How do you decide on ER vs buying/spending?

[Animorph]

I've always tried to maintain a roughly equal balance of income while working and during retirement. Not an exact science, but you can at least plan for it. When you find a comfortable balance, you can spend the planned amount without worrying about it.

Retirement gives you a pretty stark example. Most of our basic expenses will come from SS, a pension, and retirement savings. But DW and I have separate investment accounts for our personal spending (including our own cars). That's just the way it ended up, even if it was a little strange. So I have $X to spend any way I want until I die, with no additional savings from income. It's enough to buy a Ferrari now and nothing in the future, or spend a few thousand each year (4% rule, not exactly a Ferrari lifestyle), or spend more now and less later, or leave it alone and let it grow. Probably a bad idea to blow it now in one shot (though the Ferrari has to have some resale value), but it's pretty much a personal decision how to spend it.

Dan

 

[aaronc879]

A $10K vacation is absolutely out of the question for me. In the 9 years i've been working full time I took 1 $3K vacation but only spent about $4K total in 9 years and am limiting myself to no more than $500 per year for at least the next decade. I will probably spend nothing at all. As for a $10K watch, the most i've ever spent on a watch for myself was $20. I did buy my dad a $500 gold watch for his 50th birthday. I was only 20 at the time and $500 was about 25% of my net worth. I would never spend that on myself. I spend virtualy nothing on myself ever. Anything i'm thinking about buying that costs more than a tank of gas I think about how many hours of manual labor in a factory i'll have to work to pay for it and I end up not buying it. I don't buy what I don't need. The total amount of money that I spent on everything that you'll find in my kitchen (other than food), dining room, bathroom,and living room combined is about $200.

 

[FIREd]

As for a $10K watch, the most i've ever spent on a watch for myself was $20. I did buy my dad a $500 gold watch for his 50th birthday. I was only 20 at the time and $500 was about 25% of my net worth. I would never spend that on myself. I spend virtualy nothing on myself ever.

I knew some people on this board would not understand some of our choices. So there it is. We are a young couple (33 years old) with no kids, living in the deep south and this year we will earn approximately $160K in a very low cost of living area. Our annual mandatory expenses are quite low and have amounted to $38K in the past 3 years (that includes everything, mortgage, property taxes, insurance, home repairs, gas, food... We live in a modest home and drive older cars). ---Cheapstakes should stop reading right here. Obscene material coming up.--- On top of that we have been spending another $20-25K a year on splurges (Last year for example we bought new computers, a new TV, we traveled to Europe, bought antique bedroom furniture, etc...). The watch will be paid out of that "splurge" budget. Yes I know it sounds bad to be spending so much money on "frivolities" when we could be investing the money instead. But even after all that, we still expect to save $60K+ this year and to be able to retire at age 45. So here is the question. Should we be living like monks and save $85K+ a year so that we can retire by the time we reach 40 years old or should we enjoy life a little along the way and still retire early at the age of 45? I think 45 is plenty young to retire. During our twenties my wife and I lived like monks (18-20K a year) and as our income increased such frugality became harder and harder to justify. We want to be able to enjoy some of our hard earned money today. And it's not like my wife wants to buy expensive watches every year. She knows it's a one time purchase that I hope will last her for the rest of her life.

 

[toofrugalformycat]

I knew some people on this board would not understand some of our choices. So there it is. We are a young couple (33 years old) with no kids, living in the deep south and this year we will earn approximately $160K in a very low cost of living area. ....
So here is the question. Should we be living like monks and save $85K+ a year so that we can retire by the time we reach 40 years old or should we enjoy life a little along the way and still retire early at the age of 45?

Only you can answer that question, and you shouldn't care if people on this board disagree.
I'm frugal, but I'm glad I took time off work and did some adventuring when I was younger, because there's some things your body can do in its 20s and 30s that it can't do in its 50s and higher. I enjoy my early retirement but I'd enjoy it less if I'd achieved it by denying myself enjoyment of my youth.
Personally, it's mindless wasteful spending that drives me bats, not all spending.

