Personal Finance

We're in our mid-30s with a $6 million net worth and we are overspending on our budget - what can we cut back on?

Maurie Backman

Published: January 13, 2025 10:38 am

Key Points from 24/7 Wall St.

• The more you earn, the more likely you are to fall victim to lifestyle creep.
• Set a budget so you’re able to control your spending and work toward goals.
• Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. ^(Sponsor)

The more money you earn, the more you have the potential to save. But that’s only if you have the right mindset.

It’s all too easy to fall into the habit of lifestyle creep, where you increase your spending as your income rises and get used to luxuries that become hard to give up.

That’s what’s happening with this Reddit couple. They’re in their mid-30s and have a $6 million net worth, which is unbelievably impressive. Much of that boils down to the husband’s solid investments, and also, their $500,000 household income.

But ever since having a child, this couple’s spending has increased exponentially. The fact that they live in a very high cost of living area is already working against them. But they’re also spending more on luxury items, and they recognize that despite their high net worth, they need to start cutting back.

I have some advice to share with them, and it applies to anyone who’s having a hard time keeping their spending under control.

When budgeting becomes necessary

I don’t particularly enjoy budgeting. It feels restrictive, and it can be kind of boring and time-consuming.

The reason I don’t really have to budget is that I have a large automatic transfer set up where a good chunk of my pay goes directly into savings before I get a chance to touch it. Because I’m doing this, I’m more comfortable spending the rest of my household income on essentials and non-essentials alike.

But based on the expenses the couple above has taken on, it may be time to do some budgeting so they can see where to cut back. From there, they can free up more of their money and put their savings on autopilot.

Now some of this couple’s largest expenses are housing and daycare. There may not be much wiggle room to cut back there.

But a lot of this couple’s recent spending has been on luxury items, including cars. My philosophy on cars is that you need a comfortable and reliable vehicle, not a luxury vehicle. Not only do these cost more to purchase, but they cost more to insure and maintain. And also, vehicles typically lose value the moment you drive them away. So I’m just not a huge fan of spending a lot on them.

This couple also spends about $22,000 a year on restaurants and bars on top of a $9,000 annual grocery budget. Look, we all need to eat, and dining out or ordering in a couple of times a week is certainly reasonable. But I don’t see why they couldn’t easily cut that $22,000 in half and free up the rest of it for savings and investments.

It pays to get financial help

A couple with a $6 million net worth in their 30s may decide they’re done saving, and that their goal is to maintain their lifestyle until they’re ready to retire. I wouldn’t see anything wrong with that.

The reason I’m suggesting that this couple reduce their spending is that they’re not happy with it. They also have a FIRE goal of $10 million, and if they want to work toward that, they’re going to need to start freeing up more cash.

In reality, $6 million is a lot to retire on at a traditional age, like 65, but it could run out pretty quickly for a couple that retires in their early 40s. The couple above may not exactly be looking to do that, but if they’re part of the FIRE movement, it means they probably want to retire well ahead of when most working folks do. So I can see why they’d want to increase their assets to $10 million first.

Budgeting and prioritizing can definitely help, but I’d also suggest that they work with a financial advisor. An advisor can help them identify their most important expenses and ensure that money is being allocated to them while also being saved and invested. An advisor can also help them set realistic annual savings goals between now and when they want to retire so they’re able to enjoy their income without going overboard.