When young, a long working career with likely increasing compensation over time is a worker’s biggest asset. As the years pass, hours worked are exchanged for wages that can be spent or saved. At the end of a long working career, there are few hours left to exchange for wages, so savings need to be there to support a person’s needs in her final years. If the savings aren’t there, there are no do-overs and possibly many regrets about past decisions. So, I believe that the biggest financial challenge in life is, how do I best balance my spending today with saving for my future needs? I call this challenge the “elephant in the room,” because everyone knows it is there and it is huge, but no one wants to deal with it.

I haven’t even found many financial planners who specifically ask this question. They use a process to back into a prescription of how much to save out of wages based on today’s lifestyle expenses, other sources of retirement income (like Social Security, pensions, etc.), desire to leave a legacy, and many assumptions on inputs like expected lifestyle expense, inflation, rates of return, and life expectancy. Planners don’t consider how a person values the utility of today’s enjoyment versus having some sense of future security. I guess they think that since the customer is spending time and money with the planner on a plan, the customer has already decided that saving for the future is important enough to reduce spending today. Also, confronting this challenge directly opens up a much bigger dialog that the planner doesn’t likely want to have – it is easier to feed some data into a process that ends up spitting out a percentage savings rate.

Why is it so hard to directly address this question? Doing this work requires that people consider how much to delay immediate, guaranteed gratification today in exchange for an uncertain future life, based upon how optimistic they are about the future world and their lives in it, the lives they want to lead then, how much they care for family and loved ones, and how long they expect to live. For example, I have spoken to many a young person who says that retirement savings isn’t worthwhile because she won’t live a long life, the world as we know it will end, or she would rather live in the moment to enjoy today – so having a financial plan for retirement is a waste of time.

Since I’ll be writing about financial topics that will assume my perspective on how I chose to balance today and the future, I believe it is important to share my viewpoint in the case that it might be different from a reader’s. So my approach is, I’d like my wife and me to have a modestly improving lifestyle over time (being able to increase my spending at least a percentage point or more each year over inflation, if necessary) independent of whether I have earned income at that time; to pay for child-rearing and education expenses through colleges and weddings; and to not run out of money before the last of us dies, leaving only whatever assets remain to the kids.  Our legacy to our children will be no student loans, one wedding (each), and maybe a down-payment on the first starter home – anything more than that will be from what is left-over due to the vagaries of when the Grim Reaper chooses to stop by.