 

[chris2008]

Our first financial priority is to continue our saving plan. So this money is leaving our account regularly, first thing every month.
For the "spending money" we carefully consider how much satisfaction a certain purchase would bring, in contrast to finding other ways to do the job.
Example: Once in a while a visit at a nice restaurant is well invested. But when we go too often it looses the appeal. So we do a lot of home cooking, have several great books on cooking, cook in great batches and freeze for convenience on days when we do not feel like cooking from scratch.
We love to go on vacations, but enjoy the biking tours from hostel to hostel as much as the big and expensive ones like 14 days at african camps in nature resorts.
It is important how much of a wish is based on a need and how much of it is driven by the marketing industry...
For us it is not ER versus spending but to find balance and to explore our wants.
After all, we need to enjoy our life till ER, too.

 

[FIREd]

Only you can answer that question, and you shouldn't care if people on this board disagree.

My question was purely rhetorical. And my answer was: I think 45 is plenty young to ER, meaning I would rather delay ER until I am 45 and enjoy life a bit until then rather than live like a monk for the next 7 years and retire at 40.

 

[figner]

My question was purely rhetorical. And my answer was: I think 45 is plenty young to ER, meaning I would rather delay ER until I am 45 and enjoy life a bit until then rather than live like a monk for the next 7 years and retire at 40.

Sounds like you're comfortable with your life choices.

To me, it's a matter of priorities. I have no interest in expensive watches or cars, but am spending $4-5k on a 4-week vacation for myself this year. About $3k of that is tuition for a class. I'm sure it will be worth it.

 

[rai-zero]

I'm 42.5 years old and plan on retireing at age 53-55 (ish). If we both saved like mad we could probably retire 49-50 (ish) but I figure a year or two this way or the other won't kill me.

One of my favorite activities is cars. I read all the mags, am always on car forums, been to exotic car driving events (etc.) one idea of a great thing to do would be a European Delivery for a BMW or Porsche (etc.) don't have to but it's something I think I'd love to experience.

I'm 42 but just this past 2-3 years got into saving a significant amount, before I saved some but not on an ER pace. We were paying off school loans, home down payments etc..

As the loans and such went down we were able to sock more into savings so we live well below our means as our pay has gone up these past 8-10 years.

 

[Fireup2020]

I don't go hog wild in my spending, but there is no guarantee I will make it to retirement. Planning on retiring early (50 or 55) - but also having fun today (but of course that, too is budgeted!) Get on with your bad self Firedreamer - enjoy life!

 

[Animorph]

rai-zero,

I did a factory delivery for my 1984 Porsche 944 Turbo (not the 911 Turbo). I would have bought it anyway, but got a discount for tourist delivery and joined a Porsche club tour that included a visit to the factory and a ride on the test track. We drove on the Autobahn (136 MPH limit for break-in) and over to Switzerland. The car insurance while there was outrageous, but the rest was great. It's different now, but should still be more fun than a normal vacation.

Dan

 

[HFWR]

A 10K watch.

What if you only run 5k? Or 15k? What good is your watch then?

 

[Midpack]

The richer your friends are, the more it will cost you.
I'm quoting from a recent ER book I read, but I don't recall who originated the quote.

 

[SLC Tortfeasor]

My fiance and I will spend about $10K on our two-week honeymoon in Europe this August. We're starting in Chamonix, France, and hiking for five days over glaciers to Zermatt, Switzerland. Then we're renting a car and driving through northern Italy. It will be an incredible experience and, even though now is certainly a very expensive time to travel in Europe, I think it's going to be well worth the money.

I've spent boatloads of money on travel over the past 15 years. I have no regrets.

 

[maddythebeagle]

Another point of view that some might consider is saving more prior to age 35 (you know the best savings years) and loosening up more after that once you get a nice base....

 

[deserat]

Introspection and figuring out if you 'value' the amount of money and therefore time it takes/took to acquire that item or time (as in ER). YMOYL looks at that by having you figure out what you spent in 'life hours' and if you thought it was worth it. For some it's travel, other's it's ER, other's it food, etc, etc. Only you can figure out what is important to you.

