Chapter 2. We Can't Have It All

And That Means We Need to Make Tough Financial Choices

Everything's a tradeoff.

If we take on the expensive car lease, we will have less for the summer vacation. If we opt to splurge on the summer vacation, we won't have as much for savings. If we decide to save like crazy for retirement and the kids' college education, we won't be able to buy as big a house.

Within reason, none of these choices is bad. But they are indeed choices—and yet often we give them scant thought. Instead, we haphazardly spend here and save there, without considering the implications for other areas of our financial life. In the previous chapter, we took the big-picture view of assets and liabilities. Now, it's time to take the same approach to spending and saving.

Doling Out Dollars

As we decide how to divvy up our paychecks, we need to make three basic choices. First, we have to weigh purchasing one item versus purchasing another. Next, we need to weigh purchasing today versus saving for tomorrow. And finally, when saving for tomorrow, we have to decide what we'll save for.

All this may make it sound like we enjoy a world of possibilities. But that is hardly the case. A hefty portion of our paycheck is oftentimes already spoken for, claimed by essentials such as mortgage or rent, car payments, taxes, health care, utilities, and food. Once these have taken their bite, our room to maneuver is considerably smaller. To be sure, we can live beyond our means in the short term, by tapping ...

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