The main reason we did the exercise to figure out how much money to save each month was that we wanted to benchmark ourselves against other people like us who work hard, spend money wisely, and want to save for emergencies and retirement.
Since we spend money so carefully (my wife likes planning and budgeting, but my mother taught me to watch each dollar you spend at the moment you are doing it), we both felt that we might be watching too carefully and now that we are in our mid-40s (mid life crisis, maybe?) we do not want life to just pass by while we are saving just too hard (I do not like Suze Orman’s advice that we should put our lives on hold till we have enough savings). We want balance in our life. Yes, we want to save like responsible people but also have money to indulge ourselves. Yes, we travel regularly (having family overseas means that we take at least 3-4 overseas vacations), eat out when we can, buy most things we want, but because we are so damn careful, we have blocked our minds from eating out too much or spending too much on entertainment or buying things that we really want.
The exercise to calculate how much did we really spend on each item taught us that without budgeting we would always feel conscious and never be able to spend money without guilt. Since we work so hard, and save responsibly, we feel that we deserve the right to get that Thai massage or buy that sweater at Club Monaco or eat out at Mela.
While we took a complete review of our finances, we gave ourselves a weekly allowance of $20 that could be spent on absolutely anything without thinking, with no guilt, and no reason. We didn’t even have to tell each other about it. Believe it or not that for a couple that spends close to five-figures each month, just $20 felt awesome.
Now we have decided that as long as our monthly income remains at current level, we will give ourselves a monthly fun allowance of $500 each (for the months of November and December, we are giving ourselves $1,000 each so that we can enjoy the Christmas season). We are still going to pay for vacations, clothing, entertainment, etc. from the family budget. This fun money, as we are calling it, is to be spent on whatever we want, anyway we want, no explanations needed.
I will continue to update how we spend this money.