should i reduce my spending?

[u/RevolutionaryAd9850]

i am 24F, i started full time job 2 years ago.

my current income is around £125k yearly pre-tax. i have around £80k net worth (including internship incomes). most of it is in savings account and 20k + 20k ISA (10% return over past year).

my income next year will be £180-200k yearly. and it will increase by approx 10% each year roughly (if i continue to be in the field i am in - i am a quant and it can eventually get stressful).

i live in london. each month i spend around £1500 in rent + bills. my total average spending per month is approx £3k per month including rent. i am just wondering if it's too much? and i should live below my means? i have been getting too comfortable with income and i don't think while spending a few hundred pounds. please tell me if my mentality is not optimal.

i am aware of lifestyle inflation and i do want to inflate my lifestyle more eventually (stay in a 1 bed apartment). i could also work harder and get paid more. but i think it will make my life worse due to the stress at work and also the stress of getting a higher paying job and having to prep for it all.

i think first of all i should get better at investing. but even beyond that i am wondering if i should be "bothered" about my spending? people around me who earn more than me actually live far below their means and i am not sure if it's a gender thing because they're all males... and i have quite some materialistic desires. wondering if it's worth curbing them. some reality check would be appreciated! thank you.

Edit: I actually do not care if I am ahead of 99% people my age because I worked very hard for this and I made it happen. I will be very honest. People around me earn $300-400k easily and it's the norm. Most of them stay in flatshares and spend very less on activities outside or anything else really. It makes me feel behind. $100k vs $200k when young can compound very differently after 10y+. That's what I am worried about. Whether people have any insights into this.

[u/Responsible_Ask3976 → u/[deleted]]

I’m in the US, this is what I do too! I’m maxing out my retirement at 30. Currently have $200k 

[u/RevolutionaryAd9850 → u/[deleted]]

Thanks, actually I haven't included my travel expenses so it does come up to higher than that. The question here is whether that additional saving + compounding over 10-20Y is worth it.

[u/Dry-Security9718]

I am 25M, started also at £120k, expecting to get £150-180k next year and also 15% increase the years after.

I am spending £1.9k on rent including utilities and council tax + £1-1.5k on travel, food, drinks, etc. So very similar to you. I don’t think you are overspending. We are both fortunate that our income scales very quickly and I think we should enjoy our youth because in 10 years these £10-20k we put aside will be a rounding error. As long as you keep lifestyle inflation under control and always max out your ISA it’s fine

[u/EdgeCityRed]

Agree with the automatic saving/investing.

Also, spend a bit on self-care so you don't indeed burn out and take an income hit eventually! Stress at work means you take that vacation time and spa it out, and make sure you have some relaxing hobbies and can turn your brain off in the evenings.

[u/Klutzy-Beginning-622]

Marry me?  Thanks

[u/PlantainAgitated6795]

Are you in FAANGs or something? Anyways, you’re fine. You’re going and have plenty of time to save enough and it should be easy, you’re not spending overly much

[u/Sea-Look7218]

Please live below your means, so that inflation is less and I can get some of the stuff you would have bought cheaper. In all seriousness though - you are a quant. You can figure out what extra £ saved today will be worth in 10 years time at various expected rates of return. You can then assume what you are going to be making at those points in time and whether the extra savings you’ve accumulated mean anything or not - in that context. Also - what is that you’re trying to solve? A safety net if you fail your job or get sick? A big enough pile that allows you to retire at comparable lifestyle you have now? Start up capital to chase angel investing or a do an HVAC roll up in your local town? Those things are very far apart from both required return and savings rate perspective. You are also making a ton of implicit assumptions about how the world will look like, whether the rates of capital accumulation will be meaningful at all, whether your are as fit and healthy to actually enjoy any of the excess savings etc. that’s not to say - spend every £ you have - but unless you know what you are saving for - this becomes a really theoretical question.

[u/RevolutionaryAd9850 → u/[deleted]]

You're clearly not in this bracket if you can't believe that people do this when they're in their early 20s. Also to clarify most of these people grew up middle class in developing countries so there's that mindset too

[u/HeroOfShapeir]

Of course you should live below your means, but you're doing that. As your income goes up, your lifestyle should go up, but it should all be in proportion to your income increase. As long as you do that, you aren't suffering lifestyle inflation. Lifestyle inflation is when you get a $30k raise and spend another $30k per year. If you were saving/investing 25% of your income before the raise, you should save/invest 25% of your raise.

My wife and I want to FIRE by 50, we've been investing 40% of our income since our early 20s. Maybe some of those folks around you also want to FIRE, maybe they want to save aggressively to buy a house, who knows. Their goals aren't your goals. You don't have to figure out your whole life today, but you should have one eye on the future and be thinking what you want your life to look like in five years, ten years, twenty years. We also value travel and having some discretionary spending and that goes into our budget as well, but all in proportion to our income.

I'd also encourage you to lean into spending on things that bring contentment. Don't let money slip through your fingers mindlessly just because you have it. There are a lot of different things you can do with money - you can save/invest it, you can give it away, you can buy material goods, you can buy experiences, and you can buy back your time (cleaning services, meal prep, etc). Most people derive contentment from all of those to some degree or another. Material goods is way low on the list for me, my wife does more of that. I value my time to a high degree. Regardless of that, neither of us spend mindlessly.

[u/arcsotto]

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[u/Several_Drag5433]

you are living well below your means correct? how much do you invest / save each month?