Here's how this works in practice: Start with a list of your necessary monthly costs (rent, utilities, transportation, groceries, dog food, student loan payments, etc.). Write down your monthly net income and subtract your monthly costs. You should be contributing to your retirement plan before money hits your checking account, so it checks one item off the to-do list already. In an ideal situation, your income is more than your necessary expenses.
Assuming a surplus, you can decide exactly where you want to direct that money each month after hitting your baseline needs. This can include saving up for your next adventure and a line-item in your budget for dinners out or seeing shows. It can include whatever you want it to — but the point is to stay within your means.
Will you be able to do absolutely everything or buy whatever you want all the time? No. But keeping track can help you set priorities and make sacrifices that you won’t regret later.
Such planning allowed me to travel internationally in my 20s while also saving and investing and helping my husband pay off student loans. It also helped that I had side hustles the entire time and directed that income toward my “fun goals.” There’s no need to delay “the money will come back.”
It’s easy to fixate on the binary of frugality vs. living it up. But it’s far more rewarding to discern what you actually find important. We are constantly bombarded with messaging about what we should value and strive for, but much of it is marketing and social pressure. (Does swimming on a secluded beach in Albania even sound appealing to you? Maybe travel isn’t your thing and you’d rather put more money toward a hobby.) Focusing on your values will illuminate how you should be spending, saving and investing your money. Say no to what you don’t want, and budget in what’s important.
The future isn’t promised, so yes, please create some memories and live life as you go. But financially hedge your bets, just in case you do live to a ripe old age.
Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part “Broke Millennial” series.