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Enjoying your money while you're young

Home Personal Finance and Budgeting Enjoying your money while you're young

  • Avatar AZPT 
    Participant
    Status: Other Professional
    Posts: 115
    Joined: 02/02/2019

    Great question and something I think – and have posted here – about a lot.

    After working through our IPS, my wife and I recently decided to up our yearly savings rate from 22% to 40%. Because our gross income isn’t extravagant it isn’t a crazy amount – we are only really going from $38k to $68k per year. Regardless, this is still something we are proud of doing, and more-so feel like we can do it while also still enjoying our time now with 2 young kids. The more I thought about it, I wanted to be sure to take advantage of front-loading our investment timeline as much as able, given we are still in our early 30’s with loans recently paid off. Luckily the wife agrees.

    On a related note, I appreciate the feedback provided here because I, too, have difficulty at times “spending the rest”. I must have a guilty mind, because if we have money left over or unaccounted for I immediately think a 41% savings rate would be far superior to 40%. I need to be better at understanding once my retirement goals are being achieved that it’s okay to spend the rest HOWEVER I WANT TO. It’s a work in progress.

    #236344 Reply
    Avatar StarTrekDoc 
    Participant
    Status: Physician
    Posts: 2055
    Joined: 01/15/2017

    @azpt – Kudos to you.  You got the IPS down.  Followed that up with the appropriate bump of savings — 40% is quite insane with 2 little ones.   This is where you take the title to heart — enjoying it while you’re young.

    You’ve done the heavy lift.  Enjoy the view a little bit.  Stay on target.   If you really want to ‘make hay’ sure, but 40% savings and sounds like a good balance of work/life integrated.  Enjoy it.

    #236352 Reply
    Liked by Ghetto, AZPT
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3093
    Joined: 09/18/2018

    @azpt,
    Great start! As a compliment, I would merely suggest that percentages are a “guideline”. When those kids start needing things, the dollars are the same but your percentages will be much higher. You have a good income, but those college 529’s would be the same as some of the higher income earners in dollars but not percent.

    Round about way of saying “make hay while the sun is shining “. It rains in Az, not too much though.
    Probably why you debate just spending it all. Consider a slush fund for a piece to enjoy guilt free.

    #236378 Reply
    Liked by AZPT
    Avatar Fugue 
    Participant
    Status: Physician
    Posts: 13
    Joined: 10/01/2018

    Agree, it just depends on your priorities. Right now I have a 60-80% net savings rate (depends on how much traveling I’m doing that month).

    For me, creating financial flexibility is actually a source of stress relief. I’m also (apparently) the only person alive who doesn’t thirst for international travel, which drops my spending significantly.

    I also don’t get off on owning a home, and as I’m not sure I’ll be staying in my job, my modest rent of $1400 helps free up cash flow.

    I tend to get more enjoyment out of traveling domestically, places like Austin/Miami/NO where I can enjoy the nightlife. I’m 30 and single and still enjoy partying, which puts me in a tiny minority here. Not every trip has to break the bank.

    Will I wish I had done more when I’m 40? It’s hard to predict how people change over time, but I certainly don’t feel deprived in the moment. Everyone is different, which is why I never judge people with higher or lower spending rates. For most people, that savings rate would be too high. But as long as you’re meeting your retirement goals and being intentional about your spending, you’ll do fine.

    #237006 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3093
    Joined: 09/18/2018

    @fugue,
    “Agree, it just depends on your priorities. Right now I have a 60-80% net savings rate (depends on how much traveling I’m doing that month).”
    I have no doubt that you are frugal and at 30 and single there is no reason for criticism. Take trips and party as you wish.
    I could use a math course though.
    Gross-taxes-Retirement savings=spending

    If you are ever hitting 80% savings, how do you handle the remaining 20%? Is that tax withheld? I mean taxes are normally 24% or in the 30%. Taxes and living expenses need to add up to 100%.
    Enjoy you travels. Nightlife at 30 is probably better than 40 or 50. Math counts at any age.

    #237019 Reply
    Avatar Antares 
    Participant
    Status: Physician
    Posts: 507
    Joined: 01/20/2016

    @fugue,
    “Agree, it just depends on your priorities. Right now I have a 60-80% net savings rate (depends on how much traveling I’m doing that month).”
    I have no doubt that you are frugal and at 30 and single there is no reason for criticism. Take trips and party as you wish.
    I could use a math course though.
    Gross-taxes-Retirement savings=spending

    If you are ever hitting 80% savings, how do you handle the remaining 20%? Is that tax withheld? I mean taxes are normally 24% or in the 30%. Taxes and living expenses need to add up to 100%.
    Enjoy you travels. Nightlife at 30 is probably better than 40 or 50. Math counts at any age.

    Click to expand…

    Tim, I love your formula: Gross-taxes-Retirement savings=spending

    I find it much easier to work with than adding up each piece of spending!

    #237069 Reply
    Liked by AZPT, wonka31, Tim
    Avatar mapplebum 
    Participant
    Status: Spouse
    Posts: 312
    Joined: 04/17/2018

    Any of you think that you might regret saving too much money now and not being able to do some of those activities when you’re older? An example is a supercar that was brought up in one of the threads or traveling to remote locations. You can enjoy a Ferrari or travel to Antartica now in your 30s and 40s and you probably won’t be able to do that in the 70s.

