Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Spending more now? Interesting Asset Allocation Parallel
Old 01-30-2009, 10:16 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Spending more now? Interesting Asset Allocation Parallel

Is anyone spending more money now during the current economic downturn than previously?

I know our family is. We have taken two ridiculously cheap vacations in the last few months, and just booked a week at the beach this summer. These were mainly due to the price being so low, but they are also places and vacations we have wanted to take for a while but haven't due to the expense.

Our cars are getting near the end of their useful lives for our purposes (9 years old), and as a result we may pick up some new cars if the prices get stupid cheap.

My thinking had always been to spend more during a bad economy since deals should be more available. But now I am stuck with the dilemma of what I regard as very cheap investments screaming for my available cash versus less expensive goods and services to consume.

Has anyone given this much thought from an asset allocation/spending perspective? In other words, does anyone save cash in a rainy day fund waiting for an economic downturn to buy large capital goods and services?

This would tend to go against a withdrawal plan such as "spend 4% of the balance of your portfolio each year", since you would be spending more when your overall portfolio was down, and less when your portfolio was up. Has anyone seen any research on this? I am aware of Milevsky et al's work on combining asset allocation decisions with other aspects of one's financial life to better manage various risks throughout life. But I haven't seen anything specific to managing spending to take advantage of lower prices and balancing this with portfolio management and asset allocation decisions.
__________________

__________________
FUEGO is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-30-2009, 10:20 AM   #2
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
If I had confidence my job was extremely secure, or if I had a very secure income stream that I didn't think was threatened by recession, yeah, I'd be loading up on a lot of these good deals for big ticket items, travel deals and work on the house by contractors desperate for work.

I'm seeing some of the cruise deals and hotel packages these days and I want to kick myself for not feeling able to take advantage of them in this economic environment. I feel like I need as much "layoff insurance" in the bank as I can manage right now.

I suppose in the future if I wind up FIREd with a secure income stream, or I wind up with a very secure job, I'd probably plan to do just that. But for now I'm too chicken to do anything that will reduce my savings balance.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Spending more now?
Old 01-30-2009, 10:32 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,431
Spending more now?

No. Being more careful. But it's hard to spend less than I have in the past. I read Unclemick's book....'Cheap Old Bastard Guide to a Long and Prosperous Life'.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 01-30-2009, 10:36 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Good question -
I will be traveling outside the USA - Europe? Australia? and maybe a cruise for the first time.
Other things I buy on a need basis regardless of the economy.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 01-30-2009, 10:46 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,194
Are things really cheaper now? I'm always skeptical of, for example, "50% off" advertising.
__________________
Al
TromboneAl is offline   Reply With Quote
Old 01-30-2009, 10:48 AM   #6
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by TromboneAl View Post
Are things really cheaper now? I'm always skeptical of, for example, "50% off" advertising.
In some areas it's hype, but in other areas (particularly travel -- stuff like hotels and cruises) some of the deals are bordering on the insane.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 01-30-2009, 11:05 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Since equities are about 50% off, I'm only looking at buying off-budget discretionary stuff that is more than 50% off. While I have cash from 2007, I want it to last until stocks are at least 30% up from today. Until then, every $1 we spend today looks like $2 to me if I have to sell equities now.
__________________
Animorph is offline   Reply With Quote
Old 01-30-2009, 11:11 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by TromboneAl View Post
Are things really cheaper now? I'm always skeptical of, for example, "50% off" advertising.
I'm a skeptic too.

The main things that I have seen cheaper are travel related - hotels, cruises, airline tickets, and the like. I have seen some cars that are on sale, but not the kind that I would end up buying.

