Want to Pay for a Vacation? More Education? This Investing Tactic Might Be the Answer

It's a strategy worth employing.

If you've effectively been brought up as an adult to focus on retirement savings above all else, you're not alone. For years, financial experts have drilled into our heads that we need to do what we can to fund our IRA accounts and 401(k)s, even if that means making near-term sacrifices, like traveling less or spending less money on luxuries.

Now, the reality is that unless someone hands you a pile of money every year to contribute to your IRA, 401(k), or a regular brokerage account, you're not going to make progress on the savings and investing front unless you carve out a portion of your income for those purposes. But you may reach a point where you're giving up too many immediate goals to focus on future ones. And that's not necessarily a good thing.

A new approach to investing seeks to change that. And it's one you may want to adopt.

It's all about you

It's natural to focus on long-term financial goals like building a retirement nest egg or being able to put your kids through college. But you may have some shorter-term goals you want to tackle as well.

Maybe you're eager to purchase a home, or a second home. Maybe you want to start a side business that will require some seed money. Or maybe you just plain want to travel a lot while you're relatively young and have the energy to do things like sit on a plane for 14 hours or hike various peaks. 

If you're someone who believes that you shouldn't have to sacrifice your near-term goals and happiness to meet your long-term objectives, then you may want to adopt a strategy called lifestyle investing. In a nutshell, lifestyle investing focuses on helping savers enjoy the present while also working toward future goals. 

Say you have the option to hold down a stressful, high-paying job versus take an easier one with a lower paycheck. A traditional financial advisor might tell you to push yourself to stay at the harder job for a few more years so you can bank that money for the future. With lifestyle investing, you might instead think about how to adjust your future goals to make a positive near-term change possible, like being able to take a lower-paying job that offers better balance and a much improved quality of life. 

Carve out your own path

With lifestyle investing, it's up to you, as an individual, to carve out a path that works for you based on your specific goals -- both immediate and long-term. That could mean prioritizing your near-term happiness over retirement to some degree -- perhaps continuing to contribute to your nest egg, but to less of an extent so you have money to put toward short-term goals as well. 

Lifestyle investing also lets you adjust your plans as your priorities shift, which is something that can happen as you age, expand your family, or experience different events. As an example, 76% of U.S. workers said their priorities changed as a result of the COVID-19 pandemic, according to a recent Transamerica survey. The events of 2020 taught some people to focus more on their health and happiness, and less so on climbing the ladder at work. 

You might feel similarly. And so it's important to adopt an investing strategy that accounts for your feelings and priorities.

This isn't to say that you should throw caution to the wind, stop funding an IRA or 401(k), and decide that when it comes to retirement, you're just going to wing it. But it's okay to give your near-term financial goals and priorities just as much of your attention and resources.