How Much Should You Spend on Fun Stuff?
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- Опубліковано 30 вер 2024
- Traditional advice follows the 50/30/20 model: 50% on needs, 30% on wants, 20% on savings. But I don't agree-here's the number I landed on instead, and how spending less on the "fun stuff" supercharges your financial freedom timeline.
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00:00 - 50/30/20
00.51 - Optimal Breakdown
01.20 - 12% Breakdown
02.22 - 40% Save Rate
02.52 - Phases of Life
04.23 - Higher Salary Luxury
05.05 - Compound Interest & ROI
05.32 - OUTRO
PLEASE run for office now! I’ll ecstatically donate to your campaign AND vote for you and your Universal Daycare platform!!!🤜🏻🤛🏻
Sharing this with the homies . All my friend admit were afraid to learn about money and it's time to change that
Ha, thank you! I appreciate it
I use 50/30/20 as a guideline. Keep my wants under 50. Needs always at 20. And save at least 30. If my wants falls to 45 then my saving jumps to 35. Point is I try to keep overhead low, still get to enjoy the present, and preparing for the future.
The most important part of the 50/30/20 rule is the "50." The rule was designed to maximize your resilience to financial shocks, like job loss, long-term illness, or divorce. All of those things can reduce household income by about 50%. So if you can fit your fixed expenses within 50% of your take-home pay, you can withstand just about anything life throws at you.
The breakdown between the "30" and the "20" is less important, because you can always cut the "wants" spending later if you need to. If you value early financial freedom and want to save more than 20% of your income, I don't think anybody would say that's wrong, as long as you're not burning yourself out. But if you want to live it up and spend a lot on wants (and I agree, 30% is a LOT to spend on wants), that's OK too.
Note that the 30% on wants also includes donations to charity. That's important to a lot of people.
And yeah, cutting your fixed expenses to 50% of your income is hard, especially for young people these days. But it's never been all that easy for anyone. There wouldn't have been any point in articulating the rule if everyone was already following it.
I am married and live by a simple rule (we have a shared account): one of us will pay for all of our needs and wants, the other one will save all of it.
For myself personally as someone who doesn't have W2 income, I find a tiered bracket system to be much more effective. For my first $3,100 of monthly income, 10% goes to tithe, 5% goes to giving, 15% is set aside for taxes, and the rest goes into my 'Essential Expenses' account. For every dollar I make above $3,100 a month, 10% goes to tithe, 5% to giving, 15% set aside for taxes, 35% for lifestyle spending, and the remaining 40% into a business profit/savings account
60% is saving/investing, 30% needs, 10% wants, and 10% feels like I spent too much on pointless things.
New content when !? 😄
I swing form all to nothing and back again
Hi Katie!! Love your content! I earn what I would consider a very good income for someone my age and in my city. However, after hearing your thoughts on the 40% save rate, and now in this video, a 12% fun money rate, I’m not so sure I’m your audience when it comes to my income. 12% (including saving for travel and larger purchases) is barely enough for me to leave the house. Can you elaborate on what you mean by “high earners” to whom this advice applies? I want to know if this is advice targeted at ME, or someone with a different income.
I am already a 11% for fun and I think that is too much 🤣
Doesn’t this imply that the full 38% is going to investing though? What about mid-term and emergency savings?
I consider anything in emergency savings + long-term investing to be in the 38%! Short and mid-term goals that are just deferring your spend for something in the relatively near future, I don't.
Great content. I will be forwarding this.
Thank you for watching!
I think this is a great rule to live by but it's also important to remember these aren't hard, steadfast numbers. You'll have to adjust according to your lifestyle and obligations just like Katie mentioned! One should strive for financial freedom though!
Thoughts on whether you count a 401K in the 38% savings if it comes out of your net instead of gross pay?
It's in the 38%!
Love the book in the background.
❤❤❤❤❤
My fun rate is at < 1% i really need to get a life
Fun should be relatively free things that give you intrinsic joy like writing, reading, exercising, talking to friends, window shopping.