I haven't really seen many good retail deals yet. Although I usually don't buy stuff if I don't really need it, travel excepted.
__________________
FUEGO is offline   Reply With Quote
Old 01-30-2009, 11:12 AM   #9
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
we might be spending more since we have had two vacations recently. Hotels offer good deals, but car rental companies have not significantly reduced rates. We plan to replace our 10 years old Corolla and 20 years old windows (20) in the house.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 01-30-2009, 11:16 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by Animorph View Post
Since equities are about 50% off, I'm only looking at buying off-budget discretionary stuff that is more than 50% off. While I have cash from 2007, I want it to last until stocks are at least 30% up from today. Until then, every $1 we spend today looks like $2 to me if I have to sell equities now.
I have the same feelings - ie every dollar that I spend now could have bought me $2 worth of stocks at 2007 peak prices. But I'm still relatively early in the accumulation phase, so it is really just me spending some discretionary income and investing a little less, not actively selling securities at 1/2 off to fund cheaper travel.

I have stuck to my guns and continued to invest regularly every month at the same rate that I have been doing for years now. Saving most of our raises and bonuses, maxing out 401k's and IRA's, saving a lot after tax, etc.

I guess the gas prices going down also provide us with an extra $100 or $150 each month that we didn't have 6-8 months ago, so that goes a long way towards paying for our supercheap vacations.
__________________
FUEGO is offline   Reply With Quote
Old 01-30-2009, 11:19 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by Spanky View Post
We plan to replace our 20 years old windows (20) in the house.
I may have to more strongly consider home improvements soon. I do need new windows, new siding or paint/replace rotten wood, kitchen remodel, etc. I noticed 2x4 prices are off by 1/3 at the local home depot. No clue if that drop in prices in more broad on materials and if the labor costs have dropped yet.
__________________
FUEGO is offline   Reply With Quote
Old 01-30-2009, 11:25 AM   #12
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,031
We are are spending less. We cut our spending by 12.5% last year, and will probably cut it again by another 3-5% this year. We use the extra money to invest in the stock market. I would rather buy cheap(er) equities that have a great(er) potential for appreciation than buy depreciating assets, even at a discount. Besides, I still don't find deep discounts yet on many of the things I want to buy.
__________________
FIREd is offline   Reply With Quote
Old 01-30-2009, 11:46 AM   #13
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 312
For almost the first time since joining the full-time work-force, I'm short on ready cash and have to budget carefully. So, no, I'm spending less, not more.

Why? It's because I'm in the camp that believes that investments are on sale, and that I should put money into them now rather than into depreciating goods or consumption. So, for example, I'm accelerating pre-tax savings such that my entire salary is going into multiple tax-deferred plans now and for the next 4 months or so.

I'm sure my girlfriends will be understanding when I pinch pennies, won't they?
__________________
Grep is offline   Reply With Quote
Old 01-30-2009, 11:50 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
I guess I should also put our spending in context. We continue to save around 50% of our gross income, but have loosened the strings just a touch if we see something that would bring value to our lives at an attractive price.
__________________
FUEGO is offline   Reply With Quote
Old 01-30-2009, 02:16 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,280
Quote:
Originally Posted by FUEGO View Post
Is anyone spending more money now during the current economic downturn than previously?
We are leaving tomorrow for a three week excursion into the Dallas-Fort Worth/Galveston/New Orleans triangle. This is a normal expense and has been planned for a month or so.

However, those Mediterranean cruises for $1,000-$1,500 Balcony cabins INCLUDING airfare are pretty tempting. I have even seen a 28 day Alaska cruise for less than $2,500... wow! 28 days! And these are from big name cruise lines even.

I suspect that I am going to have a very difficult time this year keeping the wallet sealed since I believe the prices are going to drop even further.

