Is There A Natural Spending Vs Savings Balance?

Balanced Spending by Andrew MacGill Flickr Creative commons

Balance is one of the keys to greater happiness. But, when it comes to money it can be hard to find the right balance between spending vs savings. We are constantly bombarded by marketing campaigns and ads tempting us to spend, spend, and spend some more.

Perhaps there is a natural spending vs savings balance if we can be mindful of its existence. A natural yin yang that makes both our wallets happy and our lives comfortable.

Spending Vs Saving Scale Of Balance

For the past several months, I've been spending tens of thousands of dollars remodeling my new old house. I'm only the second owner in the house's 68-year-old history. It needs a lot of work as a result.

For example, I just spent $9,000 painting the exterior, the fence, the windows, and all the metal fixtures. The painter estimated the house hadn't been painted in 25 years! He also mentioned that his crew normally uses two gallons of spackle to fix stucco cracks on a house my size. But, they used eight gallons to smooth everything out. That's four times as much!

When it comes to spending vs saving, I'm typically way more happy saving. Even though I budgeted extra money to bring the house up to date, I still feel dirty spending so much money. It makes me wonder whether we all have some type of self-correcting overspending limit, just like we all have a self-correcting over-eating limit. If we didn't, we'd all be obese and broke. Nobody I know wants to work forever and feel the constant stress of having no money.

If the average desire to spend is a 5 out of a 1-10 point scale, I'm about a 3. But for the past several months, I've been spending at an uncomfortable 9. I'm curious to know where would you rank yourself on the spending vs saving scale?

Some of us might have to hit rock bottom before we find our happy spending vs saving balance. But, at least that should hopefully make one's future spending and savings habits that much stronger.

My Spending Vs Saving Home Remodel

There are only two things I have left to remodel: 1) Build a relatively large ~170 square foot luxury master bathroom with jacuzzi tub, walk-in closet and separate shower, and 2) Build two decks out back facing the ocean to create an ideal indoor/outdoor living space.

I've always imagined sipping a glass of wine on a balcony while reading a book before the sunset. Perhaps I can do a lot of inspired writing on the balcony during warm days as well. Let me check with my accountant whether a balcony that helps produce better writing can be a business expense.

As for the master bathroom, I've got a large garage that cannot fit two cars tandem. Therefore, I might as well take as much wasted space in the garage as possible to make a large bathroom. The incremental cost of building a larger bathroom is pretty small.

Every additional square foot of living space built increases the value of the house. If you can build at $300/square feet when property is selling for twice that amount or more per square foot, you should build all day long. This arbitrage is one of the biggest reasons to purchase properties in expensive locations with expansion potential. The fixtures and building costs aren't that much more in SF vs. Houston, for example.

Restore Balance To Spending Vs Savings For Greater Happiness

Having an amazing spa-like bathroom where I can write from a deep soaking jacuzzi tub for hours in the morning would be great (72″ X 42″ was the biggest they'd go). Although, I no longer feel the rush to remodel my home because I no longer want to spend any more money for several months. I want to restore balance to my spending vs savings rate. I want to replenish my coffers and prepare for upcoming income and property taxes.

Existing Tiny Bathroom
Proposed Master Bathroom Floor Plan (15′ X 12'10”)

The contractor asked me to do the $2,200 (!!!) drawing specifications ASAP because it will take two months for him to get approval from the SF planning department. But, I told him, “No rush! Let's really think about all the details before we start.

What I'm really trying to do is buy time to replenish my piggy bank and restore more balance to my spending vs savings rates.

Related: Should You Remodel With Or Without Permits? A Cost Benefits Analysis

The Spending Realization

Given I've been a lifelong saver, spending more than I make for three consecutive months feels wrong. In fact, spending more than 70% of my monthly net income during any month starts making me feel very uncomfortable since I've been spending 50% or less since 2000. I'm an absolute stickler for buying things only through disposable income. Withdrawing from my savings account to pay for things feels dishonest.

When I first wrote this post, it was holiday season. Deals were being advertised everywhere. So, I thought about buying a nice 60″ LED HD SmartTV for my bedroom. But, I decided against it. I abhor physically shopping during this big sales due to all the crowds, bating and switching of advertised products that are no longer available once you get to the store, and the time it takes to find a parking spot and pay for everything. As a result, I do 100% of my shopping online.

My challenge to you is to try and hustle to make extra money before the end of the year to cover all your extra spending. Those nasty credit card bills you'll receive in the New Year are no fun.

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54 thoughts on “Is There A Natural Spending Vs Savings Balance?”

