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Nervous, just plain nervous
Old 11-03-2007, 05:57 PM   #1
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Nervous, just plain nervous

My budget is well below the amount figured at 4% of portfolio, but I exceeded it this month. Actually, I have budgeted for just under 3%. One little temptation, and I blew it. I did it by buying a nice, comfy chair.

On a cognitive level, I tell myself that I am okay, but 7 months into not working, I am nervous. I suppose a crisis of faith at the 6 month mark or so is normal, and I know this will work, but I am nervous.

I also know that at the end of the year I will come in under what I budgeted. But, once again, I am nervous. Please tell me this is normal, and that it makes more sense to worry about living within an annual budget rather than a monthly budget. That is, it makes more sense to view the monthly budget as a guide line so as to stay within the annual budget. Some months may go over budget, but the under budget months will even it all out. So far, I am just a tich under for the past 7 months.
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Old 11-03-2007, 06:04 PM   #2
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It's not normal. You have some serious issues and need to return to work immediately.

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Old 11-03-2007, 06:10 PM   #3
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Zoom out. You're looking at grains of sand. Watch the beach instead.
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Old 11-03-2007, 06:11 PM   #4
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My budget is well below the amount figured at 4% of portfolio, but I exceeded it this month. Actually, I have budgeted for just under 3%. One little temptation, and I blew it. I did it by buying a nice, comfy chair.

On a cognitive level, I tell myself that I am okay, but 7 months into not working, I am nervous. I suppose a crisis of faith at the 6 month mark or so is normal, and I know this will work, but I am nervous.

I also know that at the end of the year I will come in under what I budgeted. But, once again, I am nervous. Please tell me this is normal, and that it makes more sense to worry about living within an annual budget rather than a monthly budget. That is, it makes more sense to view the monthly budget as a guide line so as to stay within the annual budget. Some months may go over budget, but the under budget months will even it all out. So far, I am just a tich under for the past 7 months.
I don't know what normal is. But you seem to have reasoned out the situation pretty well yourself. For 7 months year-to-date you are slightly under budget. Seems to me you are on track.

These once in awhile purchases are not going to occur like clockwork on a monthly basis. So you have to reason that a few months will go over the "average" month. But as long as you don't let it get out of hand, and make "splurge" purchases on a whim every month, I see no problem.

That voice in your head saying "worry" is actually good---it will keep the emotional, spur-of-the-moment, splurges under control.

So, don't worry, be happy!
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Old 11-03-2007, 06:17 PM   #5
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In tracking expenses in Oct at the end of the month, I thought it was curious that we had spent $1,000 less than income, especially since the ole bank account didn't seem to agree. Move over to Nov, and with a big bill on the 1st and voila - excess funds are gone - looks like we are $1,000 over budget. Just reflects alignment of income and outgo.

Listen to Rich - beaches not grains.

If you are that worried, you need to either (a) w*rk more or (b) play more so you don't notice so much.
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Old 11-03-2007, 06:32 PM   #6
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limpid lizard,

Large, irregular expenses (both planned, like auto insurance, and unplanned, like a comfy chair) will happen. What's important is that at the end of the year (or many years), you're on track with total spending.

IMO, what sinks many budgets is the lack of provision for those large irregular expenses: a new chair, semi-annual insurance, replacing a worn-out car, home repair. Putting those costs explicitly into your spending plan (whether or not you fund them separately; some do, some don't) gives you the confidence that you'll be okay over the long run.

In other words, I think you're fine, and the worry is normal. Unfortunately, since I still w*rk, I can't at this time give you a perspective from your side of the table...
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Old 11-03-2007, 07:15 PM   #7
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I have never been busier, so I do not think more hobbies or work will ease the concern. Today I was replacing fence posts, and the methodical plunk plunk of the post hole digger lulled me into a thinking mode. Maybe it is time to just mellow out more. Thanks.
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Old 11-03-2007, 07:25 PM   #8
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I also know that at the end of the year I will come in under what I budgeted. But, once again, I am nervous.
Why get nervous about that you know the outcome? Just relax and enjoy your chair.
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Old 11-03-2007, 07:27 PM   #9
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It is kind of frightening - no longer having a paycheck coming in, and knowing you have to live off investments.

