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Fear to spend
Old 11-27-2010, 03:35 PM   #1
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Fear to spend

I have been very frugal and fairly successful. I have a net worth of about 3.4M. About 2.0M is in stocks, bonds and cd's ( 40%, 40% and 20% respectively). The rest is in commercial real estate (750K value generating 120K/yr) the rest is in my home and personal property.

I have been retired for the last 3 years and have limited my spending to the income available from my real estate and a small amount from consulting (less than 8K/year).

I have run the FIRECalc and at age 58 (wife is 59) it seems I should be able to spend about 70-80K more per year.

But, I seem to have a great fear of doing that. I'm worried that inflation such as we saw in the early 80's is almost guaranteed (at least in my mind). So that, even though I have a good amount in equities, it may not be enough to guard against inflation.

Am I being too paranoid?

W
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Old 11-27-2010, 03:44 PM   #2
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Maybe, Maybe Not.

You did not say what you are spending. You didn't say how much more you wanted to spend. My guess is if you started spending 80, you would worry so much, you would not be any happier.
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Old 11-27-2010, 03:46 PM   #3
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Originally Posted by wrochdvm View Post

Am I being too paranoid?

W
You might not be paranoid enough. In addition to inflation risk you have:
General Market Risk - stocks & bond market fluctuation
Sector Risk
Individual company risk
World Political Risk - war, terrorism etc.
Taxation increase risk - increased income and VAT
Economic risk - stagnant or declining economy
Health risk - pandemic
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Old 11-27-2010, 04:03 PM   #4
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Here's an idea: Split the difference. Spend an additional 40K and reinvest the other 40K.
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Old 11-27-2010, 04:04 PM   #5
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You might not be paranoid enough. In addition to inflation risk you have:
General Market Risk - stocks & bond market fluctuation
Sector Risk
Individual company risk
World Political Risk - war, terrorism etc.
Taxation increase risk - increased income and VAT
Economic risk - stagnant or declining economy
Health risk - pandemic


Wrochdvm, let me introduce Dex, our resident paranoid.
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Old 11-27-2010, 04:05 PM   #6
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Oh that dex! Helpful to a fault! Do be advised though that dex posts from random mountain tops where he is honing his awesome survival capabilities while carting about his fortune in gold and anti-zombie 12 gauge shells. Well, maybe not the 12 gauge shells - or maybe he does.... Feel lucky punk?...

You can't (easily) change who you are - not liable to turn into Diamond Jim Brady just because you think you maybe could.

Sez the guy who drops $2 on the dollar menu at McD's - no drink, no fries, but doesn't have problems spending on some other stuff
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Old 11-27-2010, 04:13 PM   #7
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So you're spending $128,000 per year, and want to increase it another $80K . . . why?
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Old 11-27-2010, 04:18 PM   #8
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...The rest is in commercial real estate (750K value generating 120K/yr) the rest is in my home and personal property.

I have been retired for the last 3 years and have limited my spending to the income available from my real estate and a small amount from consulting (less than 8K/year).....
Does this mean you spend $120 (the amount generated by the $750K in real estate) plus >$8K from consulting each year? Not that it matters--are your typical living expenses covered by whatever it is that you spend?

I might be a little worried that the commercial real estate might not generate that amount in the future if you lose a big tenant, so maybe it's good that you haven't become used to spending an additional $80K a year.
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Old 11-27-2010, 04:26 PM   #9
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O.K.
My wife and I just bought a used Airstream trailer and a new Ford F250 to tow it. I could have spent an extra 5K for a totally tricked out top of the line truck for an extra 3-4K (spent 44K on the one we got).

So, it seems I could easily have afforded the extra luxury. But, my frugality kept me from doing so.

W
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Old 11-27-2010, 04:26 PM   #10
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If that $80K buys extra happiness now, then I would say to go for it.

As long as the extra expenses are discretionary spending such as travel or toys that require no upkeep, hence can be cut back as necessary, even our friend Dex would approve. Right, Dex?
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Old 11-27-2010, 04:28 PM   #11
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In reply to Bestwifeever

Yes, living expenses are covered in the 128K

The tenant is a large national corporation that bought my business. I am confident that they will continue to lease (annual increase of 2% with adjustment for excess inflation).
W
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Old 11-27-2010, 04:30 PM   #12
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O.K.
My wife and I just bought a used Airstream trailer and a new Ford F250 to tow it. I could have spent an extra 5K for a totally tricked out top of the line truck for an extra 3-4K (spent 44K on the one we got).

So, it seems I could easily have afforded the extra luxury. But, my frugality kept me from doing so.

W
I smell a rat.
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Old 11-27-2010, 04:33 PM   #13
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In reply to Gone4Good.
?
W
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Old 11-27-2010, 04:35 PM   #14
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Do you want to spend more, or are you just wondering if you can?
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Old 11-27-2010, 04:35 PM   #15
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We'll see how this plays out, but it looks very familiar.
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Old 11-27-2010, 04:52 PM   #16
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reply to kumquat

Just wondering if I could spend more. Am I denying myself the rewards of a lifetime of hard work.
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Old 11-27-2010, 04:54 PM   #17
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Am I denying myself the rewards of a lifetime of hard work.
Only you can answer that question.
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Old 11-27-2010, 04:56 PM   #18
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I definitely think a housing upgrade is in order.
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Old 11-27-2010, 05:04 PM   #19
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thanks FIRE'd@51 one of the reasons we bought the Airstream is to travel the country and possibly find a second home. We love living in New England, we are sailors and we enjoy the weather from May until mid November. I don't mind the cold and am an avid skier, but the skiing in New England can be touch and go.

I believe buying a second home on credit would be a good move since I also believe that inflation is going to rear its ugly head like it did in the early 80s. How can it not when the fed just printed 80B dollars?

W
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Old 11-27-2010, 05:05 PM   #20
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reply to kumquat

Just wondering if I could spend more. Am I denying myself the rewards of a lifetime of hard work.
Life is about choices. If you don't want to spend more, great, that's your choice and you've made it. If you do want to spend more, you have to think about the pro's and con's.
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