  1. Hey Sam, I too live in the Bay Area. Is your contractor good? Would you recommend him? People with good trade contacts tend to keep them to themselves. :) So I won’t be offended if you chose not to share.

  2. Sam,

    I know what you mean. I leased a car this past week and man am I hurting. I know the 1/10th rule (learned it here.) I know leasing is probably a dumb move, but I hate debt and hate it more on a depreciating liability. Went to the dealership and left with a car that I like, but I am regretting the purchase. I am naturally frugal, but the combined age of mine and my wife’s car was approaching 30. I’m now working on cutting monthly bills to make up for the savings loss. There goes cable!

    1. What car did you get? At least you’re leasing a depreciating asset, than buying. I decided to lease my Honda Fit 2015 for $235 a month because I don’t know where I’ll be exactly in 3 years, and I don’t know my car needs.

  3. Sam, you gotta tell Personal Capital to start expanding their services to Canadians, the closest thing we have is but it’s lacking in comparison to what Personal Capital has to offer.

    I have already signed up but can’t do anything because at this moment it doesn’t support tracking for Canadian banks and brokers.

    I’ve been waiting for quite some time and i’m ready to transfer all accounts and use Personal Capital’s service.

    Please let me know if there is anything on my end that I can do to help make this available to Canadians.


  4. Why do you have the two sinks side-by-side, with no sink in the toilet room? I know this is standard, but this forces you to handle doorknobs between when you finish using the toilet and when you have a chance to wash up. That seems unsanitary.

    Can you increase the size of the toilet room, so that you can move one of the two sinks into the toilet room? This also makes it easier for two people to use the two sinks at the same time. For example, a man can shave without fogging the other sink’s mirror, and there is a mirror that is relatively unaffected by the shower (or tub)’s moisture.

  5. A utility sink is very nice to have in a laundry room — and in a garage. If your laundry area is in your garage, this would be a doubly good place for a utility sink. (I use mine to clean paint brushes; my wife uses it to soak hard-to-clean laundry.)

    If you need to make extra room for the utility sink, perhaps you could either:

    * Shrink the shower, or

    * Combine the (large) bathtub with the (large) shower.

  6. this article hits homes right now. I have really tried to save as much as possible the last five years or so. I have managed to invest over $300,000 into rental properties, but I have not been able to increase my investing this year like I hoped. I have been spending more money on my flips, I bought the Lambo and I just spent $4,000 on a two day long master mind group and $30,000 on a year long mastermind group.

    My first thoughts are that it is crazy to spend all this money, but then I have to look at the logical side. The money I am spending will make me much more money in the future. The flip profit can be calculated pretty easy and the investment versus pay off is easy to see. It still has taken a lot of cash and stress to have 8-10 flips going at once. The lambo was a dream since I was 4 and has been well worth it, especially giving my 94 year old grandma a ride today. The mastermind group was harder to just payoff versus investment, but the I know the group will make me much more than I have invested.

    My savings plan is to take each situation as a case-by-case scenario and not have a specified savings or spending rule. I don’t want to get so thin cash wise, that I am in danger of running out o fmoney, but I also want to keep investing in things that will make me more money.

    1. You definitely have to balance a little fun in there with the spending/savings ratio! I always found that when I made a big (somewhat silly to others but fun to me), that it motivated me to go replenish the coffers…and fortunately it always has. Take it easy on grandma…

    2. How much was the Lambo Mark?

      $34,000 on mastermind group stuff sounds like big bucks! What do you learn? Maybe I should start such a product! But I feel bad charging more than $48 on my severance negotiation package book, even though it has provided tens of thousands of real dollars to so many individual people since publication.

      1. The Lambo was $126,000. The mastermind group and two day meeting was $30,000 total and is for one year weekly calls and more in person meetings.

        The in person meeting was two days of talking at a table with six other incredible real estate people. I learned more there in two days than I had in months. I also gained advertising and referral partners.

        The mastermind group has really high level people too making more money than I am. I will recoup that investment very quickly.

        I have a hard time charging a lot for things as well, but I keep hearing the more you charge the higher level people attract.

        It’s funny the group is all about real estate, but they all thought my blog was the real money maker.

  7. We had a baby and yes, we do overspend. But we’re not spending for the two of us, most of the money is for the baby, for her comfort and needs. So, even if our budget is a bit blown away, we’re still OK, since we’re not splurging for anything frivolous.

  8. I’ve been overspending for the last 6 years (my son is 6). I think my what I consider acceptable spending is stuck in the past. I really need to accept that this stage of life is just more expensive. Then I can stop feeling guilty.

  9. Why are you concerned about spending money on renovations? It’s an investment, not “spending” (as long as you don’t go overboard).

