By Matt Becker

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A little while back I got a great email from a reader asking where I stood in relation to two seemingly competing financial philosophies:

On the one hand, you have people like Tim Ferris and James Altucher who encourage you to focus on starting businesses and increase your income so that you can enjoy yourself at all stages of life rather than just saving for the future.

On the other hand, you have more traditional financial personalities like Dave Ramsey who encourage you to “skip the latte” and cut expenses in order to pay off debt and save for the future.

I get a lot of emails and this one really made me pause. Because the truth is that I think both perspectives are valuable, both will help you make the most of out your money, AND that either one alone can get you into trouble.

So, where exactly do I stand on these two philosophies? And how can you incorporate the best of both into your financial plan?

Let’s dive in.

The fundamental truth about money

No matter how much money you make, the only way to get ahead is to spend less than you earn and save the difference.

That’s it. That’s the big “secret” of financial success. All the rest is nuance.

Now, if you’re income is high enough, maybe you don’t have to worry about the daily latte. It might be well within your means. But you still can’t spend with complete abandon or you’ll have nothing left over for tomorrow.

And in some cases living within your means might require you to cut back in certain areas, at least temporarily. My wife and I have certainly had to do that as we’ve worked to get our businesses off the ground, especially with two boys in preschool and daycare.

So no matter what, I don’t think that there’s ever a situation in which it makes sense to completely ignore the financial consequences of your decisions. That may be enjoyable in short-term, but there will be a point at which it comes back to bite you.

What YOLO really means to me

With that said, cutting back isn’t the only way to get ahead. And if you only focus on cutting things out of your life, you might be able to build your savings but you aren’t likely to enjoy yourself along the way.

Here are two big pieces of the YOLO philosophy that I really identify with.

1. Earning more

Increasing your income can open up opportunities for you to do more of what you love while also saving for the future. And it has the benefit unlimited upside, as opposed to cutting back which can only go so far.

It doesn’t have to be that complicated either. There are good ways to negotiate a raise in the job you have right now, giving you more disposable income without any significant change in your day-to-day life.

Of course, you can also explore things like starting a business or earning money on the side, both of which might take more time but may also lead to bigger benefits.

Either way, increasing your income might allow you to both buy that latte AND save for the future

2. Living for today

I regularly encourage clients to pursue short-term lifestyle preferences over simply saving as much as they can for the future. Things like:

Switching to a single income

Starting a business

Going back to school

Moving to a new part of the country

Traveling

We always work to find room for these things in tandem with saving for the future. It’s never a matter of completely abandoning their financial responsibilities.

But the truth is that they could save more if they didn’t do these things. It’s also true that that would completely miss the point.

After all, the entire goal of all this personal finance stuff is to create a life that’s BOTH secure AND enjoyable. If you neglect the “enjoyable” part of that goal then you’re doing it wrong.

If something’s important to you, you SHOULD find room to make it happen. You really do only live once and you owe it to yourself to make it a life worth living.

How to find a balance between these two philosophies

Basically, I believe that you should be using your money in a way that allows you to both live for today and save for the future. Both are important and both should be a part of your plan.

Of course, while that sounds nice in theory, it’s not always easy to put into practice when time and resources are limited.

And the truth is that you may not be able to have it all right away. In fact, you’ll almost certainly have to make sacrifices on at least one of those goals, and possibly both, as you start out.

But with time and effort, you can get a lot closer to finding the right balance. Here’s how I would do it.

1. Figure out what you value

Before you can start directing your money towards the things you value most, you need to clearly define what those things are. The more thoughtful you are about this, the more likely you are to actually use your money in a way that makes you happy.

Here’s a process for figuring this out: A life-centered approach to setting financial goals.

2. Track your cash flow

Know how much money you have coming in each month right now, where it’s going, and whether you have a surplus or a deficit.

This is the baseline information you need to start making purposeful decisions going forward. Here’s my process for getting it: How I track my spending.

3. Cut ruthlessly

To borrow from Ramit Sethi, cut back ruthlessly on things you don’t value. Because every dollar you save on something unimportant is a dollar that can now go towards something you truly value.

You can find big savings on big-ticket items like a house, a car, and your investments. Smart decisions in those areas could save you thousands, or even tens of thousands of dollars per year.

But you can also find savings in smaller ways like cutting cable, finding a cheaper cell phone plan, or negotiating your monthly bills.

What you want to cut is really up to you. It’s a personal decision based on your personal values. But the real point is that cutting back on the things that don’t matter to you will make it easier to do more of what you want with your life.

4. Purposefully increase income (if necessary)

If cutting out the things you don’t value doesn’t free up enough room in your budget for the things that do, it’s time to look for ways to increase your income.

Just remember that this isn’t really about earning more money. Many people have made a lot of money and led miserable lives with that as their focus.

This is simply about creating the necessary resources for the things you want to do with your life. That means that you only need to increase your income to the point at which it facilitates those things, and no further.

It also means that you should be clear about acceptable and unacceptable ways to get it. For example, if you value having weekends with your family, then it probably doesn’t make sense to do something that takes up your weekends, even if it leads to more money.

5. Live well, responsibly

Things like saving for retirement, building an emergency fund, and getting insurance are important. They should always be a part of your financial plan.

They just shouldn’t be the only part of your financial plan. The lifestyle you want for you and your family is also important, and often time-sensitive. If you want to stay home with your baby, you only have a short window in which you can do that. Other goals like starting a business may be able to happen at any time, but deferral can become a habit that you never break out of.

Do your best to strike a balance between being responsible and creating a life you enjoy living. One approach might be to budget a set amount of money towards each path so that you’re both dedicated to each approach and still living with the limits of your reality.

6. Regularly re-evaluate

Your goals will change over time. Your financial circumstances will change over time. Your daily habits will build slowly over time, in ways that both help and hurt your goals.

Make a point of regularly re-evaluating everything you’re doing here to make sure that you’re still striking the right balance between living for today and saving for the future. And don’t be afraid to change course when you decide that your values have changed.

Every approach is hard work

It’s tempting to look at the traditional approach of cutting back as drudgery and the Ferris/Altucher approach of earning more and living for today as exciting.

But the truth is that both approaches are hard work. Both will take time, effort, and commitment and both will lead to successes and failures.

The key, really, is not to view one approach as better than the other, but to take the best of both approaches and combine them. “Skip the latte” on things you don’t value so that you have room to YOLO on the things that do.

If you do that well, you can build a life that’s enjoyable both today and in the future.