Optimal Spending

You can learn how to save, invest, and spend in the optimal, consistent, and effortless way
book cover
In
Progress

Who this book is for?

We are writing this book for (young) people...

who want

to have choices, freedom, and peace of mind to enjoy life now without worrying about the future or retirement,

so they need to know

how much to save, invest and spend in optimal way,

but they are struggling with

lack of knowledge, time, or motivation that leads to procrastinating, relying on intuition or conflicting popular advice, which often leads to terrible financial decisions they will regret for years,

and may not realize
they are really dealing with

a complex life-cycle modeling problem which can be simplified by the right science-based guidance and solved by proper independent software that can calculate personalized plans for optimal saving, investing, and spending.

What will you find?

What you can expect to find in our book.

easy-to-use tools and methods

new, practical and free tools generating personalized recommendations, immediately applicable to daily financial decisions by an average reader,

easy to understand guidance

clear explanations that make complex financial concepts accessible to everyone, regardless of their background, fully understood by young people, with simplified language and examples,

content that is based on science

all tools, methods, and advice are backed by rigorous scientific, and evidence-based financial principles and recent discoveries in the field, and are personalized to your individual situation,

content designed for long-term relevance

timeless life-time strategies that remain effective even as markets and economies evolve; any time-sensative content will be available and regularly updated on the companion website,

globally relevant content

universal principles that work across different countries, relatable concepts and tools relevant in most countries around the world, reasonable assumptions that can be customized to the country you live in, and covers the most relevant groups of financial products available in most countries.

What you won't find?

What you won't find in our book.

abstract concepts

no vague theories or abstract ideas that don't translate into real world, fit-for-all recommendations that are not relevant to your individual situation or too difficult to implement,

scientific and industry jargon

overwhelming technical or scientific terms and industry jargon, that can be confusing especially for young people with no financial background,

advise not grounded in scientific finance

recommendations based only on personal opinions, anecdotes or unproven, not optimal or even harmful popular strategies,

fast-changing content

information or advice that quickly can become irrelevant with changing market conditions or personal situation,

focus on country-specific details

excessive emphasis on local regulations or conditions that limit applicability elsewhere, or can change very quickly; we will, however, mention the most important solutions available in many countries, so you will know where to look for; more information will be also available on the companion website.

What's Inside the Book?

Explore the chapter descriptions of our book. Each chapter is crafted to deliver maximum value as swiftly as possible, covering exactly what you need and skipping unnecessary details.

1. Introduction: Not concerned about your future personal finances yet? You should be

The opening chapter uncovers the necessity of this book in today's world. We certainly wished for such a guide in our youth. This book stands out among personal finance resources. It's unique, accessible, and speaks directly to a diverse audience, including young readers.

2. We need better financial decisions more than ever

Discover the changes in our societies and retirement systems—and how these shifts affect your future. Most of us aren't ready. Consistent, smart financial choices often elude us. Trusting solely in intuition or popular advice can lead us astray. Are we doomed to fail or can we learn how to save, invest and spend in an optimal way?

3. Calculate optimal spending in less than 5 minutes

Start using our free Optimal Spending Calculator web app in under 5 minutes. Calculate your initial Optimal Spending with personalized inputs and reasonable defaults. Understand your results quickly and easily. Discover what to do if your calculated Optimal Spending feels off. The toolset you will learn in this chapter will become a lifelong solution for many of your financial struggles.

4. How to spend optimally in real life?

This chapter guides you how to spend optimally in real life. Discover how your own Optimal Spending calculation lets you enjoy what you love, minus the guilt. It will help you to stop overspending and curb extreme saving. Close to optimal is good enough—no need for perfection. Learn to assess affordability, whether it's a coffee, college, house, or raising children. Understand how debt affects your optimal spending and learn which metrics truly count.

5. What exactly is optimal spending?

This chapter explores optimal spending. You'll see how it factors in life expectancy, retirement, future income, spending needs, and preferences. We aim to maximize lifetime satisfaction through spending, not just the amount spent. We'll touch on other metrics and explain why they're less useful. Time constraints will impact your spending decisions, and the value you put on maximizing your free time. Let's uncover how to balance it all.

6. You also need to invest in optimal way

To spend optimally, you need to invest optimally. You'll discover that two types of investments is enough to balance your portfolio. We'll guide you in choosing these investments and the criteria that matter. Find your optimal allocation and understand how it shifts with your human capital and spending needs over time.

7. Impact of popular financial strategies on optimal spending

Check out popular financial strategies like early retirement and financial independence. How would they impact your optimal spending? Discover why popular advice often misses the mark. See how it affects your optimal spending negatively. Let's explore whether seeking help from a financial advisor or a robo-advisor suits you, and which type might be worth your consideration.

8. Prepare for an uncertain future

This chapter explores how to prepare for an uncertain future. You'll first understand why making assumptions about the future is essential for progress. We'll examine key risks that could significantly affect your spending and strategies to prepare for them. We'll also cover how to optimize your cash buffer and the importance of creating an emergency folder.

