Finding a Balance Between Saving and Spending


Knowing when to spend and when to save can be a tricky balancing act. Oftentimes, we let our emotions get the best of us and we splurge on an unnecessary purchase. Did you really need to buy that designer handbag when you already have eight other purses hanging in your closet?

Did you need to blow your budget and buy the luxury vehicle when a more affordable option will also get you from point A to point B? When it comes to spending and saving, our heart tells us one thing and our head tells us another. It can be hard to find a happy medium when it comes to your finances, but you need to take into account where you are in life.

For example, a recent college graduate working an entry-level job most likely needs to think twice about making a big purchase. On the other hand, someone who is a bit older and has had the time to save may not need to agonize over whether or not to splurge every now and then.

Treating yourself once in awhile is fine — regardless of your age or income level. There’s something to be said about living for today. If you sock all your money away for a rainy day or retirement, sure, you’re being financially responsible, but you also need to have some fun in the here and now.

If your spouse has been bugging you to go on a Caribbean vacation and you’re in the financial position to comfortably do so, a couple thousand dollars will be worth the lifetime of memories you will create. As mentioned before, it’s all about findning balance and figuring out what works best for you and your family.

Knowing When to Splurge and When to Save

Before you make a big purchase, stop and ask yourself a few questions such as, “Do I really need this item?” “Is this item going to make my life or my family’s life easier?” “Can I afford this item?” “Am I getting the best deal on this item?” These simple questions will hold you accountable when it comes to dropping a lot of money at one time.

I’m not suggesting you need to pause every time you go to the grocery store or fill up at the gas station, because the process will become agonizing and utterly pointless. After all, you need to eat and so does your car. However, when it comes to more infrequent purchases, it’s best to assess the situation and rationally determine whether or not you are spending your money as wisely as possible.

If you’re single, you have a bit more freedom when it comes to instances when you splurge or save. But if you have a family to think about, there are other factors to consider, because you are responsible for providing for both yourself and others.

Everyone knows saving for the future is important — especially when you reach retirement age and you no longer collect a steady paycheck. However, there are differing opinions when it comes to exactly how much you should be putting away each month.

How Much Should I Save?

Different people come up with different answers when asked how much the average person should be saving each month. However, here’s a good rule of thumb provided by Libby Kane in her LearnVest articled entitled, “How Much of My Paycheck Should I Save Each Month?” Kane proposes the 50/20/30 rule: 50% of your monthly budget should be reserved for essentials (such as housing and food), 30% for lifestyle choices (nights out on the town and premium cable), and at least 20% should go toward “financial priorities,” including debt payments, retirement contributions, and savings.

These percentages are divisions of your net pay — the after-tax income you bring home. If you make $35,000 a year, consider putting aside at least $4,800 for financial priorities.

20% may seem like a lot, but it’s possible. Keep in mind you need to use some of that money for actual savings and not only put it towards student debt or high credit card balances. Even if you have debt in excess of 20% of your net income, you still need to find a way to save money.

The bottom line is knowing when to spend and when to save depends on your individual financial situation and what kind of debt you have. Think through big purchases before handing over your credit card and when in doubt, sock your money away for the future. Forty years from now, you’ll be happy you had the foresight to plan ahead.

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