Walked out on my 45th birthday - Page 2

Milton · 05-22-2008, 02:09 PM

Quote:

Originally Posted by 45th Birthday

I don't intend for them to know how much there is until they are much older if ever.

If you keep your personal consumtion within reason, that sounds quite possible.

Quote:

Originally Posted by 45th Birthday

By not rich I mean we do not live a lavish life. And we don't have things "rich" people do like a large estate, private jet, yacht, etc. We are comfortable.... Compared to other people where we have our primary and secondary homes, we are very average.

$350,000 p.a. should buy a lot of comfort!

But I agree, everything is relative.

retire@40 · 05-22-2008, 02:34 PM

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

FUEGO · 05-22-2008, 03:20 PM

Quote:

Originally Posted by retire@40

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

I'm curious, too. "Inquiring minds want to know" as they say. Does that $350,000/yr figure include taxes?

And are you in a high cost of living area (NYC, CA, etc)?

kevin92610 · 05-22-2008, 04:03 PM

not sure why the big concern. "Frugal" is relative to how much you have. In this guy's case, I agree... $350K a year is very frugal. he isn't even living off all the interest he earns on his investments and is spending well below his means. And as he points out.... for where he lives he appears to have less than those around him.

I am in a similar situation... do my kids know we are comfortable, yes. do they know how much wealth we have, No. Do they have to earn the things they really want, Yes. Do we splurg on family vacations, yes. Are there others where we live that appear to have considerably more, yes.

Why don't I want my kids to know how much I am worth... because I don't want to instill a sense of entitlement in my kids. If they are fortunate enough to acquire as much wealth as I have, I would hope they will have learned to respect what they have and not go out and blow it all. By the same token, if at some point down the line they end up getting a sizable inheritance from me then I hope that by having made them earn their own living they will have developed enough respect for money that they will use it responsibly.

regards, Kevin

Milton · 05-22-2008, 05:04 PM

Quote:

Originally Posted by retire@40

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

I wouldn't if I were him. Why should he have to account to us for his spending?

I'd be willing to bet that every one of us blows money on some things that others would consider questionable. I certainly do, anyway.

FUEGO · 05-22-2008, 05:04 PM

Quote:

Originally Posted by kevin92610

not sure why the big concern. "Frugal" is relative to how much you have. In this guy's case, I agree... $350K a year is very frugal.

Nobody is criticizing the spending. Just curious what $29000 per month in spending buys these days. It is probably 5 to 10 times what the typical poster on the board spends and I'm just curious does it buy a nicer car, house, vacations, education, etc.

Clearly the spending level should be easily supportable from the stated net worth of the OP assuming reasonable rates of return from investments.

Milton · 05-22-2008, 05:11 PM

Quote:

Originally Posted by FUEGO

Just curious what $29000 per month in spending buys these days. It is probably 5 to 10 times what the typical poster on the board spends and I'm just curious does it buy a nicer car, house, vacations, education, etc.

No sweat. You're not the only one with such questions. You can satisfy your curiousity by reading the Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich (2007), by Robert Frank.

On a larger scale, see also All the Money in the World: How the Forbes 400 Make - and Spend - Their Fortunes (2007), by Peter Bernstein and Annalyn Swan. By the billionaire standards described in the latter work, the OP is quite correct: he is far from rich.

Happy reading!

bongo2 · 05-22-2008, 05:21 PM

Quote:

Originally Posted by 45th Birthday

how we live does not come across to them as unusual

I think this is the problem. It may be difficult for them to internalize that it is very unusual to be able to spend at a top 1% level without working.

All the CEOs and people who've made over $100m I know personally have come from privileged backgrounds, so growing up rich helps rather than hurt people's success in my experience. However, these people also all had workaholic parents, so it seems likely to me that a combination of seeing wealth as normal, and seeing hard work as normal in their childhood is what drove those people to succeed. I've never known someone who has grown up "idle rich," but the stereotype is not good.

Sorry I don't have any good advice for you, but I think you are right to be concerned.

45th Birthday · 05-22-2008, 05:38 PM

Deleted

45th Birthday · 05-22-2008, 05:41 PM

Quote:

Originally Posted by retire@40

Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal."

I have a feeling I might regret this, but here goes:

Primary House P & I 47,740
Primary House Other 61,454
Secondary House P & I 58,320
Secondary House Other 31,622
Travel 28,585
Miscellaneous, Clothing, Gifts 28,031
Food, Entertainment 24,886
Children 23,979
Medical 17,599
Charity 11,744
Insurance 8,117
Auto 7,673
349,750

This is a two-year average between 2007 actual and 2008 plan.

