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You’ve heard us talk about debt. You’ve heard us talk about saving. Now, we’re talking about life. Not the heavy “What is life?” stuff… just the money side of it.
Do you know how much you spend on “life,” i.e. dining out, clothing, Netflix and chill sessions, vacations, etc.? Do you ever wonder if you should really be spending that much money on yourself? You’re not alone.
The Importance of Living Within Your Means
Before we dive into how much you should be spending on “life,” we want to talk about what’s actually driving you to spend. As successful adults, we know you’re #killingit, but that can also mean you’re tempted to get it while the gettin’ is good. That means more trips, more shopping sprees, and more, “Sure, I’ll loan you that money!”
All of that is great, and has its place… but only if you’re saving and investing what you need to create long-term wealth and stability. You have to consider your relationship with spending now so that you can have wealth in the future. Are you saving (and giving) 25% of your income? Do you have a Backup Life Bank?
YOUR BACKUP LIFE BANK IS 25X YOUR MINIMUM INCOME REQUIREMENT. IF YOU NEED TO MAKE $80,000 A YEAR TO GET BY, YOU’LL NEED ABOUT $2 MILLION IN YOUR BULB.
Of course, we’re not saying you have to set aside 25% of your income AND have $2 million in the bank before you can have any fun. We’re just saying the amount of money you can reasonably spend on “life” is subject to how much you’re really setting aside.
Once you’ve started saving a quarter of your income and are working toward your BULB, what you spend on life is up to you (within your means, of course). That’s why it’s also important to consider your mindset… because that really affects how much you’re spending and saving.
How to Create a Wealth Mindset
As adults, we have to do a few things we’re not super excited about. Like floss every night and clean the kitchen. We also have to spend money on things that don’t “spark joy,” as Marie Kondo says. So no, we can’t just spend all our money on avocado toast and Teslas. We also need to consider our future, our families, and what we’ll do if things don’t always go as well as they’re going right now (hello, 2020!)
When your mindset is in the right place and you have the saving thing down, you can spend as much as you (reasonably) want. But how do you know you’re spending on “life” in the right ways? You spend in alignment with your values, visions, and goals for your life and money.
Sounds easier said than done, right? Lucky for you, we have a resource to help you embrace a wealth mindset rather than a spending mindset. Use our Vision Worksheet to figure out if your life’s expenses align with your true values, visions, and goals — and to get clear on what you want your money to do for you, so you’re not spending in areas that make you go, “Why the heck did I buy that?!”
A Final Note
Look, we’re not trying to tell you what you can and cannot spend your money on. However, we are firm believers that you should be spending well within your means. If you’re not reaching that 25% savings goal, nor have you started your BULB, those should be goals of yours before you start splurging on things for the here and now.
Until then, live within your means and really think about what’s important to you. Sure, that trip or designer bag sounds great now, but is it really more important than security and wealth in the future?
If you’re wondering how much you should be saving, spending, or putting aside for debt repayment or future spending goals, our Know Your Numbers Challenge is a great place to start. If you’re wondering how to manage the money so you can spend, save, and do all the things, you can always contact Generation Wealth to see if our financial planning services are a good fit for you.