 

[TickTock]

Only you can figure out what is important to you.

Exactly! It's not about not spending money, it's about spending money on *what's important to you*.

And only you can determine what's important to you.

 

[megacorp-firee]

Everyone is different. Things I like to do, to others might seem odd or even stupid. Same thing with how one spends their money. Since this is the FIRE forum, many of us are focused on how to get there and once there how to stay there. This thread is asking the question of how to balance.
That is a very personal decision. There is no ONE answer.
IMO the pertinent question should be: how did you get there? or how are you planning on getting there. Then one can get ideas on how to approach the situation.

My answer:
LBYM lifer. When I started w*rking, I maxed out (10% of salary) my employee stock plan (seemed like a good way to force save). When 401k plan started, I did the same (max to match). As I got promo's and raises, I just let those participate in the esp and 401k too. In other words, I PAID MYSELF 1st. The 1st 5 or so years of work was my 'foundation set up' years. We kept to a strict budget and paid off our debts and started to save all that was left after our budget. Credit cards are used as float, I don't think over the years we have paid more than $5 in interest (oversights). The next 10 years or so, as my career 'got better', I found that we had more discretionary income. So after 'Paying Ourselves 1st', we lightened up and started to go out for the occasional meal, buy a more luxurious car, move up in house, take a vacation that did not involve a tent. As the career progressed, we found that we didn't have to cut the dryer sheets anymore, ...etc. After my oldest got to college, we did a re-calculation and found we were better off than we thought we would be. Cruises came into play. Nicer restaurants, 2 buck chuck, but also the occassional 'nice' bottle of wine, ...etc. All of the time maxing out 401k, stock plan, and contributing to after tax investments.
From my vantage point, so far, it's been a good ride. We scrimped and saved in the beginning while paying ourselves 1st, paid off our debts, save as much as we could, and balanced it off with progressive rewards as life got better. I truly believe that life is a building of habits. DS and DD still call us 'cheap'. We certainly live way below our means, but comfortably. These habits have let us FIRE and live life the way we want. I also believe that if we had not done it our way, ... i.e. got the BMW earlier, big yearly vacations earlier on, eating out a few times a week (as our neighbors had), ...etc., I would still be a Wage Slave today (as many of my former peers still are).

btw, on our recent trip to China, DW took a fancy to a (single) gold pearl on a gold chain. I could tell that she really wanted it. It cost about the equivalent to 3x a local persons yearly income. But it made her happy. We are now able to 'treat ourselves' occassionally. After all life if to be lived.

I think the 'take away' here is that you have to do it your way. However, if you get into the habit of 'doing it now', you may not be able to 'do it later'. Balance ... like your portfolio is a personal thing.

... my 2 cents ... and worth every cent

 

[Sandy]

Priorities change over time at different ages and stages of life. Kids, elderly parents, spouse, divorce, j*b situations, etc all influence that tipping point between spend and save.

Early on, my push was to pay off school debt, then save for a home down payment, then the kids came along- twins were not planned nor budgeted for - but I couldn't exactly send one back (not that I want to) - but they have to be paid for. Throw in some issues from spouse's side of the family and the mix gets tough.

While I didn't always save for retirement as much as would have liked to, (and might have saved more if I knew then what I know now), but I always saved some. Stick to a plan, but live along the way, and keep things balanced.

You will always weigh the decision "should I save or spend it on this".

 

[FinanceDude]

I achieved my lowest estimated FIRe date (age 47) RIGHT BEFORE my first kid arrived, followed by another.

Having two kids raised my retirement age by 5 years or so, but I wouldn't give my kids up for Buffett's billions........

 

[W2R]

I achieved my lowest estimated FIRe date (age 47) RIGHT BEFORE my first kid arrived, followed by another.

Having two kids raised my retirement age by 5 years or so, but I wouldn't give my kids up for Buffett's billions........

FD, have they reached their teen years yet? (innocently smiling)

Oh well. That only lasts a few years, and then they leave home. Amazing how much smarter their parents become as soon as they do that. But if Buffett comes knocking on your door when they are around 14-15, better slam the door in his face!

