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Everyday Cheapskate: Feeling Rich and Living It Up

Mary Hunt on

Dear Mary: My husband and I have been out of debt for approximately five years. It's great. The problem is we now seem to spend a lot of money needlessly just because we can. We have so much money over and above our living expenses that it is easy to be reckless.

We keep just enough in savings ($2,000 or so) for emergencies but never get beyond that goal. I feel guilty about this. In a way, it seems like it's always harvest time for us, but we're not gathering for winter.

I just can't seem to control my spending. Any advice? -- Colleen

Dear Colleen: Getting out of debt was a great accomplishment, but quite frankly, that only got you to the starting line. You're stuck. Your wheels are spinning, but you're not going anywhere.

I suspect the two of you have not decided on the guidelines that will determine disposition of your impressive income.

Whether you make $5 or $500,000, you need a mutually agreed upon plan for managing money that flows into your life (and seems to be gushing out as quickly as it comes).

 

I believe the 10-10-80 formula is the answer. You give away 10%, save 10% and live your life on 80% of your net income. Once you establish the criteria, you may determine that 10-20-70 is where you need to be. Or some other plan. The point is you need a set plan.

I think you might have some errant belief that, because you are well-off, you can spend with abandon. That's not true at all. Even the most wealthy cannot live as though money is of no concern. If they do, they're not wealthy for very long.

The cold hard truth is that, even in your cushy condition, you are living paycheck to paycheck.

If your income were suddenly snatched away through unemployment, a health disaster or another calamity (you should read my mail), you'd be in a world of hurt with only $2,000 in savings.

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