It’s easy to live on a strict budget of debt repayment. I liken it to be on a diet to lose weight. I do it all the time honestly! Most people I know yo-yo diet. Same thing with budgeting and spending. It’s easy to set the goal, I’m going to pay off all of my debt and live without any extra for 2 years. I’m going to focus on the debt free goal! No extras. Kinda like sticking to a 1200/day calorie diet. There isn’t any flexibility if you want to lose weight.
But then the weight comes off and suddenly you have to figure out how much can I eat a day to maintain a healthy weight. It’s a lot harder. Suddenly instead of counting and portioning out every calorie, you get extra calories and are able to eat out again!
Same thing with spending and saving after debt. You can say I’ll save 10% to retirement, but maybe you have 10% of your budget left from debt repayment. Where does that go? You have to decide. There are so many other goals still left and budget items added back in. You have to decide do you add back in cable? Internet? Maybe a cell phone? Or a clothing fund or vacation fund? Perhaps saving for home repairs you’ve postponed.
How do you find that balance? Much like maintaining the weight loss, it’s a balance. You know you can eat 1700 calories a day and not gain weight. But how do you compensate for the eating out? I think like spending and saving, it’s picking when you want to indulge. Maybe internet at home is important, but to compensate you still don’t add on the cable package.
I think of it more as a list of priorities. Not everything you want on the spending list can be added on, perhaps never. But you can work on adding them in as your income grows and you get more comfortable with your lifestyle. Perhaps it’s something that needs to be monitored like counting calories until it becomes a lifestyle change.
For me, I’ve noticed that we’ve eased back on savings in the past year, because I believe we’ve hit a high limit of saving. We can save 20%+ of income comfortably, so it’s time to start adding in some luxuries to our lifestyle. Then as our income increases we’ll save more and again start spending on luxuries we prioritize as important.
How do you balance spending and saving?
4 responses so far ↓
1 JoeP // Jun 9, 2009 at 4:06 pm
IMHO, when you’ve reached a savings goal, it is time to roll that into investments that are the next stop up from savings: short-term bonds. They are liquid and round out a portfolio well. Maybe a single savings-to-bonds injection is enough for some, while other may want to add or try different bonds.
For us, once we have an “adequate” amount set aside for EF, maintenance, retirement, orthodontia, next car, etc. then we can go for some of the big ticket items. An occasional big expenditure (new washer, vacation) is allowed during this time, but we tend to shy away from contractual obligations…hence the resistance to cell phone and pay tv contracts.
I think there will always be balancing exercises along the way as things change, so there is no hard and fast rule, at least IMHO.
2 sarah // Jun 10, 2009 at 12:11 am
I cant wait until that is an issue
Right now we are just trying to make sure all of the bills get paid. But we do have a plan in place for when incomes rise & debt goes down. There are several goals we want to save towards, and once those are funded, I think we will see a rise in our discretionary spending.
Its fun to see people that have met the first goal of getting out of debt. Gives me hope that it surely can be done, and reminds me that even when I am debt free I will have to work hard to maintain it.
3 Joe // Jun 10, 2009 at 5:01 am
Nice metaphor. I think discipline is really the key if you want to save much more than you spend.
4 LAL // Jun 10, 2009 at 3:27 pm
JoeP, I think it’s a lot easier to start out living lean and adding in then starting fat and going lean.
Sarah, good luck and three cheers for getting out of debt!
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