What Do You Want?
This is the hardest question most people face in their finances. Once you get past the very basics – food, shelter, health, safety – most questions of personal finance are questions of choice. The reason balancing future needs and wants with the here-and-now is so devilishly difficult is that you must be able to put your finger on what it is exactly that you want.
The most positive version of this dilemma is the person who has done all of the “right things” (established an emergency fund, saves for retirement, bought a house, etc.) and still has leftover cash flow. Spend it or save it? Saving feels right…but for what?
“What do you want?” is a question solely about your own goals, not about “the right thing to do.” Does that sound selfish? Is the idea that your financial choices should be guided by your emotional desires heretical? I think it is simply realistic.
If you find yourself in the desirable position of not knowing what to do with the balance accumulating in your bank account, your best immediate move is…nothing. If you don’t know what you want now, do not make any moves that will limit your flexibility in the future when you do know. Flexibility-limiting moves include both spending and high-risk and/or illiquid investments. Don’t be afraid to just sit on the sidelines for as long as you need.
Or maybe your “want dilemma” looks more like this:
Should I increase my retirement account savings or buy a nicer car? You want the new car. And, you know, YOLO. Instead of seeing the stepped-up 401(k) contribution as a penance, reframe it as a means to obtain a different thing that you also really, really want: the ability to not have to work in the future. Which one do you want more?
You want a relaxing trip to a beach resort, but you also want that delicious stress-free feeling of security in your financial life. If you want the latter more, then a deposit to your meager emergency savings account in lieu of the trip will not feel sacrificial.
Stop and ask yourself the question: What do I really want?