This is something I think about a lot in a theoretical sense right now. Our current focus is debt reduction and elimination, basically getting to a place where we are not paying for our past. But at some point, all this money that we are using to reduce our debt will have other purposes. We got serious about getting out of debt so we would have more money available to do things now, but as we continue to pay down debt, subtle changes are happening in how I think about money. I’m becoming better at thinking about long term and short term scenarios instead of simply immediate gratification.
So how to know how much to save for tomorrow vs how much “lifestyle inflation” to allow to better enjoy today? And when I say lifestyle inflation, I’m not talking about upgrading a car or house, I’m talking about small things. Right now our budget is very tight, so tight in fact that for example we have no entertainment category. No going out to eat, no going to events, no budget for entertainment at all. And we have a very very very small budget for home decor/furnishings etc. So small it will take 3 months to save the money to get my son a bookcase for his room (his books right now live in a cardboard box on the floor), and we rescued the couch we have from our neighbors who were discarding it (we asked, I promise!).
Some people will think this is madness, making our budget so tight, but we really really want to be out of debt. We’re comfortable with making some sacrifices now to accomplish that. But not forever. The whole motivation for beginning serious debt elimination was for a better life now and in the future.
So once our debt is eliminated, theoretically that will free up about $1000/month. Which we, if we wanted to max out our IRA contributions (which people keep saying is the smart choice), would use basically all of for retirement. Well, that can’t happen. We need more play money to have a little more fun. But then, will we be left unprepared in the future? How can one choose between having a comfortable life now and having a comfortable life later when it seems like the “both” option is just not available?
It seems so complicated to find that balance. But we’ll keep looking. There is no room for giving up in this dojo.