She’s already cleared her student loans, has no credit card debt, is contributing 7.5% of her two paycheques (outside of tutoring/babysitting) to a 401(k) and has two other savings accounts for emergencies and travel that she contributes to regularly. I’d certainly not call that ‘living paycheck to paycheck’ or in any way irresponsible. the 300$ a week is way overblown and inaccurate, too. As another 23 year-old with obsessive spreadsheets and savings accounts, Mr. Salmon’s first point really was the one that hit home: that piece was all bluster and judgement with no substance.

Bellafante’s example of saving 100% of food spending doesn’t make sense, an S&P 500 Index Fund is a poor investment choice for saving money that’s going to be spent in the next 5 years, and residential real estate is itself a durable consumption good/inflation hedge rather than an income-producing investment. Also, Bellafante hints at Ms. Fredrick’s total financial picture but omits a lot of meaningful information. Does she have any savings? Does she have credit card debt? Is she foregoing an opportunity to take advantage of a 401(k) match from her employer? If she manages to save some money after her baby-sitting and tutoring income, I might even say good for her working extra to indulge her expensive taste while still being financially responsible. Contra Felix’s assumptions, though, Ms. Fredrick could in fact earn a quite strong return on additional savings if she has credit card debt at double digit interest rates or could put money into a 401(k) with a 50% or more employer match on her contribution.

There’s also value to developing the habit of living within one’s income and saving something. Expanding on TFF’s point about “settling into a lifestyle that consumes less you earn”, I bet that we’ve all encountered people who spend 100% (or more) of their income and have a mindset such that they would probably do so for any level of income. To me the main message of Suze Orman and Dave Ramsey is to counter that mindset – “spend less than you earn, build up savings to fund emergencies or special events rather than incurring credit card debt, be frugal regarding large purchases like cars to avoid consumer debt when possible” – and get people in a mindset of saving at least part of their income. I understand that income and life circumstances make that extremely difficult for some people. In this case, though, we’re not talking about a single mom struggling to feed and clothe her kids. We’re talking about a 23 year old with apparently limited financial obligations, a modest income, and a taste for expensive meals. It is reasonable for her to save some money.

My wife and I have decent middle to upper middle class incomes for our age (~30), but we will be debt free by 40. Mostly because we bought 2/3s as much house as we could afford, and survive on one 13 year old car instead of 2 newish cars (which is what almost everyone with our jobs would normally be doing).

Sure we spend a little extra on food and movies and such, but a life with an extra $100/month on food will be just as enjoyable as a life with $600/month in car payments, and you will have way way more money on the back-end.

Splurge on the little things and be frugal on the big things.

That depends what is done with the money saved. Invest it in your education, in starting a new business, in building a new home, or (as a country) in infrastructure, and future productivity may increase.

We’ll be investing massive (for us) sums of money in our kids’ education, through grade school, college, and perhaps graduate school. Could easily top half a million per kid, even in current dollars.

All money is spent eventually. The government makes sure of that, even if we don’t.

The other dark side of this advice is that it is has bad macro effects. If people spend less on food, then there is less revenue in food services, fewer jobs for cooks and waitresses, etc. – all spending is revenue for someone else. The impact of increased savings can be profoundly recessionary.

If everyone were even able to put significant amounts of their income into S&P index funds rather than spending it they would inflate the price of the S&P while simultaneously reducing the overall economic activity supporting S&P returns – which is a recipe for a market crash.

Worth repeating, y2kurtus…

But I would qualify that with the #1 most important thing a consumer can do to improve their financial security and satisfaction — control their spending. If you can settle into a lifestyle that consumes less than you earn (whatever that figure might be), you’ll never need to worry about money. Since that is the #1 cause of stress in our lives (and a key contributor to #2 and #3), it is by far the simplest way to improve your quality of life.

The key is that you don’t need to cut back by much. Find somebody that earns 10% or 20% less than you do, and follow THEIR lifestyle. One notch down in the housing market, one more year on the car before replacement, a couple fewer dinners out, and cancelling that HBO subscription that you never watch anyways. Not a night-and-day difference by any stretch.

This isn’t meant to apply to those who are TRULY struggling, or to those who have had a major financial setback (divorce, job loss, whatever). But for young professionals who are in the middle of finding their “station in life”, PAY YOURSELF FIRST. It won’t cost you that much life satisfaction, and it will ultimately reduce your stress tenfold.