How We Plan to Spend Our Income Next Year
For 2025, we’re planning to allocate our income like this:
- 38% on NEEDS (housing, transportation, food, utilities)
- 32% on WANTS (travel, shopping, entertainment)
- 30% on INVESTMENTS
Meanwhile, ChatGPT recommends these percentages:
- 50% on NEEDS
- 30% on WANTS
- 20% on INVESTMENTS
From experience, I’ve noticed the percentage spent on NEEDS tends to decrease as income increases—unless lifestyle inflation creeps in. For example, spending more simply because you earn more, like upgrading your car or taking more expensive trips.
For the past few years, I’ve made a conscious effort to spend more on WANTS and less on the other categories because, at the end of the day, life is short.
My Financial Journey: Needs vs. Wants
Early to Mid-20s:
- My focus was on fulfilling NEEDS with a tiny bit of INVESTMENT. WANTS were a luxury I couldn’t prioritize.
Late 20s:
- I built enough breathing room to fulfill some of my WANTS without worrying about my NEEDS being covered. INVESTMENTS grew slowly but steadily.
Early 30s (Now):
- Discipline and hard work over the last decade are paying off. I can afford experiences I truly want without derailing my long-term financial plan.
Looking ahead to my late 30s, I know I’ll benefit even more from a decade of compounding work, creating memories, and enjoying greater financial freedom.
The Key to Spending Intentionally
So why did our NEEDS percentage decrease, even though we’ve made upgrades in our lives (e.g., bigger apartment, better car, more trips)?
It’s because we’ve been intentional about how we spend our increased income. The key is knowing the difference between what you truly want and what you think you want because of societal influences.
For example, we upsized to a bigger apartment (partly sold on the vibe) but didn’t max out on a detached house. The smaller mortgage gives us freedom to invest in other areas or take pay cuts if needed.
Think about this: If someone gave you $1M today, would you blow it in one night or use it to fund your dream business?
The key is knowing what you want, not what others tell you to want.
Remember, Everyone’s Journey is Different
If you didn’t start focusing on finances in your early 20s, don’t worry—your journey is yours.
The truth is, financial freedom doesn’t happen without putting in the work first. But it’s so worth it. When you’ve gone through the ups and downs, you appreciate the outcome so much more.