    Click to expand…

    I disagree that you can’t enjoy those things in your 70’s. Unless you’re trying to pick up chicks but even then I’d feel a little more proud of myself for doing so at 70 than 30. But I digress.

    It’s hard to find a good balance on the spectrum of living below your means. My emotional money barometer is biased. It doesn’t seem excessive that we are paying 5x as much towards loans than when husband was in training but it hurts my soul to see our CC bill consistently double what it used to be. One of the main contributors is the luxury people on this forum deem an adequate excess: travel. Nothing huge, in fact no overseas travel at all this year. But even with some reimbursements it adds up. 3-5 night trips in March, May, June, July, August, 2x October, and November. Two of those trips include partial reimbursements. The “we’re good for it” mentality has sunk in. A marginal upgrade in hotels is absolutely worth it. As is National Emerald Club for just a few dollars more. I don’t know that anything has changed with our food, wine + whiskey habits. We have long since been living the good life in that regard. And then there’s house guests. Before moving this spring we averaged -1 guest per year, but now that we’re in a bigger space we have had FIVE rounds of visitors since May. In no way am I the host who insists on paying for everything but if someone is flying across the country to see us I’ll pick up the tab on at least the most expensive meal. We do like good food and drink. The final evening with our last round of guests we probably drank through close to $500 worth of wine. Welcome to Hôtel de MB, my friends. Lap of luxury.

    As we enter this year of uncertainty there is a part of me that sort of wishes we’d stayed home and used that money to buy me a car. Not to say it won’t happen but after retirement and paying loans, whatever is leftover is now going to the WTFIGTH* fund. I love to travel. Not complaining whatsoever, but once it’s over all you can hope to keep are memories and a new collection of photos on social media. If I bought a new car I would enjoy that sucker nearly ever day. But husband and I are similar in this regard: many small excesses are more palatable than one big one. We’ll see how it plays out. For now I’m fattening our rainy day fund because, well, a storm is coming ?

    Excuse me while I prepare to be crucified for traveling so much.

     

     

    *Key: WTFIGTH = What tf is going to happen

    #237086 Reply
    Avatar Gomer 
    Participant
    Status: Physician
    Posts: 8
    Joined: 07/22/2019

    As the saying goes – you can have anything you want, but not everything.  Pick what will really makes you happy and don’t spend a dime on the rest.  We made a list of priorities (investing/savings and purchases) that were important to us and did that.  It meant a house in the neighborhood we wanted but no “attending cars.”  Same clothes, no new trinkets, still careful with our travel budget but now we buy nicer furniture when we need something.

    That being said, when I see these very old guys driving convertible sports cars I do wonder if one shouldn’t wait too long…..

    #237112 Reply
    Liked by Tim, Lordosis
    Avatar Fugue 
    Participant
    Status: Physician
    Posts: 13
    Joined: 10/01/2018

    @tim – that’s the % saved of my take home after tax pay, not gross. I agree it’s impossible to save that high of gross. If you use gross salary I’m basically doing PoF’s live on half challenge, slightly less most months.

    Without disclosing actual salary numbers my rent is about 6% of my paycheck (net not gross). Add in disability insurance, cable/internet, utility bills and it’s about another 3-4%. That leaves a little over 90% to spend and save. Groceries/food/clothing take up another 2%. The rest is mostly discretionary. Loans are paid off. So although some months I put as much as 80% of my paycheck towards retirement savings most months it’s closer to 65-70%. That still leaves me with travel/nightlife money which is important to me now at this stage more than a big house or a fancy car. So I still don’t feel deprived despite a high savings rate. Until I actually thought about the numbers for this post, I didn’t realize how high my savings rate actually was.

    Again for context – single without kids. That makes my fixed spending very small by comparison to those with families.

    #237231 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3093
    Joined: 09/18/2018

    @fugue,

    Enjoy you travels.

    Click to expand…

    You are obviously targeting allocation your resources for enjoyment and building wealth. I was simply pointing out the problem with definitions and pre and post tax deductions. Some have generous pre-tax and post-tax retirement savings options at an employer and end up needing after tax taxable accounts to accomplish retirement saving targets. My intent was simply to point out when talking percentages, gross pay is about the lowest common denominator.

    How you choose to “spend” is a personal choice. Some is consumption and some is building net worth. As you say, its personal. On this forum, most would favor as rate as possible be spent on student loan debt although that is a personal choice as well. That is building net worth, not consumption or retirement savings, but it still is important. Lowest common denominator was the suggestion and only a suggestion for communications.

    Thanks for the clarifications.

    #237266 Reply
    Avatar YIFP 
    Participant
    Status: Physician
    Posts: 19
    Joined: 06/22/2019

    This is a question we are really asking ourselves.

    We are mid 30s and early 50s respectively, so this question is really pertinent.  even if we wait until I’m in my early 50s to retire (still quite early, right)? My husband will be over 70.  His health may or may not be good then, who has a crystal ball?

     

    #237488 Reply
    Liked by Tim, AZPT

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