The closer I get the less I save.

[dgalbraith100]

Another thread got me thinking about this, so I thought I'd throw it out to the group here and see if I'm just an odd-ball. About 2 years ago I reached what I would call "Base FI". That is I can cover my expenses with a 4% withdraw. The thing is, my expenses were cut to the bone, bare bare minumum. (wife, 2 kids, spending 21K a year) We were in ultimate savings mode, saving reached >75% where my entire salary and about 25% of my wifes salary was put into the "retirement savings".

Since then, I have quit my job and am doing a stay at home dad thing, we sold our expensive home (about a year after I quit) walked away with a good chunk of change from that, moved out of the mountains and back into the city. Cuting our housing and commuting costs by > 50%. (Still miss the mountains though)

So, now after all those moves, I find that we have plenty of extra money (not as much as when I was working, but not alot less either) that in earlier times I would have invested. Instead...

After running numbers, playing games with working, not working, wife working, wife quiting, keeping the kids at home, putting them into day care, saving all the excess income, spending 100% of the excess income.

I find myself spending 90% of the excess income and saving only about 10% of what we make (eating out, going to movies, entertainment expenses). Why? Saving all the extra income makes very little difference in the growth of the portfolio now. The gains are being driven by whats already in it. Our budget has grown from 21K to 28K and thats with a 50% drop in housing expense. (So we are burning 9K or so a year in "entertainment") thats a rough guess, I haven't actually looked that closely to the numbers...

Have others found this to be true for them? or did you stay in tight savings mode all the way to the end?

Thanks for your thoughts,
-d.

 

[lswswein]

Living in the present and enjoying the present are very important things to me esp when I know that there is a >0 probability that I might not live to be RE. You cannot "live" in deprivation mode for a long time.

-h

 

[SteveR]

Glad I don't live in your household. Living on $21K with a family can't be much fun. The problem I see with the very strick LBYM crowd is that sometimes folks forget to enjoy life. Working your butt off and saving 70+% of your income will certainly move you to FI much faster than only saving 10% but at what cost to your cache of memories?

Once we are old and unable to do the things we once dreamed of doing in our retirement you are left with only your memories of your life. The last thing I want to do one my deathbed is think...."if only I had done...." Dying rich only profits the government. Don't cut so deep into your life style that you neglect to live and enjoy life. We don't know when the grim reaper will call our name. No one is promised tomorrow.

You can be FI and ER before your peers AND enjoy life along the way. Moderation in all things is good advice to us all.
FIRE is not a race...it is a process. The old saying "All work and no play makes Jack a dull boy" is more true than most will admit. If you save so much that you neglect to enjoy the fruits of your labor on a regular basis you may reach the finish line only to find out you lost the race as you die shortly after reaching ER.

LBYM, saving, investing and adjusting to changes in the world are the basic of FIRE. However, living life and enjoying good health is priceless. We have managed to get to FIRE before most of our peers and well before our parents. We did it the hard way but a price was paid along the way...a very high one that I would give anything to reverse. Don't take a single day for granted.

 

[megacorp-firee]

Glad I don't live in your household. Living on $21K with a family can't be much fun.

A little hard on the guy don't ya think?

... The last thing I want to do one my deathbed is think...."if only I had done...." ... Don't cut so deep into your life style that you neglect to live and enjoy life.

I agree with you on this though

FIRE is not a race...it is a process.

well said

...a very high one that I would give anything to reverse

Sounds like you may have gone a bit far on this yourself ...

Moderation in everything is the 'way' I am not sure who to attribute this quote to, but it is something I try to live by ' ... live every day like it's your last, ... but save like you're going to live forever'. I am not sure I truly live to fullest EVERY day, but to me ... life is good... being here is a 'good thing' (thanks Martha).

 

[Spanky]

It's amazing that a family of 4 can live on a $28K budget. People call me cheap, but our expenses are about $50K per year.

 

[bright eyed]

yeah, sounds like you all are scrimping by already - i wouldn't call your spending frivolous or anything!


congrats on your accomplishments already!

 

[Corporateburnout]

What part of the country do you live in?

Living in a city on 21K per year as a family is phenomonal. My quicken budget showed that we need about 35K for the two of us as a bare bone minimum and more like 60K for a comfortable retirement.

 

[chinaco]

Sounds like you have fairly aggressive expense control. It is not a bad thing. It is one of the main reasons you have reached your ER goal. It also sound like you have decided to spend a little more and enjoy the fruits of your labor. That is a good thing.

