California man wants to invest 43% of their income, but his wife longs to travel. Why Ramsey Show hosts won't pick sides

Donovan from California called in to The Ramsey Show (1) to settle a disagreement with his wife.

“My wife and I currently invest about 43% of our income and she wants to take a trip to Europe next year, so I was wondering if that is something that we should look at doing; reducing our investment rate in order to take that trip?”

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Dave Ramsey asked Donovan what their financial situation is: they have no debt, make a net combined income of $175,000, and have a net worth of $89,000. He’s 31 and his wife is 28, and they’re only a year out of school.

“So you’re both now making good money for the first time ever, and you get to live your dream of investing, and she gets to live her dream of traveling. And that’s in conflict. Now it makes sense,” Ramsey said.

“I was getting ready to call you Scrooge McDuck or something, but I don't think you are. I think you're just getting started, and you're a serious guy who wants to hit some numbers, and your wife is serious about enjoying some of this hard work,” Ramsey said.

Finding balance with your finances

Ramsey advised Donovan that both his wife’s wishes and his were fair. “I don't think I would slap my fists on the table and declare either one of these answers to be stupid,” Ramsey said.

He told the caller that the strategy he advises for people is to “systematically throughout the scope of your life, you need to constantly, with a rhythm, be enjoying your money, be investing your money and being generous with your money.”

Ramsey said that this strategy will mean that "you're going to not only become wealthy, but also be very relationally healthy, and have a high likelihood of physical health, too.”

This strategy is about finding balance; building a strong financial footing for your future, while also ensuring that you actually enjoy your life, as well as feeling satisfaction and fulfilment through helping others, if you’re able.

Co-host Rachel Cruze agreed that this couple can negotiate both points of view. “You can do both, Donovan. That’s the great thing, because of your income, because where you guys are, yeah, you guys would be able to save cash for a trip to Europe, and be saving.”

Cruze and Ramsey cautioned that, since this couple was just in Europe last year for an extravagant honeymoon (which was a gift), they may consider negotiating on when the timing of the trip would occur, perhaps delaying a year to save more money. Cruze also flagged that the budget they had in mind for their trip, around $20,000, was high, and that there could be room to still take a trip, but spend less.

The good thing about this couple’s issue is that they may, in fact, be perfectly complementary, if they can master their communication and learn to lovingly manage conflict.

The “saver” can make sure that their future is protected, while the “spender” can remind their partner that they also have to enjoy life, and not, like Ramsey jokingly suggested, “live in a cave [...] and only come out on triple-coupon Thursday.”

Budgeting for your future, and for fun

An aggressive saving and investing plan, like the one that caller Donovan has undertaken, can certainly have the potential to bring big rewards for your future. The couples’ savings is spread across different accounts, including retirement, high-yield savings and a brokerage account.

Building both long-term retirement savings, while maintaining other investments and holding some cash for emergencies, can be a good strategy.

However, not everyone may be able to save such a high percent of their income, especially if they have a mortgage or children.

There are many budgeting strategies to choose from, so deciding what percentage you are able to allocate to savings should be based on what you can manage while covering all your other expenses.

One benchmark some experts suggest is having one to 1.5 times your annual income saved for retirement by your mid- to late-30s. Working backwards from this amount, you can calculate what percent of your income you would have to save each year to hit this milestone.

Building discretionary spending for bigger-ticket items, like a dream trip to Europe, into your savings can be done in a similar fashion. By deciding on a budget and a timeframe, you can figure out how much you’d need to save each month to reach your goal. If the percent of your income is too high, and impacts your ability to balance your budget, you could reconsider either the timeframe, or the purchase itself.

If you use a popular budgeting strategy, such as the 50/30/20 strategy, you can work a big-ticket item into your budget. For example, for the 50/30/20 strategy, where 50% of your budget is for needs, 30% is for wants and 20% is for savings, the savings for your trip would be part of the wants category.

Using the total projected cost of your trip and the timeframe you have to save, calculate how much you would need to save every month, and then calculate how much of your wants budget that would comprise. Again, if the numbers don’t add up, you’ll need to adjust your timeframe, or your budget for your vacation.

If your goal is to take a trip like The Ramsey Show caller, consider also what hidden costs may come up. Have you included the cost of comprehensive travel insurance in your budget? Will you have enough vacation time, or will you have to take unpaid time off? Will you have to pay for someone to look after your pet? All these things can add up when you’re planning a major getaway.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.