Back to the topic at hand - - I know my priorities and until now, ER was a very high priority for me. However, recently I inherited a substantial sum, so I am FI. Therefore I decided to spend my entire $1395 tax refund for the first time in a huge shopping spree, since I plan to refrain from spending any of my inheritance and can afford to spend this year.

Monday I went out with the firm intention of blowing the whole thing. I shopped for eight hours, until I was exhausted and my car was full. I bought things I have wanted for 40 years, and things that just appealed to me on an impulse. I bought clothes, lots of pillows just "because", a spice rack, baskets, a new doormat, and basically everything under the sun. Total bill: $287, so I still have $1112 left. I think I will give up and slink off to invest it, instead. How embarrassing. Until now I always thought there was so much I would buy, if I just had the money.

 

[kaudrey]

rai-zero,

Like most people here, I agree that it is all about balance. I am frugal by nature and I am fortunate to make a higher than average income (but not stratospheric). My parents were savers, I am a saver.

I started maxing out my 401(k) at my first job, and opened a taxable account at 26 so I could save more. At 31 or so (say, 7 years ago), I decided to start keeping track of my savings more. Now, I save 30% of my income, and I can spend the rest.

I spend a good amount on travel. I love to travel. I usually take one big trip a year (this year is Alaska in July), and multiple smaller trips. I also plan home-renovation projects in stages - one big project a year. I also spend money on going out with friends for drinks and dinner. But, I buy used, reliable cars and keep them a long time. I don't have the latest electronic gadgets or a flat screen TV. I hate to shop (yes, I'm a woman). I don't buy expensive designer clothes. I bring my lunch to work. I go to the library instead of Barnes and Noble.

I plan to retire at 52. If I stopped travelling, I could probably do it 5 years earlier. But what would be the fun in that?

 

[Milton]

For example who here would not like to go an a vacation to Europe or Hawaii? I'm sure most of us would. However that costs $$.... I mean is a $10K vacation out of the question or do you still do that but save in other areas?

As travelover implies, this question can't really be answered without some idea of your net income.

If you and your wife enjoy travelling and have a combined net income of, say, $200,000, I see no real reason why you shouldn't enjoy an annual $10K vacation: that would only be 2.5% of your income, and provided that you otherwise LBYM, it should be nothing to worry about. After all, you have to have some enjoyment as you go through life, especially as no one knows what the future holds and you could get hit by a bus tomorrow.

If on the other hand you only have net income of $40,000, 25% of your annual budget sounds rather excessive to me. But you could always enjoy more modest vacations, save up, and enjoy a 'trip of a lifetime' vacation every 10 years or so.

She and I have different ideas of what we want. For example she would like a baby grand piano (for what I have no idea). I say that's silly but then she informs me she makes a good income and so she thinks she should be able to buy what she wants.... It's hard to have one person saving for ER and have the wife spending for today

Sounds like you have a bigger problem than deciding where to vacation, or whether you really need a piano.

As you know (I hope), marriage involves compromise and communication. Perhaps it might be prudent to arrange for a weekend getaway where the two of you will have the opportunity to discuss your short and long term futures and arrive at some shared goals.

You say that you "have no idea" why your wife wants a baby grand, and that her desire is "silly". Frankly, that sort of approach isn't likely to lead to anything but resentment.

Does your wife know how to play the piano? If not, explore whether she intends to learn (perhaps a long-cherished secret dream?). Don't just assume that she wants a mega-expensive decoration for your living room (BTW, it is possible to rent baby grands, if she wants it for entertaining at home or something like that).

If it turns out that she doesn't want to play the piano, and indeed simply wants it for looks, personally I agree with you that it's awfully pricey for a mere ornament. But she is not entirely wrong to say that she earns her share of the total income and should be free to spend (some of) it on things that she wishes, without fear of judgment or criticism from you. In that case, probably the best that you can do is to get her to agree to a budget whereby fixed amounts are allocated for normal living costs, savings/investments, and you each get a certain regular amount to [-]waste[/-] spend on whimsical hobbies, activities or purchases.

