This Is How You Maintain A Luxurious Lifestyle While Still Saving

Being young and living in a large city can be hard—there’s always something to spend money on, whether it’s a hot new restaurant, that trendy fitness class, or Hamilton tickets. It’s easy to get caught up and find yourself with three “side hustles” just to keep afloat, but I’ve found that with careful spending and strategic management, it’s possible to buy most of the things you want, even on a limited salary. I am not a CPA, nor did I study economics beyond “Econ 101,” but I’ve been able to live in big cities and save, without feeling like I’m missing out on anything. Here are the money saving tips I use:

1. Pay off Debt as soon as possible, however you can

If you have debt, paying it off should always be your number one priority, since it’s scary-easy for debt to get out of hand. Set up plans to pay off credit card debt as quickly as possible, and then pay off things like medical bills, parking tickets, and student loans as quickly as you can, since debt only gains interest the longer it sits. You may have to make sacrifices, but in the long run, it’s always worth it. If you have debt, keep it in mind as a “necessary cost” as you read the rest of these tips.

2. Think of saving as an essential fixed cost

Saving is a safe-guard against future debt, so start saving as soon as possible. And, because returns compound exponentially, the earlier you start saving the better. To figure out how much to spend each week, I first determine what the minimum amount of spending cash I need is, and then work backwards from there. Subtract your fixed costs (rent/mortgage, gym membership, student loans, car insurance and gas, utilities), then add a small buffer (think $50) in case your gas bill is a little higher one month or you accidentally sleep with the A/C on. Then, put the rest into savings. As soon as you’ve figured out how much you can comfortably save, set up an auto-deposit to add to your savings account after every paycheck so you don’t even have to think twice about it. Of course, emergencies happen, but try not to touch this money—only add to it.

3. Open savings accounts tailored to your life goals

If you’re putting money into your bank’s regular savings account, even with interest, you’re actually losing money because of inflation (interest is usually .1% while inflation is 2 to 3%). To counteract this, it’s a good idea to keep a cushion in a traditional savings account for emergencies (ideally, you should have about three months’ expenses saved there at any given time), then put as much money as possible into savings accounts that yield higher returns.

The most common examples of these accounts are retirement accounts like IRAs and 401(k)s. Both invest your money into a portfolio of stocks and bonds (stocks can yield more money but are riskier, while bonds have a lower potential reward but at less risk), but there are some key differences. If your company offers 401(k) matching, take advantage of this as much as possible since this is free money towards your retirement. Otherwise, it’s a good idea to open an Individual Retirement Account (IRA or Roth IRA). With a traditional IRA, you don’t pay taxes on the money you invest until you withdraw it; with a Roth IRA, the opposite is true—you’re taxed when you put money in, but not when you withdraw it.

I opened a Roth IRA, because I’m counting on being in a higher tax bracket when I’m 65 than when I’m 25 (but if you’re currently at the peak of your career and just starting to invest, a traditional IRA may make more sense for you). By the way, the maximum amount you can commit to an IRA each year if you’re under 50 is $5,500 and it’s important to get as close to this number as possible, since the amount you add to an IRA grows exponentially over time.

Higher-yield savings accounts aren’t only for retirement—you can open investment account like these for anything, but they are best for longer-term goals. Since I am hoping to buy a house within 10-15 years, I also have an investment account set up for that.

If this all sounds confusing, there are a ton of financial services that can create a well-balanced portfolio for you. While you can open an IRA at any bank, I use the online service Betterment, for a small fee, which essentially functions as an automated financial advisor. I keep the app on my phone and love that I can easily set up auto-deposits, see how much money I have, or even change my investments within each portfolio. (Apologies if this sounds like a financial commercial—is there a fun way to talk about money??)

And for smaller, short-term savings goals, I use the Qapital App. The benefit of Qapital is that it’s extremely easy to set up a goal with bite-sized auto-deposits (like “Round up to the nearest dollar after every purchase” or “Add $4 every week I don’t go to Starbucks.”). This is how I save up for things like travel and large purchases like a sofa. The only downside is that you don’t make any interest on this money, which is why it’s best for small things—they actually make money by taking the interest you would make as a “fee.”

TL;DR: I have a traditional savings account that I can access for emergencies, as well as a Roth IRA that I do my best to maximize, and a house fund, which I contribute to with auto-deposit. Whenever possible, I try to add any extra money to my house fund.

4. After saving, make a budget for your spending cash, whatever that means for you

To budget my “spending cash,” or what I have after fixed costs and saving, I set certain rules for myself to follow every week (most of which are listed below). By following these rules, I’m able to always stay within my budget, but if you prefer something more regimented that breaks down the cost of every category, from eating out to home improvement, you may find an app like Mint useful.

