To Save or to Spend?
Alyssa asks, "I know the recommended amount to save is roughly 10-12% of your income. I think. Now, I save much more than the recommended percent (I know that's good), but sometimes I feel pressure that I barely scrape by at the end of the month. It's one of those never-ending guilt circles, you know, 'I’m not saving enough, but you're not giving yourself enough to live.' What is your thoughts on this?"
Dave Ramsey suggests saving 5-10%. We save 12.1% right now (see our entire budget breakdown). Saving up 3-6 months of expenses is our focus now that we are debt-free (minus our house). Once we have our 3-6 months saved, we will shift our focus slightly and save for retirement and our kid’s education funds (and of course anything else that comes up like car fixes or replacement, etc.). In general, we work diligently to reach a specific financial goal (following Dave’s seven baby steps) and then move on to the next.
I think it's important to have a plan in place on how much you will save and how much you will spend so you don't question your decisions from month to month. If you are saving and saving but don't know why, maybe you need to re-evaluate your financial goals and make a plan for the next few years. I know that I personally get lost and frustrated when I don't understand or know what we're trying to do with our money.
Of course, there is always the fine line between being financially smart and saving, and still enjoying your money/life. I like to have a security blanket of savings, but I also like to spend money on meals out, clothing, concerts, etc. To me, our budgeting pays off when we're able to enjoy these types of things. And I know that I can convince Eric to take me out to dinner if I find the money in our budget. That encourages me to be smart with our money so we can do more of what we love.
I agree with Kelsey. The thing I have most enjoyed about putting together a zero-based budget every month for the past two-plus years is that once it's done we don't have to make panicked emotional decisions. Once we have set up the budget and allocated so much for spending and so much for savings, we then simply have to stick with in the budget. As long as we feel comfortable about the budget we have agreed on, we can spend that money accordingly and not feel guilty about it.
I think this helps with the anxiety and stress that comes with money. It allows us to step back each month and re-evaluate our financial goals and make adjustments that keep us heading down the right path.
Alyssa, you are on the right track. Keep saving, but remember to live and enjoy the fruits of your labor as well!