A fair amount is payments for mortgages, which I keep for various reasons even though it costs about $3k per year after taxes in negative carry versus the intermediate-term bonds I would sell to retire them.

Lest you think the charity number is low, this is in addition to about $60k in annual contributions from a private foundation we funded that is outside our net worth. The number here is for things like church, small requests, etc. where we choose to give personally.

The auto expenses are things like gas, maintenance. They (two) are five years old and paid for.

We live in the Chicago area, which I consider middle-high on the cost spectrum.

The only taxes included here are property taxes on the houses.

ERD50 · 05-22-2008, 05:53 PM

I have not read everything in detail, but there should be nothing to regret - you are living on about 2% SWR, so you are LBYM. You just have more means than most.

I'm not sure what is in the mindset of some people here. After building up a substantial net worth, what is wrong with spending 2%? Nothing, in my book.

BTW, the richest person I know came from a very humble background - just another data point. He also lives LBYM, but he can fill a 6 car garage with classics on his means!

That said, I still think you may need to address a gap between what your children are accustom to having and what they will be able to afford on the money they earn.

-ERD50

FUEGO · 05-22-2008, 06:03 PM

So, $200,000 or so on housing expenses, and the rest on "other". Definitely more than I spend, but definitely not out of line w/ your net worth and ability to spend.

Milton · 05-22-2008, 06:07 PM

Well, I don't see anything crazy.

About 56% of your expenses relate to housing. That's a lot, but you can easily afford the actual amount. I agree that Chicago can be a relatively expensive place to live. Personally, I would retire the mortgages, but you have your reasons for not doing so.

$28,585 for travel seems like a good idea. If one has the means, travel is always worth spending money on.

I assume that the $23,979 allocated to your children represents private school tuition. There's nothing wrong with that. The right school will not only provide an excellent basic education, but will teach them that their privileged background carries with it a responsibility to excel and contribute to society (Luke 12:48: "To whom much is given, much is expected").

I don't think that anyone else has the right to pass judgment on your charitable contributions. Can you do more? Sure; but that is a given for 99% of the population.

Your auto expenses are (much) more than I would have expected; but such costs are what they are. Presumably you have fancy cars that burn premium gasoline and require lots of maintenance. If not, you may be able to save some money by shopping around. On the other hand, you don't need to squeeze every last nickel so if you are happy where you are, why waste time looking for a better deal?

FUEGO · 05-22-2008, 06:08 PM

Quote:

Originally Posted by Milton

No sweat. You're not the only one with such questions. You can satisfy your curiousity by reading the Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich (2007), by Robert Frank.

On a larger scale, see also All the Money in the World: How the Forbes 400 Make - and Spend - Their Fortunes (2007), by Peter Bernstein and Annalyn Swan. By the billionaire standards described in the latter work, the OP is quite correct: he is far from rich.

Happy reading!

I'm not interested in the super-wealthy. I've read the Richistan book you recommend - from what I recall most of the subjects described in the book had significantly higher net worths than OP and significantly higher expenses. And the multibillionaires in the Forbes 400 are drastically different than the OP.

I mean, $350,000/yr in expenditures is a lot, but it probably isn't a lot higher than what a good portion of my former classmates are currently spending. It's just that most of them probably spend every penny they get and then some and have minimal net worths, unlike the OP.

FUEGO · 05-22-2008, 06:15 PM

Knowing that $350,000 is spending net of taxes, if the $14 million net worth were mine to manage, I would make sure that the taxes on my investment earnings plus my $350k in other expenses don't exceed 4% of net worth by too much.

But from OP's post it seems that is not his concern. His concern seems to be what effect will appearing to be "idle" yet continuing to live well have on his children, specifically the effect on their work ethic and entitlement mentality to daddy's money and the lifestyle they grew accustomed to growing up. Valid concern IMHO.

