YOLO – You Only Live Once. Those who were born in the nineties would have come across this phrase at least once in their lives. That is if they’re not the ones who say it. The idea behind this term is that as you get only one life, you should live it to the fullest.
To some, this means that they should live only for today and that they’ll handle tomorrow when it arrives. In short: life is all about the now, and nothing else matters.
So, they work hard and party harder – splurging to their heart’s content. Whatever they do save is usually for the immediate future – for the night at the club, the day-trip somewhere nice, that fancy new watch, and so on. They believe that money is only for spending, and so impulsive splurging is cool while saving is uncool and boring.
Some of them may take it a bit far, ending up broke every other month. Others, in their pursuit of material (or other forms) of happiness, may rack up several EMIs because they believe they’ll just pay it all off tomorrow.
All in all, this seems a pretty fun way to live life. But, some of these things could be terrible for one’s financial health. That is one of the reasons why I don’t completely agree with the ‘live only for today’ philosophy.
I believe that ‘You only live once’ doesn’t really translate to ‘you only live today’, and actually means living life to the fullest, always. I believe that we can enjoy today and secure our tomorrows while still having fun – if only we plan for it smartly.
Tomorrow does come
One of the arguments that are popular in favour of the ‘live life to the fullest today’ school of thought, is that one never knows what may happen tomorrow, which is why it’s best if you live for today.
However, there are a few things that we do know will happen for sure tomorrow. One, the cost of living will go up – this means that food, clothes, education fees, cars, and other goods and services will get more expensive over time. We can see the proof of this by comparing the cost of bread or butter or your school tuition from 10 years ago with the prices today. Two, we’ll all have to retire some day – which means, at some day in the future, we will not have any salary to depend on.
The only way to mitigate the effects of the higher costs of living and to be prepared for our retirement is to start saving.
So, having fun is good, necessary even, to live a healthy life. But it is also important to save for tomorrow. For a generation that dreams big, buying that fancy Audi, taking an overseas vacation, owning a fancy house – all of our dreams will remain just dreams if we do not plan for our future goals.
Take a friend of mine, for example. He’s been planning to quit his job and start a company of his own. He came close to doing it too, early this year – but then the financial reality kicked in. With little savings to his name, he realised that he would not be able to pay for his rent and food without his salary, let alone start a company. That’s why he’s now decided to stay on for another year or two – but this time he’ll be saving up smartly.
In contrast, a colleague of mine just bought himself an i20 without a loan. How? He’d been saving and investing for a car ever since he started working.
First add, then multiply
One thing we need to remember is that saving is only the first step to fulfilling your dreams. The next and most important step is to start investing.
With bank accounts giving a mere 4% per annum as interest, the money in our savings account is practically sitting idle (the average inflation from July 2016-June 2017 was 3.6%). To make this money grow and compound, we need to invest it in higher returning investment avenues like mutual funds.
Mutual funds offer a vast variety of options that can suit every need. From parking money for just a few months to a year to growing money over several years, there are options for everything. Mutual funds are also more tax-efficient and have historically delivered higher returns than bank accounts and fixed deposits. In fact, equity mutual funds – the ones suited for long-term investments – have averaged double-digit returns over longer time-frames (5-10 years).
So, by investing in mutual funds, we should be able to grow money faster than we could by keeping it in a savings account or an FD.
This higher growth, when combined with a little planning will ensure that you can soon afford those currently out-of-reach goals, live in comfort and retire in comfort. All this without jeopardizing your financial situation with too much debt (loans and credit card dues).
In short, the fact that you only live once is the biggest reason why you need to start saving and investing today. You get only one shot at life, don’t end up spending it repaying EMIs.