Should you spend 90% of your income?

Stop me if you’ve heard this piece of financial advice before:

“You should save 10% of your income.”

It’s one of those general financial guidelines floating around out there most people (i.e. me) have heard of.

I wouldn’t call it the worst piece of financial advice but it’s certainly not a good one.

Spending 90% is the other side of saving 10%

Another way to look at saving 10% is that you’ve managed to spend 90% of your income (ACK!!!). I saved about 15% in London so I spent a whopping 85% of my money. I’m cringing as I type this. It didn’t feel like I was wasting money, but after the London finance review, I can clearly see that a large portion of it was unnecessary.

This is not to say spending any amount of money is bad, but rather as an exercise in critical thinking.

I used money to dull the pain of an unhappy life

Did the things I buy bring me true happiness?

Money does buy you happiness and don’t believe anyone who tells you otherwise. But the happiness was not long-lasting and didn’t address the core issue.

Living in a foreign country while being a first year teaching is hella stressful. I haven’t built up my emotional support network yet and turned to what media told me would make me happy. And it did. But the temporary high didn’t fix the root of the issue so I would need to spend money fairly often. It wasn’t until the second year when I formed deeper relationships and got a handle on my workload that the excess spending tapered off.

What are you really buying?

One of my big costs is eating out with friends. I reflected on my experiences and realized that going to a restaurant was really just a convenient excuse to get everyone together.

I love spending time with friends regardless of where we go so I switched over to potlucks and dinner parties at home more often. Figure out what you’re really spending money on and see if you can find more strategic alternatives.

Are you earning enough?

It’s an uncomfortable but important question. If you are already pretty frugal but you still can only save 10% it’s time to look at your job. Maybe you really love this job and you’re ok with the financial tradeoffs you are making. If you don’t love it, lean into the discomfort and seek out greener pastures or look for side-hustles.

The 10% rule will serve you just fine if you plan on working until you’re 65+, but if you ‘re not, dump it in the garbage.

How much should you save?

The answer is AS MUCH AS YOU CAN. Save it and invest the heck out of it. I can’t tell you where’s the sweet spot between saving enough and saving too much that you’re no longer enjoying life. That’s for you to figure out kind of through trial and error, sorry.

Hey, it’s personal finance and we see that generic advice is never the best. I’m lucky that most of the things I like to do tend to be cheap anyways but I bet you can find cheaper alternatives to things you currently enjoy.

There are loads of other bad financial advice out there about savings and spendings. Not all of it is malicious, just outdated, misinformed, or failed to mention exceptions to the rule.

What’s my current savings rate?

I can’t say for sure due to recent tax changes but I would estimate >80% of my net salary. Most of it is choosing to move to a low-cost of living area and picking a job that pays for my housing expenses.

If you don’t know your savings rate, FIGURE IT OUT! Do what I did and spend half a day sorting through all your past year’s transactions. It was boring and mind-numbing but incredibly insightful. I found out that I eat out way too much and my living expenses made up the majority of my costs. I moved my butt to China where I have 0 living expenses and food costs are less than $300 every month. Including twice-weekly dining out.

Did you ever follow any bad financial advice? Did you come up with better personal alternatives?