Balance wealth and lifestyle with financial planning

One of the most common questions that arises during financial planning is how to balance future wealth and current lifestyle. While growth and longevity are important, budgeting for intentional enjoyment in the near term is equally relevant. Here’s how you can achieve a healthy balance between enjoying life now and positioning yourself for a secure future.

The benefits of budgeting for fun

Including a fun budget in your financial plan isn’t an invitation to abandon your financial obligations or spend without intention. Rather, it’s a thoughtful strategy to help you stay on track. Allocating a specific amount for discretionary spending brings clarity and control to your overall budget.

By assigning every dollar a purpose, including those earmarked for enjoyment, you create a zero-based budget that supports both discipline and delight. A designated fun budget ensures that even your indulgences are planned, helping prevent wasteful spending on small, forgettable purchases.

Incorporating a fun budget reminds us that a financial plan isn’t just about restraint—it’s about balance. Having permission to treat yourself occasionally makes it easier to maintain momentum toward your bigger goals. And once that line item is spent, it’s a cue to pause, not to overextend. After all, mindful planning is what transforms budgeting from a list of restrictions into a roadmap for financial confidence.

How to budget for enjoyment

A well-crafted financial plan should allocate a portion of your monthly income towards enjoyment and non-essential items. Promoting memorable experiences and everyday comfort in life is just as important as achieving financial goals. Enjoyment and responsibility are not opposites; they are complementary components of a well-crafted plan. By budgeting for enjoyment, you ensure that you live a fulfilling life while still working towards your long-term financial goals.

A practical and widely accepted framework for managing personal finances is the 50/30/20 rule. This approach recommends allocating:

• 50% of after-tax income to essential expenses, such as housing, utilities, groceries, insurance, and transportation
• 30% to discretionary spending—your lifestyle and enjoyment bucket, which includes travel, dining, entertainment, and personal purchases
• 20% to savings, investments, and long-term financial goals

This rule of thumb provides a balanced structure that allows for both responsible financial planning and meaningful life experiences. While individual circumstances may warrant adjustments, the 50/30/20 model is a helpful starting point for building a sustainable and intentional spending plan that supports financial well-being over time.

Another valuable use of discretionary spending is outsourcing time-consuming or energy-draining household responsibilities, such as housecleaning, lawn care, laundry, or meal prep. Paying for these services can significantly reduce daily stress, free up time for rest or meaningful activities, and improve overall quality of life. It’s an investment in your well-being and productivity, especially for busy professionals or parents balancing multiple demands. Just as financial planning creates space for enjoyment, it can also create breathing room in your day-to-day life.

Tailoring your discretionary budget to your life stage

Spending habits are likely to vary depending on your life stage. For instance, families with young children might spend more on family-oriented activities or home renovations to accommodate a growing family, while older individuals might prefer to direct their discretionary budget towards “bucket list” purchases, like a classic car or a unique addition to a wine cellar. Tailoring your financial plan to your current life stage ensures that your spending aligns with your personal needs and preferences.

Avoid falling prey to lifestyle inflation

High-income individuals face unique challenges and opportunities when it comes to lifestyle budgeting. With greater financial resources comes the temptation to increase spending in line with rising income, a phenomenon known as “lifestyle inflation.” While it is natural to reward yourself for your hard work, unchecked lifestyle inflation can erode the long-term benefits of a high income. To optimize your financial well-being, it is essential to establish clear boundaries for discretionary spending and regularly revisit your financial priorities. By doing so, you can enjoy the fruits of your labor today while ensuring that your wealth continues to grow for the future.

When is spending too high?

While it’s true that denying yourself little treats in the name of future wealth can backfire, remember that “YOLO” is also not a sound financial philosophy. Spending becomes excessive when it starts to undermine your financial goals and chips into your emergency funds. If your financial plan shows that your long-term goals are underfunded due to current spending, it’s time to reassess your monthly budget and regain perspective on “needs” vs. “wants.”

Annual financial review

At least once a year, you should review your annual budget and long-term goals. This includes everything from checking your bank statements to assessing your investments in the stock market. From determining allocations to assessing the performance of individual stocks and funds and considering loss-harvesting strategies, this analysis should be an integral part of your long-term plan to help you determine optimal discretionary spending targets.

Aside from your savings and growth goals, review your spending on vacations or luxury items, which should come from a separate bucket. For example, if you’ve budgeted $50,000 for a vacation, enjoy it without guilt, but in a volatile market, you might consider adjusting this amount for the following year, especially if you are approaching retirement.

Live in the now without compromising your future

Striking a balance between enjoying life now and planning responsibly for the future can feel like a constant tug-of-war. It’s easy to think that allocating a “fun budget” means sacrificing long-term financial goals, but neglecting joy today can be just as risky as ignoring tomorrow.

At Nixon Peabody Trust Company, our experienced advisors help you create a financial plan that supports both a sustainable portfolio and room for intentional enjoyment. Because smart planning doesn’t mean less fun; it just means the right kind of fun, at the right time.

Gina Coletti
Chief Fiduciary Officer
+1 617.345.1110
gcoletti@nixonpeabody.com