I think this is taking things too far

[MichaelB]

People will spend income more easily than dip into their savings. Perhaps one way to avoid a situation where people deprive themselves unnecessarily is to annuitize part of their savings and portfolio. Keep enough savings to pay for emergencies, turn the rest into spendable income.

 

[Mulligan]

This extreme reluctance to spend my savings is why I've elected to do some things in my ER life that are not necessarily the wisest choice from an entirely economic standpoint. For example, I have a tendency to think of money in my checking/ MM account as OK to spend, but not money in my stock/ bond investments and particularly not money in my tax deferred accounts.

To deal with this madness, I've decided not to convert to Roths because knowing myself, I would NEVER take money out of them. My plan is to leave the money in the IRA's then, once the guvment forces me into taking RMD's I'll think it's OK to spend it. I also direct all dividends and Cap Gains from my taxable accounts to my checking account for same reason the money is OK to spend then. Crazy I know.

I don't think so. I believe we all have our idiosyncrasies with money. I am the opposite. I am still trying to add to my asset base, though in retirement. I tend to spend a bit so I stash my money in accounts that I cant readily access them. I have proven money in my checking and savings can be raided and isn't safe from myself, but when I have them in treasury direct and Vanguard I leave them alone.

 

[veremchuka]

....I actually PAID GOOD MONEY for a painter to paint the interior of my house, including the ceilings. I did this rather than depriving myself of leisure time and knocking myself out for day after day after day on a ladder, risking a fall and great bodily harm by painting over my head....

Perfect example, better than my rototiller because that was just $600 whereas painting will cost thousands.

My house was painted by me and ex when it was built and in retrospect it was a waste of time. We saved money but used vacation time to do it. 1 coat of primer and 2 coats of good quality paint, the ceilings were sprayed with that popcorn stuff in the paint so we did not do them. 14 years later the paint looks like new but the living room/kitchen is looking like it needs to be done again. When I decide to paint it I assure you I am not climbing to the top of a 10' step ladder standing on the next to the last step to get to the edge of the wall with an edger! Rolling the rest of the walls with a roller would be easy but I know someone that'll do the whole job. Much easier, for this I'll spend the money.

 

[Animorph]

Then there's the other side.

A good friend of our family, single with no heirs, is in his mid 80's. He just bought a new BMW M3, replacing his maybe 5 year old BMW 335 i. Probably because he sold his house and had a big check burning a hole in his pocket. He's saving most of the rest. Luckily he's still a decent driver, so he'll make use of the new car. Not rich, as far as I know. He retired only about three years ago. Just using his money for fun.

 

[unclemick]

Then there's the other side.

A good friend of our family, single with no heirs, is in his mid 80's. He just bought a new BMW M3, replacing his maybe 5 year old BMW 335 i. Probably because he sold his house and had a big check burning a hole in his pocket. He's saving most of the rest. Luckily he's still a decent driver, so he'll make use of the new car. Not rich, as far as I know. He retired only about three years ago. Just using his money for fun.

Rats! Just don't have the nerve. Time and money yes.

Heh heh heh - Maybe after my Chevy crosses 200k miles(140 now). Then again there is that frugal thought again. .

 

[Nords]

Aren't some of these frugal habits just a matter of choosing (a) over (b), perhaps? Is that un-named person depriving himself more than me, or me more than him? My vote is that neither of us is deprived, that we do make different choices, and that there is nothing wrong with that.

All good points. In my FIL's case I think he crossed the line from frugality to deprivation several decades ago and never looked back.

It'd be more amusing if it didn't cause so many arguments between FIL & MIL, and if it hadn't scarred spouse so much. Luckily I had plenty of warning before I got sucked into the black hole.

Then there's the other side.
A good friend of our family, single with no heirs, is in his mid 80's. He just bought a new BMW M3, replacing his maybe 5 year old BMW 335 i. Probably because he sold his house and had a big check burning a hole in his pocket. He's saving most of the rest. Luckily he's still a decent driver, so he'll make use of the new car. Not rich, as far as I know. He retired only about three years ago. Just using his money for fun.

I think you owe it to the single females on this board (and perhaps to the married females and the single/married men as well) to provide name, address, and phone number...

