Most people either identify as a saver or a spender. Savers tend to prioritize the future, socking away as much cash as they can to secure their retirement and financial security. Spenders prioritize their daily wants and needs, assuming their future needs will be met with higher income or creative solutions when the time comes.
Both spending patterns have downsides.
A growing number of people who adopted the financial independence/retire early movement (FIRE) movement now say they regret it. Meanwhile, 63% of Americans live paycheck-to-paycheck and only one-third of American retirees have enough savings to live on.
But here's the thing: you don't actually have to pick a side. In fact, finding balance between living like a monk to save for retirement and spending like there will be no tomorrow is ideal. Here are three simple ways to find that "sweet spot."
Chances are good you're overpaying for home insurance. Here's how to spend less on peace of mind
Mitt Romney says a billionaire tax will trigger heavy demand for this physical asset - get in now before the super-rich swarm
Grow your hard-earned cash without the shaky stock market these easy alternatives
Understand where you stand
This might be step one, but think of it as step zero. Take a look at your current lifestyle and income and figure out where you fall on the spectrum of saver/spender - that'll help you chart your path ahead.
It may be helpful to then compare your spending and savings habits to your income bracket. Do you spend more on your house, groceries, travel or luxuries than the typical household with your income? A good way to know is to compare how much you have left over to put into savings.
The personal savings rate in the United States has averaged 8.95% over the past 63 years. It's roughly 3.1% right now.
If you're saving more than this, your personal finances are probably in better shape than most of your peers. If not, it may be a sign you're leaning away from "saver" and more towards "spender."
Focus on priorities
As you're going through your spending, you might notice some patterns and trends. You may never go out to eat, but take an expensive vacation every few months. Or maybe you always have to have the newest tech gadget.
Do you want to continue the same lifestyle in retirement? Or are you perhaps living modestly with big plans to travel the world once you're done with work?
Read more: Trade up while the market is down: Here are the best investing apps to pounce on 'once-in-a-generation' opportunities (even if you're a beginner)
Do you even want to retire? A growing number of people continue to work into their 70s and 80s as they like to socialize at work, enjoy the structured environment and try to keep themselves mentally sharp with engaging activities. If you're one of these people, your need to save today is greatly diminished.
But even if you intend to work well beyond retirement age, you'll need to plan for your plan going sideways.
Be flexible and make adjustments
None of us have a crystal ball. Both your personal situation and the broader economy can be highly unpredictable.
Keep in mind that few economists predicted the surge of inflation and rapid rise in interest rates we're experiencing now. But a global health crisis and record-breaking inflation aside, surprises can come from anywhere. A medical emergency could derail your career and finances at any time.
And medical expenses also rise in costs after retirement.
So whether you identify as a spender or a saver, your retirement and savings targets will need to be flexible. The best plans include some space for the unplanned.
What to read next
Over 65% of Americans don't shop around for a better car insurance deal - and that could be costing you $500 a month
A TikToker paid off $17,000 in credit card debt by 'cash stuffing'
Only got 3 minutes? Here's how to find cheap health insurance before open enrollment ends
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.