Whats the right balance of spending/saving?
I’m 24, spending ~5k/mo, investing ~4k/mo. I’m living a good life but still feel myself holding back on certain things I want and could easily afford (e.g. upgrading my phone). Edit: Since people are asking, I make about 9k/mo after tax and 5k includes all my monthly expenses for me and my girlfriend which includes rent (2k/mo) Am I being too conservative with my spending or will I need these savings in the future?
More info required. What is your monthly take home after tax? What is your greatest expense? What are you investing in? Is investing your only form of saving?
What are you spending on? What location?
Nothing crazy, mostly living expenses which are high since I live in the Bay Area
You have to set a goal then work backwards. Basically calculate how much yearly after tax income you want in retirement. Calculate when you want to retire. Calculate how much you need to have saved to support your retirement spend. Save/invest at the rate that will build that nest egg. It takes doing the math — maybe a weekend to pull together a good ball park but clearly it’s worth it. I’d make a monthly cash flow projection for the next few years and a yearly projection until retirement
You’re spending too much
Personally, I think you could decrease your spending without significantly decreasing quality of life. This would greatly improve your financial situation in the future at the expense of spending today. However, your personal situation may be different than I'm assuming they are, so its up to you to decide how much savings you can target.
I’d put you at the conservative spending end of the spectrum. Ask yourself what things make you tingle? Don’t deprive yourself for the empty goal of frugality. Being cheap isn’t a goal. It’s a means. Ask yourself what are you saving for? This will tell your if you should save more or less. And dude go and upgrade your damn phone, you use it every day. Worth it.
I agree on the updating the phone part 100%. I don’t think being frugal in general is bad though, as long as you aren’t too extreme
Why should frugality be a principle overall? It’s like premature optimization. Don’t save a dollar here or there, analyze your overall cash flow and hit the spots which drain your money hard. Basically home, transport, food. Then think less about small expenses.
If you want to spend more what you should do is don’t decrease your investments but instead, when you get a raise/refreshers increase your spending if you choose to.
do you have family ? How are you spending 3k/mo apart from rent ? It seems a lot.
I pay for most stuff for me and my girlfriend. We tend to eat out and travel a decent amount. Trying to enjoy life while we’re young :)
Get a roommate or 3. Being paid 2k a month to live with someone is a pretty slick deal over living alone
I save slightly over half my after-tax income