9. Our vision for the future

Let's imagine a world where everyone spends optimally. What would our future look like? How would it affect you, your family, your household, and society? This chapter explores these questions and considers potential advancements in life-cycle modeling. Discover how you can contribute to evolving software and expand our collective knowledge.

Table of Content

In
Progress
Last modification: 2025-11-08
image

  • This is the book we should have read when we were younger
  • What can you find in this book?
  • What you will not find in this book?
  • How do we know that optimal spending works?

  • We have to start saving enough money for the future
    • Our retirement pensions will be low (very low)
      • We live longer, also in retirement
      • Our society is getting older
      • Retirement systems need to adapt
    • We are not prepared for this
    • Do we make consistently good financial decisions? (unfortunately no)
  • How could you make personal financial decisions?
    • Can I just use my intuition? (better not)
    • Can I try some popular financial advice? (could end badly)
    • Can I analyze my personal finance data? (not enough)
    • I will calculate everything I need by myself! (too complex)
  • Are we doomed to make terrible personal financial decisions? (not necessarily)
  • You can learn how to save, invest, and spend in the optimal, consistent, and effortless way
    • The two main risks in lifetime personal finances
    • The single most important number in personal finances

  • Use our Optimal Spending Calculator
    • Why to use our free web app?
    • Use reasonable initial assumptions and default values
  • Try to calculate your own optimal spending
    • What you need to know first
      • Your average income (before retirement & after-tax)
      • Your average necessary (non-discretionary) spending
      • Your current financial wealth (what you can invest)
      • Your retirement age
      • Your retirement pension (after-tax)
    • What your initial results will show?
      • How much you could and should spend this month? (optimal spending)
      • How much should you save and invest this month? (optimal investing)
    • Re-calculate every month with updated assumptions for consistently good financial decisions
  • What if your optimal spending is less than satisfactory?
    • Revise your financial plans
    • What to do?
      • Try to decrease your non-discretionary spending (might be difficult or impossible)
      • Try to increase your income (easy to say, hard to do)
    • What not to do?
      • Don’t cheat by changing market assumptions (might end up very badly)
      • Don’t change your optimal investment strategy (might end up very badly too)
      • Don’t compare yourself to others - track your progress instead

  • Spend your optimal discretionary spending budget quilt free
    • What about excessive spenders who cannot save? (optimal spending helps)
    • What about excessive savers who cannot spend? (optimal spending helps)
  • Being close to optimal is enough
    • Try to spend the optimal amount but don’t obsess over it
  • How to decide if I can afford something?
    • Small expenses: To buy or not to buy a coffee? (problem solved)
    • Medium expenses: Want to spend more than your monthly discretionary spending budget?
    • Large expenses: First check the impact on your lifetime optimal spending
      • Debt decreases your optimal discretionary spending
      • Questions you need to ask before each large expense
      • Education
      • House
      • Kids
  • Monitor metrics that matters
    • Actual discretionary, non-discretionary, and total spending
    • Lifetime Non-discretionary Spending Covered (LNSC)
    • Should you budget? (if it helps)

  • Optimal spending takes into account all important things
    • How much will you live? (life expectancy)
    • Major life events (like retirement)
    • Your lifetime income (Human Capital)
    • Your lifetime non-discretionary spending (Liabilities)
    • Your preferences
      • How much investment risk should you take? (risk tolerance)
      • Do you want to spend a bit more now rather than later? (consumption impatience)
      • Do you want to leave some money to others? (bequest preference)
    • Include all household members (if needed)
      • Life expectancy of the household with multiple members
      • Multiple life events for each household member
      • Multiple income and spending streams
  • Optimal spending maximizes our lifetime satisfaction from spending money
    • Why not maximize something else?
      • Income
      • Financial wealth
      • Net-Worth
      • Total spending
      • Satisfaction from lifetime spending on everything
      • Satisfaction from lifetime spending on things we love
      • Time we have (to do what we want)
  • Optimal spending says how much to spend, but not on what
    • Spend on things meaningful to you

  • Why do you need optimal investing?
    • What happens if you keep all your savings in cash? (inflation)
    • What can increase your optimal spending? (compounding interest)
  • Consider only two types of investments (asset classes)
    • Criteria for choosing your investments
      • Little time needed (passive)
      • Less risks (diversification)
      • Low costs (management costs)
      • Predictable profit (expected returns)
      • Easy to buy and sell (liquidity)
    • Safe investments (inflation-protected bonds)
    • Risky investments (global stock market index fund / ETF)
    • Be aware of the currency risk
  • What mix of investments is right for you? (optimal allocation)
    • Is the return worth the risk?
    • Your risk tolerance
    • Your optimal asset allocation
      • Impact of your Human Capital on your optimal allocation
      • Impact of your Liabilities on your optimal allocation
    • Will optimal allocation change over time? (dynamic allocation)
      • Which investments to buy or sell and when? (rebalancing)
  • Use legal ways to pay less taxes
  • What to do with any additional income? (invest in optimal way)

  • Popular financial strategies
    • Financial Independence
    • Early retirement
    • Profitable business
  • Popular financial advice (why it is not optimal)
    • Constant saving rates (saving advice)
    • Asset allocation rules (investing advice)
    • Safe withdrawing rates (spending advice)
  • Financial advice from a financial advisor
    • Should you get help from a financial advisor? (it depends)
    • What type of financial advisor might be worth considering?