 

[chris2008]

The thing is that some people save money for "their old age" but when old age gets here and they need to spend some of it they are so used to not spending that they are just unable to spend it.

+1!

I had some relatives like this.
When I offered that they should use their savings to enjoy life more they replied that knowing about their savings is the utmost joy for them - no purchase could beat that.

An aunt literally hoarded money in her desk, in addition to significant bank accounts. She said: "When I feel sad it is so nice to look at it and see that I am not a poor old lady." The accounts, though high, could not provide this feeling.

"I have all I want and need" was their typical statement.
Getting older I use this statement more frequently, too .
Should I worry?

 

[marko]

My grandad waaaaay underspent. His children and grandchildren are having a ball! Thanks pop!

 

[Culture]

I think people are missing the mental illness part of this. My father, a disable vet, pays no taxes of any kind, and no medical bills. He lives in Oklahoma where disabled vets pay no sales tax (they get a tax free card) or property tax. The VA pays 100% of his medical bills, no copays or deductibles. He get 50K/year in various benefits (disability, SS and pension), and has about $500K in assets. His remaining life expectancy is about 12 years.

He lives in a run down trailer in the middle of nowhere with no neighbors (he was able to get the land for 10K, the cheapest he could find). He has no working AC (the part to fix it would cost $50 and he thinks that is too expensive), no running water in the trailer (the pipes froze and the plumber charges too much), buys expired food at the scratch and dent, and cannot hear because he will not spend money on decent hearing aids (the VA ones are free, why would he spend his money?).

If you met him, you would think he was a very personable and normal person. He is not mentally incompetent except for his living situation. There is no way I could get his declared incompetent, we have discussed this with a local attorney.

He is clearly mentally ill, but you cannot force treatment anymore. What to do? I do not know. Unfortunately, I am waiting for the phone call that he was found dead in his trailer.

 

[pb4uski]

Sorry for you situation with your dad. I sounds like you have done as much as you can to help him.

You make a good point that in some cases mental illness plays a part. Perhaps certain dysfunctional extreme frugality is a symptom. Might be the case with my great uncle too.

 

[Katsmeow]

"I have all I want and need" was their typical statement.
Getting older I use this statement more frequently, too .
Should I worry?

Like a lot of things in life...it depends.

If they (and you) are able to really meet needs and are enjoying life then I think that is fine.

For example, if you are comfortable in your house and don't turn on the AC then...fair enough. On the other hand if you are in danger of dying from extreme heat and refuse to turn on the AC when you could easily pay for it then...not so much.

 

[Texas Proud]

I think people are missing the mental illness part of this. My father, a disable vet, pays no taxes of any kind, and no medical bills. He lives in Oklahoma where disabled vets pay no sales tax (they get a tax free card) or property tax. The VA pays 100% of his medical bills, no copays or deductibles. He get 50K/year in various benefits (disability, SS and pension), and has about $500K in assets. His remaining life expectancy is about 12 years.

He lives in a run down trailer in the middle of nowhere with no neighbors (he was able to get the land for 10K, the cheapest he could find). He has no working AC (the part to fix it would cost $50 and he thinks that is too expensive), no running water in the trailer (the pipes froze and the plumber charges too much), buys expired food at the scratch and dent, and cannot hear because he will not spend money on decent hearing aids (the VA ones are free, why would he spend his money?).

If you met him, you would think he was a very personable and normal person. He is not mentally incompetent except for his living situation. There is no way I could get his declared incompetent, we have discussed this with a local attorney.

He is clearly mentally ill, but you cannot force treatment anymore. What to do? I do not know. Unfortunately, I am waiting for the phone call that he was found dead in his trailer.

The reason you can not get him declared incompetent is that he is not incompetent...

He clearly is making rational decisions.... just ones that you would not make. Unless there are other things that he does that show he is irrational, you have to live with his decisions...

 

[W2R]

I just have a general statement, not responding to anybody's post really.

From the article (again):

My definition of under-spending: Expenditures that are significantly less than the amount you could conservatively dispense annually, and still have a 99% chance of never running out of money.

I'll bet that if Bill Gates, Prince Charles, or almost any random billionaire ran their numbers through FIRECalc, they'd come out with 100% chance of never running out of money and dying broke.

