Obviously, the problem for most people is not "save too much", but "save enough". Nevertheless, today, people have the opportunity to earn a "lot of money", for example after university, and some of them may not feel any reason to change their lifestyle and therefore save most of their earnings for years. Further, more and more women start their own business in prosperous fields like engineering, law, especially fiscal law, and medicine. And, as I have read today in a german newspaper, especially such women are notably careful and neither take out a loan, if possible, nor want to have large disbursements for a secretary, office space, and such.
Hence, I think there is a need for a simple rule to decide, whether someone may increase his/her consumption in a very conservative way. You may also read "should" instead of "may", when you follow the advise to balance actual savings and actual life.
My rule, as a concept that I put here under discussion, is:
It is advisable to increase consumtion, while consumtion stays within 6 % of personal net worth and while a saving rate of at least 30 % of earned income after income tax is maintained.
Or more formally:
a) Determine net worth; b) Determine earned income per annum after income tax (including savings invested according to official plans); c) Calculate aa) 6 % out of net worth determined and bb) 70 % out of income per annum determined; d) Advise: Increase of consumption is possible in a conservative sense within the range limited by (aa) and (bb) of calculations according to (c).
Remarks: - 100% - 70% = 30% = minimum saving rate within this concept. This is where the 30" in the name of the concept comes from. - Obviously, most people are outside the calculated limits, because this is a rule to determine when to spend more. - Savings of an employee that are invested according to a pension plan are already a part of the 30 % saving rate. - Rental and capital income is not regarded in (b).
Net worth = 500,000; earned income after tax = 60.000 /a; actual spending = 15.000 /a, and therefore saving is 45.000 /a (saving rate 75%); 6 % of 500.000 = 30.000; 70 % of 60.000 = 42.000; Advice: It is possible to increase spending up to 30.000. As a result, the new saving rate is at least 50%.