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The problem you're really trying to avoid is not knowing that you're subtracting from your savings target. It's too easy for expenditures, especially small ones

by setr 6y ago

The problem you're really trying to avoid is not knowing that you're subtracting from your savings target. It's too easy for expenditures, especially small ones adding up over time, to grow unbounded without you noticing, and if you're putting "the rest" into savings, you end up noticing the problem after the fact -- you can only affect the next month. If you instead allocate first, and operate the month assuming you never add had access to the funds, then it becomes painfully obvious that you've spent beyond the target -- and can make the decision then whether that's fine, and pull out the money from the savings buffer as needed (and presumably up the savings envelope for next month). The main thing, I think, is that most people (not living hand-to-mouth) spend to their financial comfort -- not their physical comfort -- growing concerned mainly as they approach their upper limits, and then reduce accordingly. I'm thinking of Braess's paradox; you spend to the money you have, even if you'd be happy & fine with less. So by reducing the total funds up front, you reduce spending earlier accordingly. Of course, no more so than what would make your lifestyle uncomfortable.

esoterica 6y ago
The psychological bias works both ways though, if you operate on a fixed monthly budget you might be tempted to spend more on stuff you wouldn't otherwise spend on if you notice you're under budget for the month. Also a mental bias against spending is not necessarily a good thing. Spending is like eating, unless you have a problem where you're doing it too much of it, doing less of it is not inherently desirable. I spent way less last year than 2019 because of Covid and my life certainly wasn't any better for it.
- setr 6y ago
  > The psychological bias works both ways though, if you operate on a fixed monthly budget you might be tempted to spend more on stuff you wouldn't otherwise spend on if you notice you're under budget for the month. Which is significantly better than the other way around, because you’ve met your saving target(s). Really, that money constitutes legitimate excess cash. You can shove it into risky investments, or spend it freely; it doesn’t matter — you’ve met your needs. > Also a mental bias against spending is not necessarily a good thing. Spending is like eating, unless you have a problem where you're doing it too much of it, doing less of it is not inherently desirable If you’re spending over your saving targets, you are spending too much. If you’re spending under your targets, you’re free to spend more, guilt-free (you’ve covered your necessities, you’re playing with excess). The only problem is if you set your savings budget so high that you can’t spend to your actual comfort (given your lifestyle). Then it becomes a question of accepting you simply don’t have so much money, and either reduce your lifestyle or extend your saving targets accordingly. TLDR; meet your targets. Beyond that, do as you wish.

by setr 6y ago

esoterica 6y ago

The psychological bias works both ways though, if you operate on a fixed monthly budget you might be tempted to spend more on stuff you wouldn't otherwise spend on if you notice you're under budget for the month. Also a mental bias against spending is not necessarily a good thing. Spending is like eating, unless you have a problem where you're doing it too much of it, doing less of it is not inherently desirable. I spent way less last year than 2019 because of Covid and my life certainly wasn't any better for it.

setr 6y ago
> The psychological bias works both ways though, if you operate on a fixed monthly budget you might be tempted to spend more on stuff you wouldn't otherwise spend on if you notice you're under budget for the month. Which is significantly better than the other way around, because you’ve met your saving target(s). Really, that money constitutes legitimate excess cash. You can shove it into risky investments, or spend it freely; it doesn’t matter — you’ve met your needs. > Also a mental bias against spending is not necessarily a good thing. Spending is like eating, unless you have a problem where you're doing it too much of it, doing less of it is not inherently desirable If you’re spending over your saving targets, you are spending too much. If you’re spending under your targets, you’re free to spend more, guilt-free (you’ve covered your necessities, you’re playing with excess). The only problem is if you set your savings budget so high that you can’t spend to your actual comfort (given your lifestyle). Then it becomes a question of accepting you simply don’t have so much money, and either reduce your lifestyle or extend your saving targets accordingly. TLDR; meet your targets. Beyond that, do as you wish.