Does that mean that they are under-spending and should spend more?

 

[Katsmeow]

I'll bet that if Bill Gates, Prince Charles, or almost any random billionaire ran their numbers through FIRECalc, they'd come out with 100% chance of never running out of money and dying broke.

Does that mean that they are under-spending and should spend more?

I don't think so. It seems to me that there are really two different situations that seem relevant:

Situation 1 - One spends the amount of money that one is content with and spends enough money to meet one's reasonable needs and enough to meet one's individual wants commensurate with funds available. So the person who could spend, say, $100,000 a year who is perfectly happy with spending $50,000 a year and is not depriving oneself and is living a healthy life is fine. And, that person is fine even if that person could spend $1,000,000 a year.

Situation 2 - Same person who could spend, say, $100,000 a year with no danger to the portfolio. That person, however, is in a situation that represents deprivation and hardship and actual pain and negative health effects. That seems different and is miserly and can be actual mental illness.

 

[W2R]

Exactly, Katsmeow. I think that for many of us there is a huge difference between not spending enough to properly care for oneself and meet basic human needs, and simply allowing for 100% probability of not dying broke.

And yet, most of us are not mentally ill or likely to not meet our own basic needs. But IMO the author uses extreme examples to illustrate why we should spend, spend, spend, even if we don't need to do so in order to live a normal and happy life.

Perhaps instead of defining underspending as

My definition of under-spending: Expenditures that are significantly less than the amount you could conservatively dispense annually, and still have a 99% chance of never running out of money

, the author should have simply defined it as not spending money on taking care of our own bodies and spirits, and in doing so, engaging in a form of self-abuse. Now that, I agree is repugnant.

I don't agree with the author that it is necessarily a bad thing if a billionaire feels he has already bought enough yachts and castles and decides to put some reasonable limits on his own spending.

 

[Culture]

The reason you can not get him declared incompetent is that he is not incompetent...

He clearly is making rational decisions.... just ones that you would not make. Unless there are other things that he does that show he is irrational, you have to live with his decisions...

Well, while there is some truth here, I think living without running water and AC (Oklahoma is having a record heat wave this summer) is not rational when you can easily afford the alternative and you are endangering your health by not having them. Most public heath professionals consider heat waves to be the most dangerous weather. They kill a lot of elderly people. Hygene goes down the toilet (pun intended) when you have no running water. He has problem with recurrent kidney and skin infections, which I am convinced are related to hygiene.

 

[MichaelB]

I don't think so. It seems to me that there are really two different situations that seem relevant:

Situation 1 - One spends the amount of money that one is content with and spends enough money to meet one's reasonable needs and enough to meet one's individual wants commensurate with funds available. So the person who could spend, say, $100,000 a year who is perfectly happy with spending $50,000 a year and is not depriving oneself and is living a healthy life is fine. And, that person is fine even if that person could spend $1,000,000 a year.

Situation 2 - Same person who could spend, say, $100,000 a year with no danger to the portfolio. That person, however, is in a situation that represents deprivation and hardship and actual pain and negative health effects. That seems different and is miserly and can be actual mental illness.

+1

 

[Texas Proud]

Well, while there is some truth here, I think living without running water and AC (Oklahoma is having a record heat wave this summer) is not rational when you can easily afford the alternative and you are endangering your health by not having them. Most public heath professionals consider heat waves to be the most dangerous weather. They kill a lot of elderly people. Hygene goes down the toilet (pun intended) when you have no running water. He has problem with recurrent kidney and skin infections, which I am convinced are related to hygiene.

My sister lived in a run down trailer without running water or air conditioning for many years when she was in her 20s.... and she could afford to have them... not as easily, but she still could afford them...


Right now she has been without electricity at her house for over a year... she is now in her upper 50s... her and her DH do not have a lot of money, but they could afford to get the problem fixed if they really wanted to.... they do have running water as they do have electricity to their pump house... she does not have AC, but lives in Oregon and does not need it...

Do I think she is crazy... yes... is she incompetent Nope.... she is very smart and very competent...