    1. Because it’s still spending more than I earn a month, which is the point of the article; discovering our natural spending / saving balance.

      I feel great not spending now and taking my time getting the drawings approved by the planning department.

      It’s dangerous to categorize spending as an investment. Let me think about writing a post about this mentality.

  10. Interesting post. I always feel good if I save 40 to 50% of net income but really bad if I approach 80 to 100% spending. That’s exactly why I don’t like owning real estate anymore. Too many uncontrolled expenses even in a newer house.

  11. Sam, I agree with Jay, please reconsider all those hinged doors. I put a set of converging heavy duty Johnson pocket doors with glass tops between my master bed and bath. Your layout is gonna feel confining when completed. I’d also make your exterior windows as large as possible to enhance the space with natural light. Finally, I would only use Kohler cast iron for the tub as fiberglass, while lighter, always feels cheap to me. You’ll appreciate these luxuries for many, many years.

      1. I disagree. Cast iron’s weight gives it rigidity and durability. Fiberglass moves under your weight and scratches much more easily. I love our two person Kohler “Tea-for-Two” with integral heat. Then again, I also have luxurious underfloor radiant heat and would never go back to the drafty forced air heat.

  12. Interesting concept of the natural spending limit. There are definitely personality types when it comes to money handling, typically on the thrifty vs spendthrift scale.

    That’s one of the things I like most about money handling by percentages, e.g. 10% for fun, 10% for charity, etc. Once you set your limits, as your wealth increases your opportunity for spending increases as well. It’s a naturally, self-correcting practice and almost impossible to “over” spend as long as you’re disciplined about the spending side.

    Good luck with your remodel!

  13. I tend to spend way more during the bad financial times because it makes me feel a lot better. After losing lots of money in the dotcom crash, I went on trips to Asia and Europe and bought a new car with my savings whereas I didn’t during the boom phase. Back in 2008/2009 financial crisis, I figured I’ve saved this money, may as well buy a house now, buy more stocks, go on that European family vacation, eat out more, etc.

    During boom times, I just get a nagging feeling it won’t last that much longer, so tend to spend less, invest less new money, and hoard my savings more to look for opportunities when the eventual downturn comes. I wish I can time the upturns and downturns more accurately, but then again, it doesn’t seem anyone else can either.

    1. Totally logical Josh. Spending helps smooth out the pain and experiences during bad times. When times are good, it feels good so why spend?

      I always feel the good times won’t last forever. This upcycle has lasted longer than I expected. Let’s hope it lasts several years longer! Uber is getting valued at $35 billion in its latest round of funding from just $18 bill at the end of 2013! Wow.

  14. That bathroom looks great! Quick thoughts for your consideration…
    1) what would ‘pocket doors’ do for your space? The reason I mention, is the ‘entry’ door swinging into the space where someone using the sink might be problematic, but a ‘pocket door’ would eliminate that issue. Same with the commode, rather than have the door swing into the passageway, a ‘pocket door’ would eliminate that issue.
    2) looks like the washer/dryer would face into the garage? If so, a metal rod across the top of that space, hanging a soft ‘blackout curtain’ across, would allow a finished look for the parking space and easy access to the washer/dryer.
    3) two metal poles sunk into the garage floor, 3′ high, 6″ wide filled with concrete, in front of the bathroom wall/laundry area. Nobody ever intends to crash their car into the wall, but for the very small cost it will guarantee it.

    It is really coming together! You whole home will be an oasis, a place to be separate from the wider world. Cristal in the Jacuzzi-tub, like on ‘Cribs’!

    1. Here are some ‘Pocket Door’ designs to show how they look, and conserve space. I’m a new fan of them, and there are some spaces that don’t really need a door at all most of the time. Much easier to install when the walls are stripped.

      Another thought on the tub, you might consider Glass Block windows to allow natural light. A narrow row up high would allow diffused light, give privacy, and still provide security.

        1. Pocket doors are great! My house has more pocket doors than regular doors.

          Unfortunately, most people’s pocket doors are hard to open and close, because the latches and handles are tucked into the edge of the door — and then completely hidden inside the door jamb.

          Fortunately, there is a fix:

          * Make both the door and doorway 4 inches wider than what you would otherwise use for your doorway.
          * Make the door stick into the doorway by 4 inches, even when the door is “completely” open.
          * Use a grab bar style handle (on both sides of the door), about halfway between the door jamb and the edge of the door. The Ives 8102 series handles work well. (My pocket door handle dimensions match the 8102-7, which does not seem to be made anymore. 8102-6 and 8102-8 are available. You will need to check with the manufacturer to make it work with standard 1 3/8″ thick residential doors.) ( )
          * Use a latch that is as easy to use as a deadbolt. My pocket doors have Jako K34 latches. ( )
          * Use heavy-duty pocket-door hardware. Johnson Hardware’s 1500 series and Hafele have good reputations.
          * If the door becomes harder-to-open and harder-to-close than you like, rub soap on the floor where the door rubs on the floor. This will provide a few months of lubrication.

