So you need to keep your eye on the macro goals. If you need to save x for retirement per month, you need to save x. If you are not there, then it’s probably a good idea to lay off the discretionary spending as much as is practicable and continue reserve the lion’s share of your spending for things that are good investments, whether educational, business, or other.

The way I approach this is I have a target for my long term goals that are necessities, like retirement, and any other expenses that are necessities. If I am on track to meet those goals and have extra money, I budget it for “fun stuff”. Of course, I budget a small amount for fun stuff anyways, but if I have more money than I need to meet predetermined survival-and-security type goals, then I will consider upping the “fun” basket.

right at the moment, I am still not on track for these long term necessities, so fun money is on the backburner–low but not nonexistent.

My priorities may change in the future, but that’s how I guide my month-to-month spending right now.

1. Paying off our second mortgage
2. Retirement
3. College savings
4. Savings for future car purchases, home improvements
5. Paying down student loans
6. “Fun” savings

I started the fun savings last year and, honestly, it’s really hard for me to fully fund it. Other priorities so outweigh it I always find a reason to divert extra money elsewhere. Paying off the second mortgage, our number one priority, should be done in a year and after that I feel like we will be able to breathe easier and start enjoying our extra income more.

When baby was on the way, we started piling money up into a ‘baby’ fund. Nothing fancy – just another column on the savings breakdown spreadsheet. It’s purpose is as you are describing – general baby-related needs. We knew that we had all of the paraphernalia, but may have some big doctor bills. When you know a storm is coming….

Post-debt-snowball, we took our extra income and finished the emergency fund, then funded retirement, then college savings. After that, and it sounds like you are there, you can start putting extra down on the house. At the same time, if you want to save money for other things – car replacement, home renovations, vacation, whatever – then you can do it. You have taken control of your income, now you get to use it. Me? I’d pile up ‘baby fund’ money. If you end up not needing it, then you can cross that bridge.

That last category is for things that are so expensive you have to save up for them. So for me it includes vacations, furniture, and electronics. A hot air balloon ride would have come out of that fund.

Even if you just put $50 or $100 a month in that fund, since you are used to not ever spending any money on things that pricy, it will add up to some real money before you know it. And it’s really nice to have some money you can spend guilt free, knowing that all your other goals are being covered.

I don’t have the same kind of prioritizing questions you have, because every time I get a raise, I decide what my budget will be, and I save the same amount each month toward my goals.

You should check out the link above. It’s for a fidelity 529 acoount. It offers 1.5% on all purchases. I use the one that is for the brokerage since I don’t have kids and I make sure I charge everything. I feel like I have saved without really saving. It’s a really nice reward card when you think that $75 dollars will add up to a lot more.