Edit to add... about hygiene.... my mom lives in a condo and does not have to pay for her water.... yet when I go to her place I see she has not flushed the toilet to 'save water'..... she also takes 'spit bathes' to save water... even though at times she has skin problems... we keep telling her to not try and save, with zero results.... so even if he had water, it might not change what he does.... just sayin...

 

[Meadbh]

Exactly, Katsmeow. I think that for many of us there is a huge difference between not spending enough to properly care for oneself and meet basic human needs, and simply allowing for 100% probability of not dying broke.

And yet, most of us are not mentally ill or likely to not meet our own basic needs. But IMO the author uses extreme examples to illustrate why we should spend, spend, spend, even if we don't need to do so in order to live a normal and happy life.

Perhaps instead of defining underspending as , the author should have simply defined it as not spending money on taking care of our own bodies and spirits, and in doing so, engaging in a form of self-abuse. Now that, I agree is repugnant.

I don't agree with the author that it is necessarily a bad thing if a billionaire feels he has already bought enough yachts and castles and decides to put some reasonable limits on his own spending.

You are quite obsessed with this, W2R

Quote:
My definition of under-spending: Expenditures that are significantly less than the amount you could conservatively dispense annually, and still have a 99% chance of never running out of money

The anomaly here is that the author makes the assumption that spending (up to one's ability) has intrinsic value. Of course, it may have economic value, but it does not always have value to the person doing the spending. The ability to choose to spend or not spend personal discretionary income arises from the fact that one's personal assets are private, and not a public good (at least in democratic societies).

 

[W2R]

You are quite obsessed with this, W2R

maybe so! I think we have a lot of pressures in our society to spend beyond all reason, from Madison Avenue and elsewhere. This article is yet another such input. I do not like such pressures.

Quote:
My definition of under-spending: Expenditures that are significantly less than the amount you could conservatively dispense annually, and still have a 99% chance of never running out of money

The anomaly here is that the author makes the assumption that spending (up to one's ability) has intrinsic value. Of course, it may have economic value, but it does not always have value to the person doing the spending. The ability to choose to spend or not spend personal discretionary income arises from the fact that one's personal assets are private, and not a public good (at least in democratic societies).

Exactly. I don't like the fact that the article implies there is something wrong with not spending every last cent up to the 99% success level and implying that that equates with not properly caring for one's physical or mental well being. Beyond a certain point, spending is work in itself and counterproductive, IMO. I would rather see the author imply that there is something wrong about not knowing when one is satisfied and happy, if there is anything wrong at all.

 

[grasshopper]

I have always found the accumulation aspect of ER, easier than the dispersal side.

 

[BigNick]

Still cannot pull the trigger on a last great act of defiance - ? sports car or similar adult toy.

Get a 4-year-old MX-5/Miata - all the fun of the sports car and one of the cheapest cars to own you can find.

 

[mh]

Get a 4-year-old MX-5/Miata - all the fun of the sports car and one of the cheapest cars to own you can find.

+1 . When I went out shopping for a sports car ( a convertible ) I looked at bmw z3's , Audi Tt , Porsche boxster, etc, and discovered I liked the miata the best. It had better legroom than most of the others . Had all the power I cared to have and had the best price by far. 1 or 2 yr old pne's are easy to find since many people figure out they don't want a two seater after that amount of time.

 

[Purron]

It's all relative. Some of our friends think DH and I are odd because we choose to live in a small house and drive old cars but could afford fancier stuff. We're frugal in many ways but don't scrimp on things that are important to our health or make us happy. Like Kubota tractors and Buffett tickets ;-)

 

[Lsbcal]

Suppose you run Firecalc and get the following result:


The Y-axis shows the failure rate. I haven't shown the X-axis numbers because we all have different numbers.

The question is:
What level do you feel safe spending at?

1) The 95% success rate level (black dashed arrow)
2) The 100% success rate level (red arrow) with no buffer
3) The 100% success rate level (green arrow) with a buffer
4) The 100% success rate level (blue arrow) with a big buffer

Personally I would go for the red arrow but monitor yearly. We have an unofficial priority list that seems to grow. DW always can find a new idea if I run out of them. So no problem finding things to spend on. We live in a nice house and try to enjoy ourselves without getting silly about spending.