  15. I feel like before you become aware of the personal finance world and the concept of financial independence in particular, you don’t have any feeling of a natural savings rate. You just spend money, and if you have some left over, then great! Save it for something even better later like a house, holiday or car! Fortunately I’ve always loved buying stocks, it just happens to be my favourite thing to spend money on :)

    I know for me it’s not until I read books like Rich Dad Poor Dad some years ago, and really discovered this personal finance blogging world, that I’ve felt a ‘natural’ savings rate kick in. Unfortunately for me, I don’t feel like I’ve ever been at my natural savings rate yet. It’s probably been around 10 – 15% (excluding super contributions) for the last few years since my wife stopped working and we started our family! Before that it felt like we had a ton of excess money to spend and invest. And unfortunately for me, the savings rate will disappear in the short term once we move in to our new house. I’ll be on a mission to get back to our regular savings rate and then surpass it, hopefully discovering my natural savings rate (of 50%??) in the process!

    If only we were born with such a mechanism for over-spending, the way our over-eating mechanism works!

    1. That’s great your love to spend money buying stocks! I think you’re right that many people just spend b/c that’s what you’re supposed to do when you earn money. Only until they realize, “DAMN, I don’t want to work at this crappy job forever,” do they realize they need money for more options. For some, it will be too late. Hopefully for many readers of Financial Samurai, financial freedom before regulation is an inevitability.

  16. I just got a notification that my Amazon GC will be sent shortly! I don’t know if it’s for $10 or $20. Fingers crossed. Thanks for the link, Sam.

    Also, congrats on being only the 2nd owner! I’ve not owned a home but I imagine it would feel as good as being a 2nd owner for a used car.

    1. Great to hear you got the free $20 Amazon Gift Card! I didn’t get a notification, but I’m glad you did. It’s still early in the day, so I would say chances are pretty high that you get $20. My colleagues said they still have $20 gift cards as of 10:15am. The best benefit is if you aggregate all your accounts so you can see the big picture of what’s going on with your money.

      On the house front, I never thought about that car and house correlation in terms of ownership. Would I feel even better if I was the original owner? Not sure! I would feel best if the original owner made the house a killer house and I didn’t have to do anything to improve it and I could buy it at a discount :)

  17. Sam,

    I hope you had a nice Thanksgiving and thanks for taking the time to share your latest post. I have a very similar attitude/temperament towards spending as you…Despite the ability to comfortably consume, I often feel quite guilty when I spend any meaningful amount of money. However, as you mentioned, at least your expenses will create and unlock additional equity in your property. It certainly seems like the right play given you can afford it, get to take advantage of the arbitrage opportunity, and especially because you will get to enjoy the new space going forward. I look forward to hearing about your joy/happiness with your new additions once the construction is all complete!


    1. Thanks JP. Hope you had a nice Thanksgiving too. We did a potluck at a friend’s place and had some wine and beer in their outdoor hot tub :)

      It takes money and suffering to create joy and happiness in real estate, unfortunately. If only things were so easy. But when you deal w/ people, their schedules, and money, things get hairy.

      I hope the bathroom will be done by Feb 15 and the decks to be done by July 15! Gotta set expectations low.

  18. For me, at least, the willingness to spend has been dynamic over time and inversely correlated to my income. When I wasn’t making much, I felt like I needed to enjoy life more to compensate, so I routinely ate at the fanciest restaurants, began collecting high-end watches and went on nice vacations. Now that I’m making more, my desire to spend has fallen to a 2-3 on your scale, but I’m actually much happier. I derive happiness from NOT spending, and so it becomes a virtuous cycle.

    That said, I’m about to pay a down payment on a NYC condo, and I know it’ll be hard to overcome my savers’ mindset!

    1. What a great feeling right Nate? I think we’re pretty similar in views. It makes me HAPPY, NOT spending so much money. When I get into my economical Honda Fit, I’m happy I didn’t spend $60,000 for the Range Rover Evoque b/c I’m still getting to the same place with a higher MPG.

      Good luck on the NYC condo! How long have you been looking and how is the market there now? One of my biggest financial regrets was not buying a condo in 2000 in Manhattan on 22nd and Madison.