Question for 45th Birthday: Do you come from a more modest family background or from wealth? If your kids have seen how less wealthy family/friends live, then they may have a better feel for how "the other half" live (more like the lower 99% of folks, but who's counting right?).

retire@40 · 05-22-2008, 06:45 PM

Quote:

Originally Posted by 45th Birthday

...
Primary House P & I 47,740
Primary House Other 61,454
Secondary House P & I 58,320
Secondary House Other 31,622
Travel 28,585
Miscellaneous, Clothing, Gifts 28,031
Food, Entertainment 24,886
Children 23,979
Medical 17,599
Charity 11,744
Insurance 8,117
Auto 7,673
349,750

This is a two-year average between 2007 actual and 2008 plan...
The only taxes included here are property taxes on the houses.

I figured your travel and entertainment may have been high, but now I see that the houses account for over half of your budget.

Your budget is actually higher than you think since I always consider income taxes as part of a budget, but I'm sure you are still in good shape even factoring in your income taxes which are probably in the $100K to $200K range.

Ronstar · 05-22-2008, 06:54 PM

Doesn't look out of line to me either. I think most families spend more as a pct of net worth than he does. I think I need to re-look at the tax (and other) ramifications of mortgages if he can carry his for only $3k more per year than the income lost by retiring them.

45th Birthday · 05-22-2008, 08:00 PM

Thanks for your opinions and for not being judgemental. It is interesting to hear what people think. To answer some things:

The spending on children is not private school tuition. It is for camp and activities; some school expenses such as books.

The auto expense is mostly fuel, with an extended warranty purchase skewing the numbers somewhat.

Relating to taxes and investment earnings, since I FIRE'd myself (correct terminology?) almost exactly two years ago, my portfolio is up 6.9% net of spending and taxes.

I come from a very modest background. I worked from the time I was in the fifth grade and paid for the vast majority of higher education myself. My dad never made more than $30,000 in one year. But my kids haven't been around my family that much, although a few siblings have also done well financially.

socca · 05-22-2008, 11:19 PM

On the opposite side of the spectrum from 45th, there's me: I expect to spend $16k in 2008 (that's all expenses). No wife, no kids, no mortgage, no fancy cars, no second homes, no exotic vacations, low taxable income, etc. Nevertheless, I consider myself immensely 'wealthy' and very fortunate. I'm finally pursuing my own interests and the greater good rather than the interests of the war-mongers/war-profiteers I formerly served. I hope that American society holds together for at least a few more years!

lbymfire · 05-25-2008, 10:23 AM

For numerous reasons, I have found this post and the replies very helpful. 45th ... since you have been willing to share, I was wondering if you wouldn't mind sharing some high lvl facts about how you have invested your money outside of real-estate. While my situation is different in $, it is also very similar in many ways. However, I find it hard to get comfortabl

05-22-2008, 02:34 PM	#22
retire@40 Thinks s/he gets paid by the post Join Date: Feb 2004 Posts: 2,584	Could you give us a summary budget for your $350K annual spending? I'm just trying to reconcile that amount to your definition of "frugal." __________________ No man is free who is not master of himself. --- Epictetus Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo

05-22-2008, 05:38 PM	#29
45th Birthday Dryer sheet wannabe Join Date: May 2008 Posts: 11	Deleted Last edited by 45th Birthday; 05-22-2008 at 05:41 PM.. Reason: Duplicate-tried to fix formatting

05-22-2008, 06:07 PM	#33
Milton Thinks s/he gets paid by the post Join Date: Apr 2007 Posts: 1,000	Well, I don't see anything crazy. About 56% of your expenses relate to housing. That's a lot, but you can easily afford the actual amount. I agree that Chicago can be a relatively expensive place to live. Personally, I would retire the mortgages, but you have your reasons for not doing so. $28,585 for travel seems like a good idea. If one has the means, travel is always worth spending money on. I assume that the $23,979 allocated to your children represents private school tuition. There's nothing wrong with that. The right school will not only provide an excellent basic education, but will teach them that their privileged background carries with it a responsibility to excel and contribute to society (Luke 12:48: "To whom much is given, much is expected"). I don't think that anyone else has the right to pass judgment on your charitable contributions. Can you do more? Sure; but that is a given for 99% of the population. Your auto expenses are (much) more than I would have expected; but such costs are what they are. Presumably you have fancy cars that burn premium gasoline and require lots of maintenance. If not, you may be able to save some money by shopping around. On the other hand, you don't need to squeeze every last nickel so if you are happy where you are, why waste time looking for a better deal? __________________ "There is no more dreadful punishment than futile and hopeless labour" - Albert Camus Last edited by Milton; 05-22-2008 at 06:20 PM.. Reason: Added Biblical quotation.

