A financial planner explains why he plans to save less money next year

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  • In 2023, my family will deliberately save less money.
  • We will put the money we would have saved into childcare and investing in our business.
  • We can make this choice because we have avoided lifestyle inflation and have maintained a high savings rate.

The biggest change we are making to our household finances in 2023 is to consciously choose to save less.

This may sound sacrilegious coming from a financial planner. But there are a few reasons we’re deliberately making this decision, and some specific ways we’ll change our money management to accommodate it.

We will reinvest in our business

The most important way to “spend more” in 2023 is by reinvesting in the financial planning company my wife and I run together. We currently have three other team members as well, but we look forward to growing and expanding even further in the new year.

While it means taking a hit to our own revenue, we are excited to add more staff so we can better serve existing customers, but also provide our strategies and approach to plus clientele. We are viewing this move not just as increased spending, but as an investment in a valuable asset that we have a proven track record of managing and growing. As an investment, we expect to see a return on that in the future as well.

We’re spending money on childcare for the first time

In 2022, my wife was the main mother of our little daughter. Throughout the year, she worked as a full-time caregiver…but she also managed a part-time role managing operations for the company.

“Overall, it was the best decision for our family,” he told me of the time. “But it was really For real challenging year”.

He went on to explain that although it was difficult, it also, in a way, gave him the opportunity to have the best of both worlds.

“I my love being the full-time primary parent to our daughter,” she said, “and I’m grateful for the fact that I’m working remotely for a company in which I have an ownership interest. That meant I got to spend their first year at home together, Y I didn’t have to put my career on hold to do that.”

The fact that we didn’t have to pay extra money for childcare help our budget last year. But, my wife and I know that playing both the roles of a working parent and a stay-at-home parent without outside support would never be a sustainable arrangement.

In 2023, we will be spending $250 a week for a few days of childcare support so my wife can have the time and space to not only focus on her work, but to have time in her day just for herself. The cost means an additional $13,000 per year to fit our budget, but we do not plan to cut costs to accommodate this new item. This will simply be an additional cost that will increase our total spend.

The movements of money that we made in the past made this plan possible

There are a few strategies we’ve used over the years that allowed us the freedom to make this decision for next year:

We avoid the creep of lifestyle

Our base level of spending has changed very little in recent years because we do everything possible to avoid including large fixed costs in our budget.

When we bought a houseFor example, we set our price range so that the monthly mortgage was less than what we were paying in rent. When we bought a car a few years ago, we planned ahead and saved for three years before paying cash instead of financing the purchase and add a car loan to our balance.

And when it comes to everyday expenses, we pay close attention to how we use our money. If something doesn’t align with our values, we probably won’t buy it. It also helps that we are naturally more savers than spenders, and we don’t have much interest in hoarding material things.

However, the better you know your core values ​​and priorities, the easier it will be to use your money in a way that truly makes you happy (and easily say “no” to anything else!).

We work to increase our income year after year (instead of focusing exclusively on spending less)

There’s nothing wrong with having a frugal mindset, but there are also so many expenses you can cut back on. That’s why we prefer to focus on the other side of cash flow: profit.

Theoretically, your earning potential is unlimited. We put our energy into increasing revenue and growing the business instead of scrimping and scrimping pennies. Earning more is a harder path than spending less, but it is the path that empowers you to have more flexibility and freedom with your finances.

we establish a For real high savings rate target for the last decade

We’ve spent almost a decade saving very large percentages of our income every year. We typically take more than 40% of our earnings and invest that money in long-term investments, including our 401(k)s, HSAY brokerage accounts.

Saving so much money in investments in the past has given us a lot of choice in what we do in the future. That includes having leeway in our financial plan to make an adjustment like saving lessat least for this year.

We still plan to save a minimum of 25% of our income in long-term investments to increase wealth. If we can, we will save more. We assess our available cash on a quarterly basis to identify what is available and move that money into investments as soon as we can.

This 25% guideline It’s the same benchmark I suggest for our six-figure financial planning clients, and we use it for a reason: At that income level, saving 25% is not only realistic and achievable, but also very powerful. If you can consistently maintain that level of savings each year, you’ll have a high chance of long-term success.

“Saving less” does not translate to “saving nothing.” It’s important to strike a balance between living well right now and continuing to save responsibly for a secure future.

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