Everybody has their priorities and approaches family budgeting differently. I agree with you, after you have saved to a certain level and you feel confident that it support you, there is no need to save money for the heck of it. It is a good thing to consume it.

It sound like you are still living within a budget.

Congrats on your discipline and acomplishment.

 

[Culture]

It's amazing that a family of 4 can live on a $28K budget. People call me cheap, but our expenses are about $50K per year.

Things are so relative. I am accused of being a tightwad, and my spending in 2006 for a family of 3 was $78,000 (not including federal and FICA taxes). Personally, I do not think I am a tightwad, I just do not spend on flash, and spend less than my peers (co-workers at my job level and neighbors).

In other words, they think I am tight because of the percent of income I spend, not the absolute amount spent. I think this is how most American's judge people. If you do not spend everything you make plus a little more, you are a tightwad.

BTW, I also agree that the OP should consider loosening up a bit more.

 

[Delawaredave]

Saving all the extra income makes very little difference in the growth of the portfolio now. The gains are being driven by whats already in it.

I'm seeing similiar. If you're at 4% SWR - then portfolio is 25x your expenses. Reducing your household costs 5% (generating more savings) - equates to 0.2% of the portfolio.

Years ago, 5% budget savings equated to nearly 5% additional to the portfolio.

If you're "on or above plan" - maybe additional budget restraints are not in order.

I'm always going to be extremely frugal - but I'm trying to find "high gain" household areas where easing up a little on frugality pays high "stress reduction dividends"

Good luck.

 

[SteveR]

A little hard on the guy don't ya think?

Not at all. The rest of my post explained my comment. Also, I can't imagine trying to live on that raising a family of 4 today; maybe 30 yeas ago (I made less than that); but not today unless you are living the "Unibomber" lifestyle.

Sounds like you may have gone a bit far on this yourself ...

Not at all. My point was to address the fact that my wife worked her tail off for 34 years and denied herself many things so she could retire early. She did retire at age 56....and died 7 months later. So yes, I am a bit preachy when it comes to being too LBYM at the exense of missing life as it passes you by. One can do both...save and enjoy life. That was my message to the OP.

 

[happy2bretired]

My point was to address the fact that my wife worked her tail off for 34 years and denied herself many things so she could retire early. She did retire at age 56....and died 7 months later. So yes, I am a bit preachy when it comes to being too LBYM at the exense of missing life as it passes you by. One can do both...save and enjoy life. That was my message to the OP.

I completely agree.

 

[kaudrey]

It sounds like you are on top of what you have and how much you need. I think it's great that you can loosen the wallet now and start enjoying the rewards of all of your hard work.

Congrats on your FI success, and don't worry about it!

Karen

 

[aaronc879]

Things are so relative. I am accused of being a tightwad, and my spending in 2006 for a family of 3 was $78,000 (not including federal and FICA taxes). Personally, I do not think I am a tightwad, I just do not spend on flash, and spend less than my peers (co-workers at my job level and neighbors).

In other words, they think I am tight because of the percent of income I spend, not the absolute amount spent. I think this is how most American's judge people. If you do not spend everything you make plus a little more, you are a tightwad.

BTW, I also agree that the OP should consider loosening up a bit more.

Agree it's all relative. I can't imagine spending 28K a year let alone 78K. I live on half his 28K per year and I feel fortunate compared to what I had growing up. I don't have kids but even if I did I can't imagine i'd spend more than 20K per year. I live in a small town of 15,000 in the upper midwest. It's all relative.

 

[megacorp-firee]

One can do both...save and enjoy life. That was my message to the OP.

Agree with this 100% ... balance is the key. Sorry, did not mean to bring up bad memory.

 

[dgalbraith100]

I live in Albuquerque NM, not a super cheap place, but can be cheaper than alot of places. (you can live in a 150K house in a decent neighborhood, not great, but not bad either). 1300SF, it works. Or you can live in a $300K (2400SF) house in the mountains where you are surrounded by trees (Where we lived before), or you can live in a $650K (5000SF) house in the foothills of th mountains (where some friends live it up) , its all in your priorities. MS Money says we spend 28,475K. Thats with a $500 a month eating out budget Right now because of my wifes job health ins. is cheap (work pays 60% of the cost).

Dining out is our biggest expense, followed by groceries, then insurance (car/health), misc, bills (water/sewer/cable/garbage/cell), then all others. We don't skimp alot. In general, we just don't buy alot of "things". For the kids, we own passes to the zoo and explora, and go there all the time. But those are cheap ($75 annual each). I aim for memorys of doing things rather than memorys of owning things.