05-22-2008, 04:03 PM	#24
kevin92610 Dryer sheet aficionado Join Date: May 2008 Posts: 39	not sure why the big concern. "Frugal" is relative to how much you have. In this guy's case, I agree... $350K a year is very frugal. he isn't even living off all the interest he earns on his investments and is spending well below his means. And as he points out.... for where he lives he appears to have less than those around him. I am in a similar situation... do my kids know we are comfortable, yes. do they know how much wealth we have, No. Do they have to earn the things they really want, Yes. Do we splurg on family vacations, yes. Are there others where we live that appear to have considerably more, yes. Why don't I want my kids to know how much I am worth... because I don't want to instill a sense of entitlement in my kids. If they are fortunate enough to acquire as much wealth as I have, I would hope they will have learned to respect what they have and not go out and blow it all. By the same token, if at some point down the line they end up getting a sizable inheritance from me then I hope that by having made them earn their own living they will have developed enough respect for money that they will use it responsibly. regards, Kevin

05-22-2008, 05:53 PM	#31
ERD50 Thinks s/he gets paid by the post Join Date: Sep 2005 Location: Northern IL Posts: 3,687	I have not read everything in detail, but there should be nothing to regret - you are living on about 2% SWR, so you are LBYM. You just have more means than most. I'm not sure what is in the mindset of some people here. After building up a substantial net worth, what is wrong with spending 2%? Nothing, in my book. BTW, the richest person I know came from a very humble background - just another data point. He also lives LBYM, but he can fill a 6 car garage with classics on his means! That said, I still think you may need to address a gap between what your children are accustom to having and what they will be able to afford on the money they earn. -ERD50

05-22-2008, 06:03 PM	#32
FUEGO Full time employment: Posting here. Join Date: Nov 2007 Posts: 683	So, $200,000 or so on housing expenses, and the rest on "other". Definitely more than I spend, but definitely not out of line w/ your net worth and ability to spend.

05-22-2008, 06:15 PM	#35
FUEGO Full time employment: Posting here. Join Date: Nov 2007 Posts: 683	Knowing that $350,000 is spending net of taxes, if the $14 million net worth were mine to manage, I would make sure that the taxes on my investment earnings plus my $350k in other expenses don't exceed 4% of net worth by too much. But from OP's post it seems that is not his concern. His concern seems to be what effect will appearing to be "idle" yet continuing to live well have on his children, specifically the effect on their work ethic and entitlement mentality to daddy's money and the lifestyle they grew accustomed to growing up. Valid concern IMHO. Question for 45th Birthday: Do you come from a more modest family background or from wealth? If your kids have seen how less wealthy family/friends live, then they may have a better feel for how "the other half" live (more like the lower 99% of folks, but who's counting right?).

05-22-2008, 06:54 PM	#37
Ronstar Full time employment: Posting here. Join Date: Aug 2007 Posts: 526	Doesn't look out of line to me either. I think most families spend more as a pct of net worth than he does. I think I need to re-look at the tax (and other) ramifications of mortgages if he can carry his for only $3k more per year than the income lost by retiring them.

05-22-2008, 08:00 PM	#38
45th Birthday Dryer sheet wannabe Join Date: May 2008 Posts: 11	Thanks for your opinions and for not being judgemental. It is interesting to hear what people think. To answer some things: The spending on children is not private school tuition. It is for camp and activities; some school expenses such as books. The auto expense is mostly fuel, with an extended warranty purchase skewing the numbers somewhat. Relating to taxes and investment earnings, since I FIRE'd myself (correct terminology?) almost exactly two years ago, my portfolio is up 6.9% net of spending and taxes. I come from a very modest background. I worked from the time I was in the fifth grade and paid for the vast majority of higher education myself. My dad never made more than $30,000 in one year. But my kids haven't been around my family that much, although a few siblings have also done well financially.

05-22-2008, 11:19 PM	#39
socca Recycles dryer sheets Join Date: Nov 2005 Location: Sarasota, FL Posts: 350	On the opposite side of the spectrum from 45th, there's me: I expect to spend $16k in 2008 (that's all expenses). No wife, no kids, no mortgage, no fancy cars, no second homes, no exotic vacations, low taxable income, etc. Nevertheless, I consider myself immensely 'wealthy' and very fortunate. I'm finally pursuing my own interests and the greater good rather than the interests of the war-mongers/war-profiteers I formerly served. I hope that American society holds together for at least a few more years!