What is that Chinese curse, may you live in interesting times? (which I didn't know until now is the English translation of "It's better to be a dog in a peaceful time than be a man in a chaotic period.")
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline   Reply With Quote
Old 01-30-2009, 04:15 PM   #16
Moderator Emeritus
Khan's Avatar
 
Join Date: Aug 2006
Location: Pine Island, Florida
Posts: 6,868
Send a message via AIM to Khan
Yes, have had frequent visits from the plumbers.
__________________
"Knowin' no one nowhere's gonna miss us when we're gone..."
Khan is offline   Reply With Quote
Old 01-30-2009, 04:20 PM   #17
Full time employment: Posting here.
friar1610's Avatar
 
Join Date: Jun 2002
Posts: 820
Quote:
Originally Posted by FUEGO View Post
Is anyone spending more money now during the current economic downturn than previously?

I know our family is. We have taken two ridiculously cheap vacations in the last few months, and just booked a week at the beach this summer. These were mainly due to the price being so low, but they are also places and vacations we have wanted to take for a while but haven't due to the expense.
Although we generally live pretty modestly, I personally see this period as a good opportunity for people in our situation.

The situation is this: both retired - a pretty decent military pension and 2 early SS checks each month, inflation adjusted. (5.8% this past year.) A decent portfolio which has lost about 25% during recent troubles, but which we rarely touch, so there's no real loss until we sell. Own home outright, so no danger of foreclosure.

I think this is a time, if not to go overboard, at least to take advantage of things (trips, new TV from places going out of business, etc.) that are "on-sale." We're certainly not going to go buy a BMW, but we may replace aging furniture, electronics, etc. if (an only if) they're a good buy.

I'm realistic enough to know that the value of both my pension and our SS may diminish as the new administration looks for ways to stimulate the economy. And I'm conscious of the fact that, at least for the moment, we're very lucky compared to many others. But during the good times, there are some things priced out of our reach; it makes sense to take advantage of them when they are within our reach.
__________________
friar1610
friar1610 is offline   Reply With Quote
Old 01-30-2009, 04:43 PM   #18
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
We have already started this past year: 2-New relatively expensive Dell Computers (DT/NB), New HDTV, and a New Digital Camera. This Year (2009) we have a very long vacation planned (8,000 miles about 8 states, and a month or so long). Plan, when we get back to start looking for a new car which we will probably hold off on until 2010. We too have military retired pay, and we both have SS, nest egg is totally in CD's, so no market impact (too old to worry about inflation much). I do not know about lower prices but these are things we WANT to do and can. Regardless, of what happens in the economy I do not think much will change - lived through too many administrations to really worry about it.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 01-30-2009, 04:59 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,280
Quote:
Originally Posted by friar1610 View Post
from places going out of business, etc.)
Worst possible place to try and save.

Just one of many, many articles:

Little secrets of 'out-of-business' sales

Quote:
"Consumers think this is the time for bargains. That's not true," said George Whalin, president and CEO of Retail Management Consultants.
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline   Reply With Quote
Old 01-30-2009, 05:02 PM   #20
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,076
Quote:
Originally Posted by FUEGO View Post
This would tend to go against a withdrawal plan such as "spend 4% of the balance of your portfolio each year", since you would be spending more when your overall portfolio was down, and less when your portfolio was up. Has anyone seen any research on this? I am aware of Milevsky et al's work on combining asset allocation decisions with other aspects of one's financial life to better manage various risks throughout life. But I haven't seen anything specific to managing spending to take advantage of lower prices and balancing this with portfolio management and asset allocation decisions.
I don't see how this goes against the withdrawal plan. Outside of my retirement savings I hold an account that is used to save up for spending on "luxuries" such as a replacement car, vacation etc. There is nothing that says that you have to spend everything you withdraw in the year you withdraw it.
__________________

__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Reply

Tags
Asset Allocation, recession, spending


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Asset Allocation AV8 FIRE and Money 17 02-25-2006 08:13 PM
Asset Allocation kenepp1 FIRE and Money 2 01-14-2006 03:33 PM
Asset Allocation Trace FIRE and Money 4 05-27-2004 07:09 PM
Asset Allocation Merron FIRE and Money 9 10-17-2003 02:17 PM

 

 
All times are GMT -6. The time now is 03:57 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.