Laters,
-d.

 

[Alan]

Interesting thread. We certainly made a decision to cut back saving once we felt comfortable that we were going to make our goal of both RE'ing at 55. 3 years ago I had the chance of a move in my company. Although the new job was a sideways move moneywise, we really liked the town where the new job was, plus my new boss was a good friend and was based in England so plenty of opportunity to get company paid trips back to where our families lived.

DW was making about $65K/year and we decided that we could do without and she RE'd as well rather than looking for a new job after the move.

So I am very much in agreement with the idea that FIRE is a process, and living life to the full is important. If we'd stayed we could have forged ahead and been able to FIRE a few years earlier, but we don't regret one moment deciding to take our foot off the pedal. The last 3 years have been great and DW has also accompanied me on some of my overseas business trips including Barcelona 3 weeks ago. (although she declined this latest trip - I'm in India at the moment)

 

[Alan]

I aim for memorys of doing things rather than memorys of owning things.

Agree absolutely. We love travel for exactly that reason.

 

[trixs]

I cant imagine how some of you guys think living on 28k is impossible.. Well, yes I can as its all just the area.

Here in Georgia a brand new 1700 sq ft, all brick house cost around 130-150k. So you get a mortgage with insurance and taxes for about $1000 a month. Then you have your full cable with internet for around $100 from Cox Cable. Next we add some utilities like a $50 phone, $100 electric bill, and $50 other utilites...

Required Expenses Total: $1300 per month or $15600 a year.

That will leave you with 28k - 16k = 12k per year of spending money for food, entertainment, ect..

All of the bills above are actually my expenses.. Averages out to $1300 a month for everything :

 

[rw86347]

I track my spending very closely. I am very frugal, but not extreem. I change my own oil, and my wife cuts my hair, but I don't feel deprived.

I have a $1100 mortgage, and commute 100 miles per day. In total I spend $33,600/yr.

I have 18 more house payments, then It will cost me $20,400/yr.

After I quite work, I think it will cost me $16,800/yr (1/4 the driving)

All of this without changing my lifestyle. I do worry that once I quit working I will be more temped to shop.

rw

 

[SteveR]

I cant imagine how some of you guys think living on 28k is impossible.. Well, yes I can as its all just the area.

...All of the bills above are actually my expenses.. Averages out to $1300 a month for everything :

So, how many kids are you feeding?
Health insurance?
Medical bills?
College fund?
Car and house insurance?
Fed. and State income taxes?
Vacations?
Savings?
Christmas and other gifts?
House repairs?
Car repairs?
Gas for cars?
Etc.

Not saying you CAN'T do it....only that I would not want to.

 

[DangerMouse]

Does your increased expenditure bother you or are you more bothered that it conflicts with FIRE and LBYM?

As Steve mentioned, balance is what it is all about. With regards to your expenditure on dining out, I am just wondering if this is for you and the wife or are you spending this taking the kids out?

 

[maddythebeagle]

I track my spending very closely. I am very frugal, but not extreem. I change my own oil, and my wife cuts my hair, but I don't feel deprived.

I have a $1100 mortgage, and commute 100 miles per day. In total I spend $33,600/yr.

I have 18 more house payments, then It will cost me $20,400/yr.

After I quite work, I think it will cost me $16,800/yr (1/4 the driving)

All of this without changing my lifestyle. I do worry that once I quit working I will be more temped to shop.

rw

No doubt that you have been tracking...you certainly can have a much reduced tax bill in FIRE with planning....it seems after reading a lot of folks...it comes down to the wildcard of health insurance and expenses...for that a working spouse is in order

 

[rw86347]

..it comes down to the wildcard of health insurance and expenses...for that a working spouse is in order

I have racked my brain over Health care. I can't figure out how i will do it after I quit my job.

RW

 

[megacorp-firee]

I have racked my brain over Health care. I can't figure out how i will do it after I quit my job.

RW

I've just gone through my own 'figuring' ... it is a lot more expensive.
I will be doing COBRA for 18 months which will cost me about 5x what I am paying now for DW and I. Then I get the opportunity to do MegaCorp retirement health care for about 8x the working rate.
I have looked into BCBS ppo and a 'like plan' to what I have today will be about 6x of working rate. This is not good, but I am fortunate to have the funds to do this.

Do you have a COBRA option? Are you retiring or quiting and do you have any company options? Try this as a starter: http://www.bcbs.com/coverage/
Good luck.