“The best and safest thing is to keep a balance in your life, acknowledge the great powers around us and in us. If you can do that, and live that way, you are really a wise man.” - Euripides (Greek playwright, c. 480-406 BC)
Balance is something that I struggle with daily. As a man of passion it is easy to get swept from one extreme to another, and finances are no exception. I came across a great post on Get Rich Slowly the other day that offers some great insight into the topic of balance in your personal finances called "Financial Balance Lets You Enjoy Today AND Tomorrow." Below are some of the main points of the post but do yourself a favor and read the entire post as I am sure you will find some of yourself within it.
In order to find balance, you’ve got to do some soul-searching. I think of it as a three-step process:
Find what makes you happy. Look inside yourself and ask, “What is it that brings meaning, pleasure, and joy to my life?” Be honest. How can you create a life that features more of the good stuff and less of the mundane?
Focus on your goals. Set personal goals based on the things that make you happy. If you like music, maybe one of your goals could be to learn to play the guitar. If you want to change careers, maybe one goal would be to go back to school. Make meaningful goals a priority, and let the other stuff be secondary.
Seek balance. Strive for moderation in all things. Pursue your goals, but don’t forget frugality. Be frugal, but don’t forget your goals. Work hard to build your financial fortress — but let yourself have a little fun, too.
The balanced money formula
One tool that I’ve embraced for the past year is the balanced money formula introduced by Elizabeth Warren and Amelia Tyagi in their excellent book, All Your Worth: The Ultimate Lifetime Money Plan.
Here’s what it looks like:
As you can see, when your financial life is in balance, you’re allocating enough for savings and needs, but you’re also setting some aside for the things you want. This idea is simple, but it was a revelation to me. No more spending too much on wants, but no more pinching pennies, either.
I really like this outlook. On the one hand the majority of people can relate to the struggle my fellow Oregonian went through with compulsive spending. But on the other hand I am sure many can also relate to becoming obsessive regarding saving and investing to the detriment of your daily happiness. I know that sometimes I go the opposite way and get stressed out if I am not saving enough or investing “enough.” Sometimes the percentages can be deceiving. “I am only saving 10%, I am not saving enough, I will never get to X,Y, or Z,” your brain might be saying. That is why I really enjoyed the visual representation of what it takes him to be balanced. It helps to focus and provide structure to your spending habits without becoming obsessed and disrupting that mental balance that is necessary for your happiness.
When I start to get stressed about how much I am saving and investing I think back to one of the main lessons from the ever-insightful classic The Richest Man In Babylon by George S Clason. The book states that saving a mere 10% over a lifetime is a surefire way to reach your financial goals. If you haven’t read that book, read it now. It’s about 100 pages set to a backdrop of what I would describe as Aladdin meets personal finance. Pretty interesting, very simple, and timeless.
If you are getting stressed that you are only saving X percent, keep in mind that you are probably doing better than most in the sense that you are actually keeping more than you spend. As I have stated before on BadskiBlog, if you are keeping more than you spend then it is only a matter of time until you reach your financial goals. If you don’t like how long that timeline is you can either spend less or make/keep more. It is an iterative process that is definitely more challenging mentally than tactically. Maybe I am a product of my generation and our culture in that patience is not one of my strongest virtues, however I have to remind myself that my wife and I are saving more than a quarter of our income and we are still living the life we want to live as far as experiences go. Which brings us to the most important lesson from the Get Rich Slowly post.
The quest to achieve financial balance is about more than money. It’s also about meaning. Money is important, yes, but it’s not the only thing. Money is a means, not an end.
Money is a means, not an end. I love that. Remember your goal is happiness and living the life you envision yourself wanting to live. That can start today….as in NOW. You can work on your personal finances by slowly course correcting over time, but you need to enjoy life now. That is why the concept of balance is so important and like most things it must be worked on over time.