People frequently wonder, “how much should I be saving?”

You want to make sure you’re saving “enough,” but is there such a thing as saving too much? How do you decide how much that is?

In most cases, people under-save, but there are also outlying cases that people over-save to the point that it actually restricts happiness.

So the million dollar question is, what’s the right amount for you?

What makes you happy?

I heard a thought experiment some time ago that should help to get to the bottom of this little conundrum. Take some time and write out the 10 things that make you happy on a monthly basis. Really think through what makes you happy. What are you passionate about? What are you excited about doing on a monthly basis? Are there things that you think makes you happy, but in reality have little impact on your happiness?

Here are some examples from my list:

  • Watch a movie with my wife
  • Watch my favorite sports games
  • Eat at some of my favorite restaurants (typically ~$10 per meal restaurants, not the expensive ones)
  • Play pickup basketball
  • Go swimming in our pool
  • Hang out with friends (regardless of the venue, aka, money not required)

Most people won’t have things like “buying new shoes,” or “driving my fancy car” on their lists. Those things are great, but they probably don’t enhance your happiness much.

If driving your fancy $50k vehicle didn’t make your list, you could consider trading that in for a $20k vehicle and apply the difference in your payments to saving for your future. Remember, the goal is to make decisions today that will lead to the most happiness, not to do things so people think you have money and status.

Take as much time as you need to make your list. Hopefully, this exercise will help to inform how much you need to spend every month to be happy today and while still putting yourself in a position to accomplish your financial goals.

“But what if I don’t make enough to do everything I want?”

There are going to be cases that you don’t make enough to maintain the savings rate you want (which is a direct indication of when you’ll be financially independent) and spend on things that will make you happy. In those cases there are 4 options:

  1. Question the items on your list. This is an important step, is everything on your list really worth the money? Are there easy items to remove that will allow you to hit your goals? Can you get creative? Did you write “I enjoy clubbing with friends.” Would you be just as happy to have a backyard BBQ instead? There’s often a cheaper way to achieve the same goal.
  2. Lower your savings goal (highly, highly inadvisable, this is a slippery slope that you don’t want to start down)
  3. Sacrifice some spending today. This is the easiest solution in the short-term. You don’t want to delay spending forever, but you also don’t want to sacrifice your future, but if you could remove a big ticket item or two and hit your financial goals it could be worth it.
  4. Make more money! This is my favorite option. You are capable of making more, whether from your job or a side-hustle. I’m a fan of being frugal, but sometimes increasing your income is the easiest fix.

What are some of your favorite/unforeseen things you’ve added to your list?



4 thoughts on “How much should I spend to be happy?

  1. Great advise here. So simple and so true and I have been u consciously following quite a few of these steps recently. When I was in MegaCorp my savings rate fluctuated between 25-45% and I never tracked it spending as much as as time allowed for it. I was taking frequent 2 days weekend trips to foreign lands spending an unbelievable amount entertaining myself to forget about the work related stresses – I don’t regret it as it was fun, it helped keep my sanity, and I learnt a lot but calculating the missed savings does hurt. Today my net income equates to a little more than 1/5 of MegaCorp but my savings rate is still 33 to 76% (depending if I instruct diving or not); the biggest difference is that today I know exactly what makes me happy, and cut everything else out almost entirely plus I look deals to maximise how much I can do of my highest spending buckets. So my list today is:
    1. Sports (21%)
    2. Self Development & Learning (19%)
    3. Quality time with family/ friends (Free/ captures in other categories)
    4. International Travel (14%)
    5. Restaurants (13%)
    6. Socialising with Friends (9%)
    7. Groceries (6%)
    8. Transport (3%)
    9. Housing (2%)
    10. Other/ Medical/ Car (5%)

    I think it also helps to think about and understand what you don’t like doing much and minimise it to be happier. For example I am ok to pay restaurants to cook for me (as I never cook). I also don’t like to sit at home, so I save a lot by having rented out my principal home most times and just travel instead. When I don’t travel I stay with my family in Poland or Girlfriend in England. Result: happier than ever.


    1. I love how you have really broken down and quantified what makes you happy, and then you make sure that you spend an appropriate amount of money on those areas.
      I think you also bring up an interesting point, saving money at all costs isn’t worth it. When I started my new job I needed to get a gym membership since I love going to the gym and I’ll no longer have access to my provider. I could have saved $28 a month going to a cheaper gym, but I opted for the gym that is closer, nicer, newer, more amenities, less crowded, and an overall good feeling in the gym. Despite making the “poor” personal finance decision, it was the right decision for me, and 2 months in, I’m very happy with the decision.
      Not everything in your life needs to be optimized and hacked to the extreme.

      Liked by 1 person

      1. Thank you, Tylor! I agree spending on what makes you happy supersedes some financial decisions! Only saving will depress you overtime for sure, a common threat to reaching FI and keeping that status. It is also important to keep and develop ones’ passions, more so when u reach FI and have much more time available on your hands.

        Liked by 1 person

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