One of my favorite Aesop Fables is The Ant & The Grasshopper. The ants worked diligently to store food for the autumn while the grasshopper was busy making music. The grasshopper did not have time to work the fields and save for the future, a costly mistake.
Here is the fable.
One bright day in late autumn, a family of Ants was bustling about in the warm sunshine, drying out the grain they had stored up during the summer, when a starving Grasshopper, his fiddle under his arm, came up and humbly begged for a bite to eat.
“What!” cried the Ants in surprise, “haven’t you stored anything away for the winter? What in the world were you doing all last summer?”
“I didn’t have time to store any food,” whined the Grasshopper; “I was so busy making music that before I knew it, the summer was gone.”
The Ants shrugged their shoulders in disgust.
“Making music, were you?” they cried. “Very well; now dance!” And they turned their backs on the Grasshopper and continued their work.
There’s a time for work and a time for play.
A challenge I’ve seen during my career is to live for today or save for tomorrow, and, unfortunately, there is not an easy answer. It’s essential to save for tomorrow so you can afford to retire on your terms. On the other hand, you can’t ignore today’s demands.
I recently talked with a young client planning a trip to Europe but canceled her plans because her insurance premiums and property taxes increased significantly. She’s postponing her trip until her finances improve. An older client was contemplating returning to work to make ends meet.
Here are a few suggestions to help you live for today while saving for tomorrow.
- Develop a spending plan. A spending plan will help you allocate your dollars so you can live for today while planning for tomorrow. A well-constructed spending plan will free you from the burden of battling the needs of today or tomorrow. Here is a link to EveryDollar: https://www.ramseysolutions.com/ramseyplus/everydollar
- Start an emergency fund. An emergency fund of three to six months of expenses can help weather a storm if you need short-term assistance. If your job is safe and secure, three months of savings is sufficient. Six months to a year if your job is risky or unstable.
- Invest in a taxable brokerage account. A taxable brokerage account allows you to access your funds without penalty, a valuable feature if you want to retire before age 59.5. You can also use the account to fund a car purchase, a trip, education, or retirement. Since COVID-19, we’ve seen a spike in individuals wanting to retire early, highlighting the importance of investing in taxable accounts.
- Fund your retirement accounts. Contributing the maximum amount to your company retirement plan is the best way to save for your future and achieve financial independence because it is an automated process that removes procrastination and market timing. The maximum amount is $23,000, and the catch-up provision is $7,500. If you can’t contribute the maximum amount, aim for 10% of your income. If that’s too much, do what you can, especially if you’re young.
- Don’t delay. Time is friend and foe to the investor. A twenty-five-year-old can save $158 monthly to become a millionaire at age 65, whereas a fifty-five-year-old must save $4,882.
- Invest in good habits. Automate your savings and expenses to ensure financial peace. Automation removes the guesswork from investing and eliminates late fees on your obligations.
The Franklin Utility Fund (FKUQX) was my first investment. I started investing shortly after October 19, 1987, when the Dow Jones fell 22%. I invested $150 to start and $25 monthly. I used the funds for several items, like taking a trip or buying a car. It wouldn’t make me rich, but it started the flywheel for a successful investing career and pending retirement (someday).
It’s important to invest for today and tomorrow, but the bottom line is that you must prioritize retirement because you can get a loan for every other endeavor– car, home, school, etc.- but you can’t get one for retirement.
Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty. ~ Proverbs 21:5
April 20, 2024
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.
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