I mentioned in my previous post on personal finances, there is the long-term strategy and there is the short-term strategy. Normally, the long-term takes priority and then one has to adapt the short-term. However, saving for retirement should not make everyday life infeasible. So, if you have to put away 1000 $ /month, do you have enough to live your life in a way that is good for you? If you are broke all the time 'cause you want to be a rich old person some day in the future, you might not live to see that day. Broke people are often unhappy. Unhappy people have shorter lives. Therefore, don't make a long-term plan that limits your life today severely.

I am sure you have stuff you wanna buy tomorrow and you like going out. You should set up a plant that takes that into account. Say you have a long-term plan. If you are short on cash in your everyday life because of this, you have to think. What are the options?
  • Get a new job that's better paid?
  • Cut some expenses?
  • Change the savings plan?
I'd postpone the savings plan until I have figured out what to do, at least partially. If my job today isn't cutting it, and if I don't have any other extremely good reasons to stay, I will look for another job. I put priority on this. At the same time, I'd look for expenses to cut.. Can I find a cheaper grocery store? Save on gas? Electricity? Stuff like that. Then, if this fails (both job and expense cutting): change the savings plan (and get more agressive at saving when you have the better-paid job)!

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