  • You cannot avoid predicting the future
    • We all make assumptions about the future (even if we don’t want to)
    • Better be roughly right than precisely wrong
  • What are the major risks and how to prepare for them?
    • Cyber risks
    • Sequence of investment returns
    • Long life
    • Job loss
    • Burnout
    • Divorce
    • Death, sickness or disability
    • War and other disasters
  • Grow your Human Capital (learn new things)
  • Optimize your cash buffer
  • Create In Case of Emergency (ICE) folder
    • What to add to the ICE Folder?
    • Do not put these stuff in the ICE Folder!

  • What if everybody would spend in the optimal way?
  • Advanced life-cycle modeling
    • R4GoodPersonalFinances R package (free and open-source)
    • Possible extensions to the life-cycle modeling software
    • Help us make the software even better!

  • Check the companion website with recommended resources
  • Is there someone else who needs this book?
  • Stay in touch for future updates

I want this book

Quotes That Inspired The Book

See a bunch of quotes that inspired us to write this book.
"[…] there are recommendations […] which may be just wrong."
CFP Board, ed. 2015. Financial Planning Competency Handbook. 2nd ed. p.594
"Our approach to saving is all wrong: We need to think about monthly income, not net worth."
Merton, Robert C. 2014. “The Crisis in Retirement Planning.” Harvard Business Review 92 (7/8): 43–50.
"To put it bluntly, life-cycle models are the most powerful models for financial planning that we have, but they exist only in obscurity"
Idzorek, Thomas M., and Paul D. Kaplan. 2024. Lifetime Financial Advice: A Personalized Optimal Multilevel Approach. CFA Institute Research Foundation. p.10
"Investing isn’t the only area where making sound financial decisions under uncertainty is important. Everyone needs a coherent saving and spending plan for all stages of life, especially if they expect to enjoy periods of retirement. […] Sadly, personal finance books just don’t provide enough good advice either, as documented in a recent easy-to-read survey of the 50 most popular ones by Yale Professor James Choi"
Haghani, Victor, and James White. 2023. The Missing Billionaires: A Guide to Better Financial Decisions. p.6-7
"[...] no fewer than 11 Nobel laureates in Economic Sciences did important work related to lifecycle finance. Given this pedigree of lifecycle finance and the leading economists who contributed to lifecycle finance, it is a bit of a paradox that many financial planners and investment textbooks are either unaware of or silent on lifecycle finance."
Kaplan, Paul D., and Thomas M. Idzorek. 2024. “The Importance of Joining Lifecycle Models with Mean-Variance Optimization.” Financial Analysts Journal 80 (4) p.12-13.
"The central problem of life-cycle finance is the spreading of the income from the economically productive part of an individual’s life over the person’s whole life. As with all financial problems, this task is made difficult by time and uncertainty. Merely setting aside a portion of one’s income for later use does not mean that it will be there—in real (inflation-adjusted) terms—when it is needed."
Ibbotson, Roger G., Moshe A. Milevsky, Peng Chen, and Kevin X. Zhu. 2007. “Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance.” Research Foundation of CFA Institute. p.vii.

Questions & Answers

See the answers to the most frequent questions.

We plan to release the book in two formats: as an e-book (EPUB, Kindle) and as a physical book (hardcover).

Yes. The digital e-books will be available globally, and we will also do our best to make the physical book available in your country.

The best way is to subscribe to our newsletter. You can do it here.
Ask us anything
Olesia Wais
Olesia Wais, Ph.D
Kamil Wais
Kamil Wais, Ph.D

About Us

We know from our own experience that consistently making smart financial choices isn't easy. We know that managing finances on a low income is challenging, and even when you earn more, the path isn't clear. For years we were wrestling with questions of how much to save and where to invest.

Our research shows that popular financial advice often fails and can even harm our financial future. We revisited our academic foundations and explored scientific personal finance. While academia can offer important insights, it often struggles to share these effectively and provide practical solutions for everyday life.

We're closing the gap. With our background in teaching, writing, and academic research, paired with industry experience in data science and research software engineering, we are crafting a book that is scientific and practical. It'll come with free, open-source, independent software that is ready for you to use. Complex ideas will become simple tools and approachable guidance.

Our mission is to empower young people with the necessary knowledge, optimal strategy, and independent fiduciary-minded software, to save, invest, and spend money in a way that is both optimal and highly personalized so they can enjoy life now and be more confident about the future.