How to Find the Perfect Balance Between Spending and Saving

It's the key to being able to enjoy life now AND in the future. It's also the basis for a successful retirement plan, and it all starts with setting your optimal saving rate.

A piggy bank balances against a shopping cart on opposite ends of a teeter-totter.
(Image credit: Getty Images)

It’s certainly not easy to find the perfect middle ground between saving and investing enough to secure those future goals while allowing yourself to spend enough to truly experience all the years in between now and then.

Most people tend to fall on one end of the spectrum or the other. Either you’re more inclined to save a lot of money at the risk of missing out on life today, or you’re a little too flippant about the future and don’t save enough for the inevitable arrival of a time in your life when you can no longer (or don’t want to) work to earn a paycheck.

I believe that if you can find this balance, you’ve got yourself a successful financial plan. You need to know how much to save and invest to fund your lifestyle in the future, and you have to know how much you can safely spend along the way.

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But how do you get there?

Set a Starting Point: Your Savings Rate

To create balance with your money, you need to determine how much is appropriate to spend now to live your life fully. At the same time, you need to know how much you’ll realistically need to save for the long-term. You want to make sure you can enjoy a secure financial future and not run out of money.

The “right” answer on how much you need to save depends on a number of factors, including:

  • How much your goals cost
  • How much it will take to fund your ideal lifestyle
  • The timeline between now and when you need to have the money in place

These are the basics. Generally, I suggest that most of my clients start by saving 20% of their gross income. Most of the people I work with are interested in getting to financial independence at some point. They don’t necessarily want to retire early — but they want to ensure they’ll enjoy freedom and flexibility down the road.

Saving 20% can help you get there. But if you want to be financially free sooner rather than later, even this amount may not be enough. Saving 30% to 40% of your gross income may be more appropriate. This is what I do with my own personal finances, and my wife and I are currently on track to be financially independent in the next 10 or 15 years (which means being at a place where our nest egg is enough to cover our expenses and we no longer need to work to earn an income to pay the bills.)

The great thing about starting with your savings rate and setting that first? You can then look at what’s left over after you address your savings needs. That amount is what you may be able to spend freely on fixed and discretionary expenses right now, without worry or guilt.

Make Adjustments as You Go Along

Just because you decide on a savings rate doesn’t mean you’re locked in with that rate for life (or until you achieve the goal that’s most important to you). It’s a starting point, but you need to be prepared to adjust as you go. Life changes! That’s OK — your financial plan just needs to be able to change with it.

There might be years where you don’t make as much money, which might mean you can’t save as much. And again, that’s OK. It doesn’t mean your entire plan blew up and is no longer valid. You can always make it up in the future when your job or income changes; or maybe you’d prefer to choose to spend less as well to keep more of a balance today. Maybe you can make up for that in the future; maybe your job or income changes.

We want to find a starting point, not a sticking point. Start somewhere, get in action, and then stay aware of your financial situation. Look at what works and what doesn’t. If you find something isn’t working or getting you to where you want to be, then you can simply adjust and move forward from there.

What It Really Means to Maintain Balance

That’s something important to understand about creating “balance” in your financial plan. This does not mean that you must keep everything in perfect balance, all the time. What balance looks like in real life might change from year to year.

You might get aggressive with your savings for the next few years so you can relax more in the future. Or maybe you need to fund something else in your life right now (like starting a business or a family), so you save less today but you know you can make up for it by saving extra in the next year or so.

This being said, keep in mind that periods of your life where you can enjoy low fixed expenses present great opportunities for intense savings. Even if you feel like you don’t have to save, if it’s easy to do so — why not throw a little extra into savings or investments to help build your wealth and future financial stability?

I say that because with all financial planning, we’re trying to predict what is completely unknowable: the future. Anytime you’re working with vast amounts of unknowns like this, it’s a good idea to plan conservatively. If things don’t go your way, a more conservative plan comes with built-in cushions and wiggle room. And, if things go perfectly, it just means extra to enjoy.

You always want to err on the side of more savings rather than enough to just get by.

Create a Financial Plan That Balances Today AND Tomorrow

Enjoying yourself today means understanding what you need to feel like you’re living fully and getting to experience the things that are most important to you. After all, tomorrow isn’t promised — and we’ve all heard the sad stories of people who worked hard and pinched all their pennies trying to get to “someday”... but never made it.

There’s no guarantee the future will be there for us. Anything could happen, and dying tomorrow is possible — but that’s not probable. What’s most likely to happen is reaching your desired retirement age and living long beyond that, which means you have a need to save and invest for the sake of your future self.

Preparing responsibly for tomorrow means just that: Look at the future, understanding that you’ll need money to fund that future, and then save enough so that you can afford the lifestyle you want down the road. In both enjoying today and planning for tomorrow, you can create a financial plan that offers the best of both worlds — and a good balance between the two.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser
Founder, Beyond Your Hammock

Eric Roberge, CFP®, is the founder of Beyond Your Hammock, a financial planning firm working in Boston, Massachusetts and virtually across the country. BYH specializes in helping professionals in their 30s and 40s use their money as a tool to enjoy life today while planning responsibly for tomorrow. Eric has been named one of Investopedia's Top 100 most influential financial advisers since 2017 and is a member of Investment News' 40 Under 40 class of 2016 and Think Advisor's Luminaries class of 2021.