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Has the wealth effect changed your spending?
Old 12-04-2017, 04:39 PM   #1
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Has the wealth effect changed your spending?

From Wikipedia, "The wealth effect is the change in spending that accompanies a change in perceived wealth"

Has the rising stock market changed your spending? We have not altered our basic budget, but we set up a Donor Advised Fund for charitable giving and will gift the DS and DD money for their Roth IRAs. Okay, I also bought a few nice bottles of wine and the whole Serrano ham mentioned in the Costco thread.

How about you?
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Old 12-04-2017, 04:45 PM   #2
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The market giveth, the market taketh away...
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Old 12-04-2017, 04:46 PM   #3
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Yes, I have recently decided that we should up our spending somewhat because the portfolio has increased so much since I retired 11 years ago. I include giving as a type of spending.
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Old 12-04-2017, 04:46 PM   #4
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The market giveth, the market taketh away...
Sure, but mostly it giveth.
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Old 12-04-2017, 04:49 PM   #5
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Old 12-04-2017, 04:50 PM   #6
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Quote:
Originally Posted by HFWR View Post
The market giveth, the market taketh away...
HFWR, I think Wikipedia captured your sentiment well when they used the words, "perceived wealth".
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Old 12-04-2017, 04:52 PM   #7
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Yep, stock prices plus "...one day you find ten years have got behind you."
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Old 12-04-2017, 04:53 PM   #8
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We've not changed anything. Our main income is a pension, SS, and some dividends, and we save a good chunk of that for "lumpy" expenses like a replacement car, new roof, property taxes, etc.

There's a fair bit in my IRA, but if I croak before DW turns 66 she's going to take a huge hit on income (SS goes away, pension drops 30%) so the IRA will more than tide her over until then. So until she's 66 we won't touch that. Since we're not much for travel or other expensive stuff the grandnephews and grandnieces will probably start getting more expensive gifts when I have to take RMDs. Or we might just reinvest the RMDs in taxable accounts, we'll decide then.

In the meantime the IRA and a few other accounts are doing better than I thought they would!
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Old 12-04-2017, 04:54 PM   #9
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Apparently, any "wealth effect" has no effect on me.

We've always lived below our means. And we've just saved that much more as our means increased.
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Old 12-04-2017, 04:55 PM   #10
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Yep, stock prices plus "...one day you find ten years have got behind you."
.....Every year is getting shorter, never seem to find the time.......
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Old 12-04-2017, 05:11 PM   #11
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Heck, no. Like most people here I've had years of negative returns. I kept my withdrawal rate at 3% this year so I don't have to cut back in bad years.
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Old 12-04-2017, 05:11 PM   #12
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Originally Posted by flintnational View Post
From Wikipedia, "The wealth effect is the change in spending that accompanies a change in perceived wealth"

Has the rising stock market changed your spending?

How about you?
The rising stock market has only made my TIRA a larger amount.

I have spent ~$45 K OOP in dental expenses so far this year that I had only planned $10 K for though.
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Old 12-04-2017, 05:42 PM   #13
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One of my hobbies is figuring out what is safe to spend. Our safe spending limit has definitely gone up.

Soon we'll be remodeling the kitchen. That will take a chunk.

It's not so easy to spend a lot as we research and shop around before we commit. Still want to do the due diligence. That goes for large vacation tabs too.
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Old 12-04-2017, 05:55 PM   #14
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Taking out an additional 1% for the year and putting into the cash bucket. Trying to smooth out the inevitable bumps in the road.
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Has the wealth effect changed your spending?
Old 12-04-2017, 05:57 PM   #15
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Has the wealth effect changed your spending?

Not really. Well, I'm trying to spend more (because you can't take it with you) but seems like I've about topped out. In 2017 I've had major dental work, bought a new laptop and new iPad, and a new Dyson vacuum. Despite all this, my projected 2017 spending is ~$1030 less than my 2016 spending was.

Taking the bull by the horns, I decided to get a new car which I don't actually need. Just for fun, y'know, why not? and it should increase my spending this year. But, F wants to buy my Venza from me when I do that, and his timeline is delaying the new car purchase for a little while, maybe until next year.

Oh well, I'm happy with life so who cares. Besides, the bigger my portfolio becomes, the better prepared I will be for the inevitable market crash.
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Old 12-04-2017, 06:01 PM   #16
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I derive my income from dividends, mainly from a big bond fund (monthly dividends and a stock fund (quarterly dividends). The value of the stock fund plays very little role in my income and spending. Only reinvested cap gain distributions from the stock fund have any impact on my share holding, although later this month I will add enough new shares to generate about $40 a month in dividends going forward (after paying some income taxes and seeing a loss of ACA subsidy this year to cancel out said benefit.


I won't be going on any spending spree from the rising markets.
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Old 12-04-2017, 06:08 PM   #17
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I still think old school and lived frugal and saved all my life so NO. My spending won't increase for now. If I were in my middle 70's I might think about it different but not at 60.
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Old 12-04-2017, 06:22 PM   #18
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I have made it a point to distribute my RMD. In the past few years, my IRA balance has increased even after taking my RMD.
This year there will be an increase will be in charitable giving, plus a small amount for our grandchildren. The two oldest will get cash, the other 3 will have it deposited in their 529 accounts.
There will be a balance left over that is for me. It will pay for my Angel Flight missions.
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Old 12-04-2017, 06:22 PM   #19
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For the past 3 years I used a 1.8% SWD, but next year I am increasing it to 2.7% of my original portfolio of 2014. While our health insurance went from $18,600 to $21,400, and DW's dental and cataract surgery cost and additional $6,000, we barely made this years budget. Wealth, although it has increased nicely, has not changed my spending, medical costs have.

DW and I are still able to eat and drink the world's finest, and travel to the ends of the US.
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Old 12-04-2017, 06:29 PM   #20
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Taking the bull by the horns, I decided to get a new car which I don't actually need. Just for fun, y'know, why not?
You have your dream home. Will this be your dream car? I bought my dream car when I was 45. Something about a midlife crisis or who knows what? But we still have it 12 years later. So, it has turned out to be cost effective transportation, almost LBYM style.
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