It really took me a couple of years before I felt comfortable with this. I had feelings of insecurity at first. Wish I could tell you it was a shorter time period, but there it is.....

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Old 11-03-2007, 07:30 PM   #10
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My budget is well below the amount figured at 4% of portfolio, but I exceeded it this month.
I assume you are retired, and trying to achieve the 4% "gold standard".

As for me, I retired 6 months ago, and don't adhere to any artificial goal. Not to say that I don't want to ensure that I have enough money till "end of days", but I'm not "anal" enough to worry about the present day (or year!)

I know by running an anlysis against various forecast tools (e.g. FireCalc, Vanguard's Financial Engines, Fidelity's Retirement Income Planner, etc.) that indicate that I will have more than enough to get me through this life.

For instance, using Fidelity's tool (which gives you a breakdown by year of withdrawls's, taxes, and percentage of withdrawl), I'm using 4.84% next year (age 60) up to 9.54% at age 65. At age 66 (when I plan on SS), it drops to 1.70% (and 1.52% at age 67, my/DW's first full year of SS).

We don't exceed that magic 4% again till we are age 94!

What does it all mean? Just that the "short term" means nothing at all (yes, the other forcast "tools" show a similar end of life portfolio value, so it looks good across the board).

Don't worry about the "short term", if your long term plan looks acceptable to your exepectations.

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Old 11-03-2007, 07:36 PM   #11
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Dont buy anymore chairs for a while.

It'll be good.
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Old 11-03-2007, 10:04 PM   #12
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This is normal and it makes more sense to worry about an annual budget than the monthly goal.

ReWahoo hilarious love the signature.

Limpid anyone as focused on the budget as you are can only egt one result and that is you will hit your target. Enjoy the chair you earned it.
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Old 11-03-2007, 10:40 PM   #13
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DH and I RE'd in 1996 at age 49 (actually we had all of the fun we could stand in the corporate world and said to hell with it) and began to live off of our assets...which was a little unsettling. We had always lived below our means so I never really worked with a personal budget. To make myself a little more comfortable, I developed a budget and monitored it on a monthly basis. We came in just below budget the first year...as well as the second year. By the third year, I no longer used a budget, just reviewed the credit cards (everything goes on credit cards and they get paid off in full each month) to see where the money was going. Like Audrey, it took a couple of years to get comfortable with retirement. So go ahead and enjoy the chair...stop squirming or you'll wear it out!
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Old 11-03-2007, 11:22 PM   #14
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I also think you should relax and enjoy the chair. But if it still keeps bugging you, you can put yourself on a "pay back the chair" challenge and see how long it takes you to keep your spending to the minimum point you can and get back on track with your annual budget figures. You could also try to pick up some irregular income (maybe sell some stuff on e-bay?) to cover the amount you overspent in the short term.

In the future, if it really bothers you when you find yourself overspent, then try to avoid it by only allowing yourself to splurge when you actually have the excess in your accounts. If you want to splurge on something that costs $1000 that isn't in your basic budget, then you may need to keep your spending in check for 3-6 months so that you can generate that much of a surplus. I think it is probably easier to take this approach than to change your whole money psychology. If going "into debt" is something you resist to your very core, then you are not likely to get to the point where you will feel comfortable ever seeing a negative balance on your spreadsheet. Been there, done that (even though I'm not officially FIREd yet....)

lhamo
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Old 11-04-2007, 12:14 AM   #15
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Limpid Lizard -

As you have discovered, there is no way that spending is going to be the same each month. I am also given to nervousness when "the budget" is exceeded. Here are a few ideas that have helped me be less nervous over the years since I retired:

Keep an off-balance-sheet buffer account. My checking account is not counted as part of my investment balance. I deposit my monthly budget in my checking account each month. The balance fluctuates between 1/2 and 2 times my monthly budget. I am "on budget" as long as the monthly deposit to the account does not exceed my monthly budget for normal expenses.

