Should I live the good life now or pinch pennies for retirement? Here are 3 simple ways to find the 'sweet spot' between spending and saving

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.”

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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?

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.