Saving every Penny vs Living a good Life

Each person has a unique lifestyle and thereby a unique spending/saving habit. No matter how much you earn the secret to doing well financially lies in how much you save out of your paycheck. Some guys have shared on various blogs how they are trying to save 60-70% of their income with a dream to retire well before 40. It’s a great plan if you can do it. However, there is one big problem with this plan. If you really go extreme, you start to put off some of the essential fun that you want to have for later on in life. Now obviously not all the fun activities are expensive, but if traveling a long list of places is one of your goals then it can get costly at times. I still believe that you shouldn’t be putting off your big traveling plans in order to save a lot. After all you need to do certain things while you are young. Striking the right balance is super-important.

I think one must save anywhere between 40-50% of their paycheck each month. As part of our multiple accounts strategy, I discussed how we’re going to transfer this money from the salary account to the ‘investment funds’ account as soon as we receive paycheck. Over time, this amount is then invested into stocks and other asset classes after doing research. Then, a part of the money goes to our emergency fund. Now out of the remaining amount, we have a normal family budget with some buffer. Whatever is left over is transferred to another ‘Big Ticket’ savings account just before the next paycheck. This way we can continue to accumulate into this account with whatever is left over from the budget. Then use this account to fund our big ticket purchases including the many important things we want to do in life like traveling. The beauty of this plan is that we decide how much to save well in advance (probably beginning of each year). Once saving is done, then we have money to live and enjoy life while ‘investment funds’ work to help us retire.

Once you have saved as per your goal there is no need to feel guilty about putting the rest of the money to good use and to enjoying the things you like to do in life.