Track a separate budget for optional indulgences. This is a yearly amount that may be spent in one lump or spread among several items. If not spent one year, it can be added to the next year's budget. Indulgence money comes directly from investments.

Most important and trickiest, track an amortization budget for large, necessary, and relatively unpredictable expenses. This is for things like: refrigerator quits working, roof springs a leak, car blows a head gasket, tooth breaks and requires a crown, etc.

The trick is figuring out how much to budget for amortizable expenses. I have defined what types of expenses fall under this category. I made my best estimate of what these sorts of things will cost over the years, and added the yearly average to my budget. I keep an eye on the total spending and adjust the amortization budget as required, but I don't expect to have "saved up" everything I need to spend in this category. Amortization money comes directly from investments.

The sum of these three separate budgets is a level of spending that I feel I can safely maintain (with inflation adjustments) for the rest of my life. Now I can spend whatever I need to spend for an amortizable expense when it occurs. I can spend on anything I want if money is available in the optional indulgence budget. The amount of money I spend varies widely from month to month and even year to year. As long as I follow these rules, I figure that I am "on budget" and keep nervousness to a minimum.

ExHermit
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Old 11-04-2007, 12:35 AM   #16
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There have been so many changes this past year, it is just amazing. I think this is an adjustment phase. Even when working, I monitored things pretty closely. I'd fret payday to payday when I was living on one paycheck out of two a month and saving 25% pretax out of each of them.

Actually, I have been selling things on ebay and craigslist for mad money. That is how I stumbled across the the chair. It is an antique and the most comfortable chair I have ever sat in. As soon as I plopped my butt in it, I knew it was going home. I found it at an auction that I was looking for ebay stuff at. In a summer of auctioning, this was the most expensive thing I have bought, and one of the few things I have bought without the intent of flipping it on ebay.

In my buying and selling, I am running about 500% profit. I have been able to do some remodeling, buy a used car and do a bit of traveling without going over budget until the chair. If I flip the other stuff I bought within the next couple of weeks, the chair should be paid for, and then some. I am just nervous. With time, I will be a calm old pro at this, and I hope to be comfortable enough to reward myself once in a while. What good is retirement if we do not enjoy it?
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Old 11-04-2007, 01:59 AM   #17
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Very interesting. Please tell more about your endeavors. What were some of your best turnarounds in this auctioning?
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Old 11-04-2007, 04:34 AM   #18
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It's not normal. You have some serious issues and need to return to work immediately.

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LOL!


Limp Lizard - I agree with what many posters here are saying. Some expenses are too large and irregular to fit into a monthly budget paradigm. The off balance-sheet buffer account is the only way to go.



Enjoy your chair!
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Old 11-04-2007, 05:31 AM   #19
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Actually, I have been selling things on ebay and craigslist for mad money.
It sounds like you're still w*rking part time. No problem with this and it sounds like something you enjoy. I do agree with the other posters that are telling you to "lighten up." If you are living off of 3% of your assets and still bringing in cash, you can easily splurge on a chair now and then. It also sounds like you can flip it when you want a different one.

What I've seen is when people retire and are living off of their assets, the stock market performance starts to overwhelm people. If you don't have a significant pension, you see your whole financial life ebb and flow with every major move. One recent retiree told me his wife never paid any attention to the stock market until he retired. She became frantic when we had our little summer correction. Ignoring market moves is a bigger adjustment IMHO.
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Old 11-04-2007, 07:09 AM   #20
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ExHermit,

Great budgeting ideas! I plan on using similar methods.
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