 

[megacorp-firee]

Monday I went out with the firm intention of blowing the whole thing. I shopped for eight hours, until I was exhausted and my car was full. I bought things I have wanted for 40 years, and things that just appealed to me on an impulse. I bought clothes, lots of pillows just "because", a spice rack, baskets, a new doormat, and basically everything under the sun. Total bill: $287, so I still have $1112 left. I think I will give up and slink off to invest it, instead. How embarrassing. Until now I always thought there was so much I would buy, if I just had the money.

W2R, you sound like you are terminally frugal.

IMO FI is a very personal thing. In my case, I 'lucked into' it. My goal was not a portfolio dollar amount, it was 30 years @ megacorp. By the time I got there, I had a buffer. So now FI means having a buffer. With that buffer, I now give myself permission to indulge myself on occassion.

An observation;, it seems to me that you are running on 'auto-pilot'. After years of frugal habits, it is hard to go on a spree.

A suggestion: run you numbers with your inheritance... see what you would have at age 100 using reasonable assumptions. If it is a big number ... and you don't plan on leaving a 'ton' to your dogs or something like that, then it may give you the confidence level to 'up your spending'.
You need to give yourself permission to go wild. You may want to do it slowly ... i.e. you can't go cold turkey and spend $2K in one day on 'fun stuff' , if you don't normally spend that much in a year on fun stuff.

Enjoy

 

[Rambler]

Never been on a $10k trip paid for by myself, but have been on numerous $10k trips (more than I can count using all fingers and toes) but they were megacorp mandates, not vacations. The four walls of the hotel, and the four walls of the meeting rooms get old fast. What has been nice though is that I have been able to take DW on a few of these over the years (at the company's invitation and on the company's dime) and stop in Paris or somewhere on the way (on our dime), just for a couple of days. Once we FIRE, there will probably be ONE $10k vacation, probably even more like $20k, to visit multiple cities in Europe, with a longish stay in London. But, as Walt34 mentioned, you can buy a really nice travel trailer for a few thousand (ones I have my eyes on are about 13-16k), and see a lot of places for slightly more cost in gas than without the trailer. (By the way, Walt, your mention of luminol and blacklight kinda grossed me out, since I have to stay in hotels all the time...too much information.....).

I could never buy a $10k watch, even though I have drooled over them in Geneva. DW says I should get one, but if I am going to spend that kind of money I would rather spend it on a used car for the kids, or a travel trailer.

But yes, it all comes down to understanding well, within yourself and within your your marraige/family, what you want to do and when you want to do it, and BALANCING those priorities. Some people are better or more skilled at understanding the concept of balance than others. I know too many people who want FIRE, but they also want the bimmer, and the 10k watch, and the 10 vacation each year, and, and, and....

FIRE is like most things in life, you can't have your cake and eat it too...!!! Eat it now, or save it for later...eventually it gets et!

R

 

[W2R]

W2R, you sound like you are terminally frugal.

IMO FI is a very personal thing. In my case, I 'lucked into' it. My goal was not a portfolio dollar amount, it was 30 years @ megacorp. By the time I got there, I had a buffer. So now FI means having a buffer. With that buffer, I now give myself permission to indulge myself on occassion.

An observation;, it seems to me that you are running on 'auto-pilot'. After years of frugal habits, it is hard to go on a spree.

A suggestion: run you numbers with your inheritance... see what you would have at age 100 using reasonable assumptions. If it is a big number ... and you don't plan on leaving a 'ton' to your dogs or something like that, then it may give you the confidence level to 'up your spending'.
You need to give yourself permission to go wild. You may want to do it slowly ... i.e. you can't go cold turkey and spend $2K in one day on 'fun stuff' , if you don't normally spend that much in a year on fun stuff.

Enjoy

Thanks. You are right about the years of habits. I ran the numbers and I would have a ridiculously large amount at age 100 using conservative assumptions. You are SO right - - if I am going to increase my spending, I have to do this slowly and ease into it, for so many reasons. But, Monday's shopping spree was at least a good start. I am sure I will get better at this with practice.