A lot of things change as we mature, both personally and financially. Looking back, we realize that our preferences and spending habits have considerably changed over time, seemingly subconsciously. We upgraded to our first new car, we started buying dry clean only clothes (and actually have them dry cleaned), and our host selections of choice transitioned from Doritos and ranch dip, to charcuterie with fancy fig spreads. As we become more financially secure, our lifestyles tend to creep upward. We’re all guilty of spending more as we make more. But, the vast majority of us will not find ourselves with the means to spend mindlessly, forever. And so, spending will require prioritization.
Just because you have more cash, doesn’t mean you can afford to spend it. When attempting to stretch your hard-earned money across competing financial priorities such as buying a home, traveling, childcare, college, and retirement, we encourage you to define affordability not by cash flows, but in light of other goals, instead. Perhaps your cash flow says you can afford that trip to Italy but your retirement goal says you should travel less. Remember that the lifestyle you create during your working years is the lifestyle you will eventually have to self-fund from savings in retirement.
Work with a financial advisor who can help you understand what is needed to achieve your financial goals and to help you prioritize. We consider a healthy lifestyle one that allows you to save 15-20% of your take-home pay. So, start there. The next time you get a raise or bonus, direct the extra funds to your retirement plan or savings account. Check with your HR Department to see if there is an option to automatically increase your savings and/or retirement plan contributions on an annual basis – if you can’t see it, you won’t miss it! The easiest way to save more is to never get used to having the extra cash. Take control of your standard of living and don’t let an expensive lifestyle creep up on you.
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