The Financial Cost of Living for the Moment

It may be difficult to say no to the things we want to do and buy, but there is a price to pay for ignoring the future.

There are a variety of benefits associated with living in the moment. Some researchers say that living in the moment can relieve pain, while others claim it makes it easier to resist cravings. A Harvard study showed that people who spend time "in the now" are happier than people who don't. And yet, there is a distinct difference between living in the moment and living for the moment.

Living for the moment means pursuing immediate gratification with no thought for the future. Here are some of the ways living for the moment can cost you big.

It can hit your credit score

Your credit score follows you like a shadow. Wherever you go, your credit score goes with you. Want a low interest rate on a car? The decision will largely be based on your credit score. Hope to qualify for a credit card with a 0% balance transfer? Better check your credit score first. 

If you live for today and rack up unnecessary debt, it can put the kibosh on everything, from obtaining a low-interest loan to getting the job of your dreams. 

Here's one way that could happen: You and your friends are taking a trip to Padre Island. You don't have enough cash, so you charge all the expenses to your credit card. The trip is more expensive than you anticipated, and you max out that card. The week after you arrive home, you're scheduled to attend a friend's wedding a few hours drive away. You charge a wedding gift and a new outfit to another credit card. As you drive to the wedding, your radiator springs a leak and you need a tow and repair. Suddenly, your second credit card is also maxed out.

Now you have a lot of high-interest debt. If you had charged $3,500 on the first credit card and $2,500 on the second, you'd owe a total of $6,000. Let's say the interest rate on both cards is 16%, and that you can pay $200 every month towards that debt. 

Depending on how you split the payments, it will take about 40 months to pay off both cards and you will pay over $1,700 in interest. That's more than three years of your life spent paying for a few weeks of fun and $1,700 that you could have kept in your own bank account if you'd avoided paying by credit card. 

Weeks later, you're having trouble sleeping, worried about debt. You want to take out a personal loan to consolidate your new credit card debt. Unfortunately, your credit score has been hit by utilizing too much of your available credit and is now too low to qualify for a loan with a reasonable interest rate. 

The lesson? The next time you want to do something special, like take a trip with friends or attend a wedding, begin saving for it as soon as you learn of the event. Paying in cash will protect you from credit card debt that could take years to repay, cost you hundreds of dollars in interest, and lower your credit score. 

You won't have an emergency fund

A National Foundation for Credit Counseling (NFCC) report shows that 30% of Americans have no money saved outside of their retirement accounts. That means no cash to pay for repairs on a leaking water heater, and no money to cover large medical deductibles or any other emergency that arises. 

If you're living for today, you're likely not planning for the future. A big part of planning involves making sure you'll be covered in the event of an emergency. If you hope to cover emergency events with a credit card, what happens if your cards are maxed out? And if you've depended on credit cards to pay for things you need and want, how are you going to find the extra money to pay those credit cards off?

Establish an emergency fund before you do anything else. You never know when calamity will strike and you'll need some easily-accessible cash to tide you over.

You'll never achieve financial freedom

What if you had said no to that Padre Island trip and saved money instead? That simple decision would have moved you one step closer to financial freedom. Freedom is the ability to leave a job you can't stand because you have enough put away to get you through until you get a new job. It's the ability to open your own business and cover emergencies as they creep into your life. Freedom is knowing that you can retire one day and start a whole new, happy chapter. 

Speaking of retirement, here's something I've discovered to be true: No one believes they're going to grow older. After all, it's tough to imagine something that seems far away, especially if you use the logic that you might be hit by a truck tomorrow. The problem with not being able to imagine yourself in the future is that it's easier to justify living for today. 

Investing in a retirement fund or putting money in a savings account every month may not be worthy of a Facebook brag, but perhaps they should be. Those are the things that give you financial freedom in the long run. In fact, nothing says "adulting well" like mindful spending and saving for a rainy day.

If the danger of living for the moment is debt and uncertainty, why not choose a different path? It is possible to have fun today, enjoy your life, and plan for the future. In fact, it's a recipe for success.