5. Don’t spend money you don’t have

There are definitely good reasons to be in debt—student loans, a mortgage—but whenever possible, don’t spend money you don’t have. By that I mean, don’t buy an expensive purse because you think you’re going to get a promotion next week—if the money isn’t physically in your bank account, it isn’t yours. When you do get that promotion, by all means, treat yourself.

6. For one day per weekend, spend very little ($10 max) to no money.

It’s incredibly easy to spend a lot of money on a weekend—if you go to a movie and dinner, that alone can be $50—so I limit my weekend spending by putting a freeze on one day. Sometimes this means staying in on Friday night and reheating leftovers, or going to a series of free events on Saturday, like “Roga” followed by a hike or beach day.

7. Limit yourself to one large physical purchase each paycheck, if that.

If I’m spending money on clothes, like a pair of jeans, that’s the only item of clothing I’m going to buy for the next two weeks. Or, if I’m saving up for a new couch like I am now, I’ll take a chunk of money and put it into my Qapital fund for the next two weeks. This method forces me to prioritize what physical items I really need and want.

8. Allow yourself little perks, but be conscious of them.

I love buying coffee, but I only buy myself one per week because even though one coffee is barely anything, a week’s worth of lattes can already run close to $25. As a result, I only treat myself once per week. This may be on a Monday when I just can’t even or as a Sunday treat, but I keep it to one. The same goes for getting a drink with dinner. There’s pretty much nothing I love more than a draft IPA (literally any IPA, I’m not picky), but adding $8 to every dinner tab adds up, so I always ask myself, “Do you really want this?” If the answer is “Maybe,” I skip it. To compromise, I keep really good beans and craft beer at home so that I’m not doing without by any means, I’m just not paying for the mark-up that comes with having someone else pour and serve it.

9. Bring your own lunch to work

This tip is almost too specific for this list, but it goes so far. If you spent $8 on lunch every weekday, you’re spending $2,080 per year on lunch, which is enough for a nice vacation. Even if you buy it once a week, you’re spending $400, when it’s so easy and affordable to make a few extra leftovers and bring those.

10. Don’t buy anything significantly expensive without first thinking about it for 24 hours

When I see something I love, I experience an immediate reaction where I feel like I have to have it. I start to imagine how it will make my life better—that reading chair will make my evenings so much cozier, powder-pink mules will make my everyday jeans look infinitely cooler—and I get obsessed with it. But I’ve found that that feeling often fades after about 24 hours. If I’m still thinking about it the next morning, it’s probably worthwhile. Worst case scenario, it sells out overnight, there’s almost always a way to get it (call other stores! write to customer service!), or it just wasn’t in the cards for you and there will always be a next thing.

11. Don’t spend to save, don’t buy something just because it’s on sale

If you only buy things you absolutely love and have to have, whether they’re on sale or full-price, you’ll probably end up saving money in the long run. You may have saved $80 on that half-off J.Crew blouse, but how many times have you actually worn it? Think of the price of something in terms of the price divided by how many times you’ll wear or use it. For example, after months of thinking about them and returning to the store twice to try them on, I recently splurged on a $200 pair of Current/Elliot jeans. Denim is a staple for me, so I’m willing to spend more on them than I would pretty much anything else in my closet (I’ve only had them for about 4 months, and I’ve already worn them more than just about anything else in my closet). Splurge on the things you will use every day—a really good leather tote for work, jeans you’ll wear upwards of two to three times a week, boots. Not to quote a leather goods store, but buy “fewer, better things.” That being said, be strategic with deals. If you love something at a store that you know often has sales, track it until the price drops.

12. Constantly reassess what you’re spending on

Once you’ve made a budget you’re happy with, regularly return to it to make sure it still applies to your life. I do this all the time in regards to my fitness budget. Working out and health is important to me, so I’m willing to prioritize and spend on it, but it isn’t always necessary. Right now, I’m spending $115 per month for a ten-class membership to Classpass, but during the months I trained for the marathon, I cancelled my membership to my rock climbing gym since most of my time was taken up by running outside. Be honest with yourself and don’t buy a gym package only because you hope to workout—if I don’t go to all ten classes this month, I’ll downgrade next month to a five-class package so I don’t end up wasting my money. In the same way, I reassess my subscriptions—am I really watching enough shows on Hulu to justify the monthly cost? Am I cooking enough meals at home next month to benefit from a farmers market box? If I miss two months in a row of any magazine, I’ll cancel the subscription—I can always restart it again once I catch up.