      1. I hear ya! That similarity is why I gravitated to your site.

        I’ve been on the hunt for a condo for a month or so now. As I’ve heard from every agent I’ve spoken with, real estate inventory is very tight right now in NYC because it’s the off-season (if there is such a thing here). Pricing has snapped back quickly and is slightly above the middle of the range between the bubble peak and the 2009/2010 trough. Given where we are in the economic cycle, I still think that’s a reasonable price to pay. When I move to the ‘burbs in a few years, I plan to keep the condo as a rental, so resale value isn’t paramount.

        Your posts on real estate and mortgage options have been a big help!

        1. The biggest thing I wonder in SF is what happens to real estate when Uber raises its next round at a $35 billion valuation+, and goes public within the next three years. I think the knock on effect of thousands of new multi-millionaires is going to be a little scary.

          Any big liquidity events upcoming in NYC?

  19. Hi Sam,

    I’ve been on a spending binge since June 2012.

    The total amount of my liquid assets, cash savings/bonds/stocks, decreased by about $200k over this time period. That’s pretty brutal, considering I actually booked some stock/bond gains during these past couple years AND brought in about $100k in passive income from rental and dividend income.

    On the bright side, about $75k of that $200k is from taxes paid on real estate and stock/bond capital gains. That leaves about a $125k reduction from actual spending and business venture losses.

    Also worth noting, the SF condo value went up about $150k, maybe a bit more, during this same time period, so total net worth hasn’t changed that much.

    Ideal situation, of course, would have been to stay 100% invested in stocks during this time and all this spending would really not have mattered that much.

    Here’s the list of the major expenses from the past 2.5 years:

    – four months of condo and car rental in San Francisco to visit family and friends
    – one month traveling through Europe solo
    – week long family trips to Maui (The Ritz) and Tahoe (Squaw Creek)
    – three months traveling with girlfriend throughout Europe and Caribbean – includes two cruises
    – losses and fees from buying and selling a restaurant and condo in the D.R. (lived there for about one year)
    – one year of condo rental and general living expenses in Montreal
    – capital gains taxes from stocks and real estate sales (about $75K)

    1. Sounds like you’ve been having a lot of fund and building great memories. Was all the spending worth it? Europe, Maui, and Tahoe is a great combo!

      Maybe your propensity to spend is closer to a 7 or an 8 on the 1-10 scale vs. my 3?

  20. I absoloutly think we each have our own comfort levels with regards to spending. Even at times when I’ve saved up for many months in order to fund a large one-off purchase it still makes me feel very uncomfortable to part with such a large amount at once (even though averaged out across the months there hasnt been any actual increase!).

    This really came to a point for me when I had to transfer away everything I’d saved for a house deposit when we bought our first home. I remember actually thinking how stupid it was to be worried about ‘spending’ such a huge amount despite knowing I’d been saving all that money just for this specific thing!

    1. Weird yah? Hopefully after you put down that housing down payment, you became super motivated to replenish your coffers and save some more? I know I did, and am motivated now.

      1. I became more motivated to pay off the rest of the debt!

        Unfortunately my partner has taken the ‘I have a nice house so now I want to fill it with nice things’ mentality. It’s a bit of a battle ;)

  21. Hey,

    Dam your house looks like it’s going to be epic.

    A couple of months over spending does it for me. Had three stag dos this summer, expensive and nothing to show for it except being knackered!

  22. That’s a cool looking bathroom design! I can see how it must feel out of your element to be spending so much money on your house in such a short period of time. I also don’t like spending a lot of money. Since I’m looking for a new job right now, I’m hyper sensitive to how much I’m spending.

    I don’t have anything I’m really hoping to get on Black Friday. I’d be happy to have a new filing cabinet but I’m not in a rush to get one. Usually I order holiday cards and photo books during the sales, but I think I’m too far behind to put orders in on that kind of stuff tomorrow. Plus I know there will be more sales over the next month.

    And lastly, on the 10 point scale, I’m probably at a 2 if 5 is considered average. I feel better when I’m saving than when I’m spending!

    1. I wish I could just *blink* for the bathroom to be done. Will try and coordinate the build during a long vacation abroad. Pretty stressful and dusty when all the construction is going on.

      Happy saving!

      1. Great idea to move out construction… Especially during kitchens and bathrooms! It can be overwhelming to see your house gutted! We rented a beach house for a month when they were ripping out and re-doing our kitchen. So glad we didn’t have to wake up to that mess every day. We were close enough to drop by once a week or so, and to be able to make decisions as things popped up.

      2. Construction dust is the worst. You can clean everything and get it spotless, and then a couple hours later everything is dusty all over again. It’s nuts. If you can’t get away, it’s worth it to get dust masks and a good air filter at least.

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