Reply to When do you decide to spend today instead of save for tmw?

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[quote=Anonymous]I am a saver who has to encourage myself to spend, and it helps me to go with the idea  that capital is what affords unusual luxury so I prioritize things this way:

First we already have established a 6 month emergency fund plus additional savings for unexpected expenses (e.g., I keep a fund that is our out-of-pocket limit of health expenses; a fund for dental, for vet, for car and for house in cash savings).

1) 20% pre-tax to retirement.
2) Budgeted expenses (monthly bills, groceries etc.)
3) Pre-established amounts to kids' college accounts. (We worked with our planner on what this should be).
4) Expanded expenses for experiences (restaurants, cultural events, kids' lessons/activities) we can cash-flow with current income.
5) All extra from current income goes to taxable investment accounts or sinking funds. Sinking funds are for designated things we know we need/want within the next 5 years.  A big trip, a particular home renovation etc.  Taxable investment is more fungible.
6) At the beginning of the year, we calculate 4% of the taxable investment account and that is our money to spend on something "extra" that year. If the market is down we might not take the full amount (like this past year the 4% would be around 15000, but the market tanked before we decided to use it and we didn't really have anything extra we really wanted, so we will likely take out less and take out more next year).

So 4-6 are our ways of 'spending for today' while balancing saving.  4 is directly spending from current income, and 5-6 are saving/investing for 'fun' spending.[/quote]

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