Live Below, Vacation Above

I'm a savings fanatic. I've always made it a point to follow the advice of "pay yourself first" that I learned in high school financial lit. As I've spent longer in tech, I've become capable of saving half my income every month, and I use that to pay down debt, mostly.

The trend in America seems to be that when one makes more money, one upgrades their lifestyle proportionate to whatever pay raise they received. This is dangerous, though, because it becomes increasingly more difficult to recover from a job loss, and you set the bar ever-higher for the lowest salary you can take to sustain your quality of life. This creates stress and can potentially hurt your retirement prospects.

On the flip side, there's a good psychological argument for enhancing your lifestyle. Exposing yourself to a more high-value lifestyle--living situation, car, dining, gadgets, etc.--can bring up the baseline that you call your comfort zone. If you were to lose your job or experience a major catastrophe, your brain tries to get back to its comfort zone as quickly as possible. If your comfort zone is luxurious, you have a better chance of landing back into a luxurious situation.

I have come to treasure having half my income to use on savings or debt repayment, though, so I think there's a limit to how beneficial this exposure to the finer things in life can be. Instead, I think a nice balanced approach is to live below your means so you have plenty of expendable income to work with. Some of this can be set aside for vacations, and vacations can be experiences well beyond your means.

On the surface, it sounds like an easy to way to get into debt, but it's not necessarily the case. In the same way that people typically invest more into their day-to-day when they get a pay raise, you can invest more into the once-or-twice-annual vacations and take yourself to unimaginably beautiful places. The difference to note here is that you're treating the experience as something you're "trying, not buying."

When you allow your vacations to be extravagant, you can justify spending less on your day-to-day. The worst thing you can do is make both your day-to-day and your vacations mediocre. I think it's important to decide which you value extravagance in more and go all-in on it.

So what do you think is better? A luxurious lifestyle every day or 1-2 extravagant vacations every year?