My clients regularly tell me they’re “not extravagant” or they “live frugally”, which I can understand; they might live in a modest home, drive a sensible car, and holiday within their means. But extravagance is subjective.
What one person sees as a necessity, another might view as indulgent. An annual ski holiday for one person might be a necessary element of their relaxation and well-being, but for someone else, it may be ludicrously expensive. Or more modestly, a daily coffee from a high-street café might seem like a small pleasure to one person but an unnecessary expense to another.
In financial planning, what truly matters is not whether you or anyone else considers your spending extravagant—it’s whether you can sustain your lifestyle and achieve your most important priorities with the money you have.
Your Priorities Define Your Spending, Not the Other Way Around
Rather than labelling spending habits as “extravagant” or “frugal,” a more useful approach is to focus on your priorities.
For some, retirement is about financial security—knowing they won’t run out of money, even if unexpected costs arise. For others, it’s about experiences: travel, hobbies, or supporting family. Some prioritise charitable giving or leaving a legacy for the next generation.
Your financial decisions should align with what matters most to you. A holiday home in Spain might seem like an unnecessary luxury to one person but a meaningful investment in family time and happiness to another.
The key question is: Can you afford your lifestyle while maintaining financial security?
The Danger of Defining “Extravagance” Too Strictly
Some retirees are overly cautious with their spending, fearing they’ll run out of money. They might deny themselves experiences they could easily afford, thinking they must always “live within their means.”
On the other hand, some people underestimate their spending and take on commitments—such as helping children onto the property ladder or booking long-haul trips—without fully considering their long-term financial impact.
Both extremes, unnecessary sacrifice and reckless spending, stem from the same issue: not having a clear financial plan.
How to Know If You’re on Track
Instead of worrying about whether a purchase or lifestyle choice is “extravagant,” consider these questions:
- Can I maintain my lifestyle for the rest of my life? A financial planner can help forecast whether your assets and income will sustain your spending.
- Am I prepared for the unexpected? Do you have enough flexibility in your plan for rising costs, health issues, or changes in family circumstances?
- Am I spending in a way that aligns with my values? If travel, family, or philanthropy are important to you, your financial plan should reflect that.
The goal is not to cut back unnecessarily but to spend with confidence, knowing your priorities are covered.
Practical Steps to Balance Lifestyle and Security
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Understand Your Lifetime Cash Flow
A financial planner can help you project your income and spending over your lifetime, showing whether your current lifestyle is sustainable. -
Plan for the Unknown
Consider potential risks, like long-term care costs, inflation, or stock market downturns, and build a financial buffer. -
Differentiate Between Essentials and Discretionary Spending
Essentials (housing, food, utilities) must be covered, but discretionary spending (holidays, dining out) can be adjusted if needed. Knowing this distinction gives you flexibility. -
Test Your Assumptions
A financial plan isn’t set in stone. Regularly review your spending and investments to make sure they’re aligned with your goals.
Final Thought: Give Yourself Permission to Enjoy Your Wealth
If your financial plan shows you can afford your lifestyle and meet your priorities, there’s no need to worry about whether your spending is “too much.” The real question is whether your money is serving the life you want, not whether your choices fit someone else’s definition of extravagance.
A well-structured plan lets you enjoy your wealth with confidence, free from guilt, fear, or second-guessing. After all, the purpose of money isn’t just to be saved, but to be used wisely in a way that brings you fulfilment.
Photo by Paul Einerhand on Unsplash
