When financial compromise is worth it
Take the time to analyze your current spending habits and determine if your lifestyle and savings style align with your priorities, values, and goals. If you’ve been intentional in analyzing your current financial situation. Doing that brings you one step closer to financial freedom.
Real financial compromise requires taking a look at your priorities, values, and goals, and ensuring that your lifestyle and savings style align. Some compromises are easier than others and some are more fulfilling than others. So we asked millennials when financial compromises have really paid off, and when they haven’t. Before we tell you what they said, let’s take a quick look at what financial compromise really means when put into practice.
1. Understand your goals and priorities
If you’re single, this means taking the time to really think through what is most important to you in the short and long term. We suggest having only 3-5 financial priorities. Any more than this and it’s hard to justify them as priorities.
Two options: save more aggressively, or spend it…guilt-free
If you’re in a relationship, and especially if you have or are planning to have kids, this means having some important conversations with your significant other about whether or not your goals and priorities are aligned. Talking about money can be tricky, we know, we are basically arm-chair financial psychologists after working with as many couples as we have. But it is absolutely key that you and your partner get your financial goals on lock. The sooner, the better.
2. Set savings goals and automate your contributions
Once you know what you’re saving towards, set a realistic target of how much money you will need, how much time you have until that goal, and then set up automatic deposits into a savings account for that goal. Open up a new savings account for each goal. Doing so will give you a realistic picture of how much you have left at the end of each pay period or month after you’ve set money aside for your goals.
Then it might be time to compromise. If you have more left than you’d expected, go you! You can save more aggressively, or spend it, guilt-free. We are big fans of both options. We are not opposed to treating ourselves when we are living within our means. More often though, the money leftover is less than you’d anticipated, in that case, move on to the next step.
3. Explore ways you can spend less
This is the “give up the lattes” step. And sure, if you’re drinking a ton of coffee at cafes and could be hitting the coffee machine at work, then, yeah, maybe giving up your lattes is a good compromise for you.
What actually works
Eating at restaurants less frequently.
Cutting on splurge spending and impulse buying.
Downgrading your lifestyle if you’ve become a victim of lifestyle creep.
Picking up a side hustle to help cover the balance.
Compromise doesn’t have to be about spending less, it can also be about making more. But that would require giving up more of your time. Either way - compromise.
When financial compromise is worth it
When compromise is worth it really comes down to what you prioritize. If you’re saving for your priorities and goals and then you reach them, it feels great! One of the top things people didn’t feel great about compromising for was saving for the sake of saving. If you don’t understand why you are saving, it’s hard to feel good about giving anything up to put money away for later.
To help you start to think about which goals are really worth compromising for, here are some insights from millennials who have decided that financial compromise was #worthit.
Therapy
Millennials are all about ending the stigma of getting psychological help and we are here for it. Therapy may feel like a splurge, but it can pay dividends when your improved mental well-being trickles into all aspects of your life. Similarly, several millennials we spoke with talked about life and career coaches being worth the investment of both time and money. What they gave up financially ended up paying off big time in improved productivity, self-esteem, and resilience.
Travel
Experiences are often prioritized over tangible things when we speak with millennials, particularly HENRYs. Saving up for a trip can be hard and require discipline and compromise, but almost everyone we talked to said that ultimately, it was worth it for the experiences they had that will last a lifetime.
If you don’t understand why you are saving, it’s hard to feel good about giving anything up to put money away for later.
But remember, just because you want an adventure, doesn’t mean you have to break the bank. In fact, HENRYs™ who felt they overspent on five star hotels and fine dining while traveling didn’t feel as good about their compromises as HENRYs™ who travelled on the cheap. Or cheap-ish.
Upgrading your living situation
For some millennials this meant buying a home, for others it meant investing in a more expensive rental closer to their work to cut down on commute time. Making a financial commitment to invest in the place you live is something that we found paid off in satisfaction and happiness. Where you live is more important to some people than others, so this is a really great opportunity for a conversation with your partner about how your home affects your happiness.
Saving for a baby
Having kids is expensive, and don’t even get us started on how much it is going to cost to put the children born today through college 18 years from now. But if you know that you want kids, it is important to start planning for the expenses. And it turns out that the millennials who do plan ahead and start making financial compromises before they actually have kids rarely regret it.
Other things people weren’t super jazzed about were attending weddings for people they didn’t know well, as well as buying tangible goods. Generally speaking, the millennials we talked to weren’t all about the material things. So much for us being the most materialistic generation, right? Compromise is personal, and you can take steps each day toward making sure you are choosing when and how to compromise based on realistic and exciting goals. You got this.
Stash Wealth provides financial plans designed to assist high earning young professionals build and manage their wealth.
Stash Wealth offers a pragmatic approach to financial planning and wealth management. Whether saving up for Tahiti or a Tesla, we help you achieve your short-term and long-term goals.
Written by Priya Malani
Stash Wealth, Founder & CEO
Priya is a force in the personal finance space. As an industry disruptor, she specializes in bringing the unapproachable world of money to young professionals across the country.
