How do you decide on ER vs buying/spending?

[Caoineag]

Definitely a concept set on an individual level.

For me, I am still learning to balance. I am a spender that has frugal moments.

I don't own a car, can't justify the expense when mass transit is so much cheaper and can rent a car on the weekend if I really need one (I can do this twice a month and still have it be much cheaper than a car but rarely exceed one weekend every 2 or 3 months). Yet, I have saltwater aquariums (initial expense is massive but upkeep is low), love to travel (cheaply, managed a 1 1/2 week vacation to Scotland for 4 people and we didn't spend more than 5k which was a once in a lifetime thing), and love to eat out (but have definitely cut back to only $100 per month).

I think the part that I am really frugal on is upkeep, the cost of maintaining our lifestyle fits on my paycheck (2 people no kids) and I am rapidly becoming the low earning spouse.

I believe in enjoying life on the way because I have no guarantee I will live to enjoy my savings but I do not want to have to count on work being there for forever. Balance is really key to me because in my family you either live forever or die young and you won't know until its too late to change your spending strategy.

 

[CuppaJoe]

....I decided to spend my entire $1395....

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.

LOL, W2R, I see myself here, love your last line. I allowed myself $3,000.00 to blow recently, but didn't exhaust myself at the mall, just went on-line: I gained a long-awaited laptop, digital camera and printer, all compatible, an e-book with compatible light and enough memory cards and batteries to last five years. Got manuals for the laptop with the credit card rewards certificates. I'm not as precise at bookkeeping as you are but I think I still have $200 left over.

 

[W2R]

LOL, W2R, I see myself here, love your last line. I allowed myself $3,000.00 to blow recently, but didn't exhaust myself at the mall, just went on-line: I gained a long-awaited laptop, digital camera and printer, all compatible, an e-book with compatible light and enough memory cards and batteries to last five years. Got manuals for the laptop with the credit card rewards certificates. I'm not as precise at bookkeeping as you are but I think I still have $200 left over.

You did better than I did! but then, I already have a laptop, digital camera, and printer, and although the camera and printer are old, I am happy with them. I don't have the e-book reader, but I used to read them on my pocket PC and found that that grew old for me after a few months.

I'd love a treadmill, but it would be one more thing to move to Missouri in a couple of years, or to have to sell, and I have no idea where I would put one - - they take a lot of space.

 

[Marquette]

Shoot,

The next two lenses I want to buy are $1,600 and $6,000 respectively. Heck, the next camera I want, if I felt I could justify it, is not cheap either (and, if I really wanted to blow money, the one I really really want is over $6k).

I haven't even bothered pricing out lighting and backdrops for playing around with studio shots...

You guys just need more expensive hobbies.

 

[CuppaJoe]

Shoot,

The next two lenses I want to buy are $1,600 and $6,000 respectively. Heck, the next camera I want, if I felt I could justify it, is not cheap either (and, if I really wanted to blow money, the one I really really want is over $6k).

I haven't even bothered pricing out lighting and backdrops for playing around with studio shots...

You guys just need more expensive hobbies.

That's hilarious! My dad was a photographer and my fave photo is of him shivering in the cold with his tri-pod and Speed Graphic. But mercifully because of my so-so income, high housing expenses and hopes for (somewhat) early R, I am uninformed. Never had much skill at buying stuff.

 

[W2R]

Never had much skill at buying stuff.

Yep - - I, too, am an amateur at blowing money and have much to learn!

 

[Marquette]

That's hilarious! My dad was a photographer and my fave photo is of him shivering in the cold with his tri-pod and Speed Graphic. But mercifully because of my so-so income, high housing expenses and hopes for (somewhat) early R, I am uninformed. Never had much skill at buying stuff.

As a mediocre amateur, I do at least have half a brain to not just go and buy willy-nilly. Of course, if I just got one more lens then I'm sure my pictures would be much, much better . In fantasy land, though, I'd be $50k in the hole in no time

 

[W2R]

As a mediocre amateur, I do at least have half a brain to not just go and buy willy-nilly. Of course, if I just got one more lens then I'm sure my pictures would be much, much better . In fantasy land, though, I'd be $50k in the hole in no time

Goodness. I have seen houses online for less than that, that would be perfectly habitable in a pinch.

P.S. - - my digital camera is one of those old Sony cameras that record on a floppy disk. But hey, it works, and my old desktop computer has a floppy drive.

 

[Marquette]

Goodness. I have seen houses online for less than that, that would be perfectly habitable in a pinch.

Just throw a tarp over the tripod.O0

 

[brewer12345]

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....

That is the approach we took. Bear in mind, this is coming from me after an excruciatingly hard day and a lot of strong beer, but:

TANSTAAFL. Either you scrimp a lot while you are young and then slack off a bit, or you smooth things out and retire later. If you are married and have kids, the former choice makes paying for the kids easier, but it runs the risk of depriving you of doing all the frivolous things you won't have time for after the kids arrive (then again, if you are working and going to grad school at night and pursuing professional designations on the side like we were, you will think that having an hour of free time is a fantastic, priceless luxury). If you choose the latter, it makes things a little dicier later on, but maybe you get to enjoy life some more.

But always remember that you could be hit by a bus tomorrow, and all your plans for the future could be silly/worthless/foolish.

 

[megacorp-firee]

LOL, W2R, I see myself here, love your last line. I allowed myself $3,000.00 to blow recently, but didn't exhaust myself at the mall, just went on-line: I gained a long-awaited laptop, digital camera and printer, all compatible, an e-book with compatible light and enough memory cards and batteries to last five years. Got manuals for the laptop with the credit card rewards certificates. I'm not as precise at bookkeeping as you are but I think I still have $200 left over.

Hey Cuppa... that close enough in in my book.... I'd take the 'change' and get me a nice bottle of JW Blue and some pate and cavier and put a mark in the win column.

 

[CuppaJoe]

Hey Cuppa... that close enough in in my book.... I'd take the 'change' and get me a nice bottle of JW Blue and some pate and cavier and put a mark in the win column.

I'll drink to that. I'd like to have you and Marquette as my personal shoppers! Marquette to remind me to dream bigger and you for celebration ideas. It's both reluctant shopper joins the Digital Age and a new stage of R planning. Cheers!

 

[FinanceDude]

That is the approach we took. Bear in mind, this is coming from me after an excruciatingly hard day and a lot of strong beer, but:

TANSTAAFL. Either you scrimp a lot while you are young and then slack off a bit, or you smooth things out and retire later. If you are married and have kids, the former choice makes paying for the kids easier, but it runs the risk of depriving you of doing all the frivolous things you won't have time for after the kids arrive (then again, if you are working and going to grad school at night and pursuing professional designations on the side like we were, you will think that having an hour of free time is a fantastic, priceless luxury). If you choose the latter, it makes things a little dicier later on, but maybe you get to enjoy life some more.

But always remember that you could be hit by a bus tomorrow, and all your plans for the future could be silly/worthless/foolish.

Ever notice how good HOMEMADE beer makes one so cogent??

 

[Urchina]

When trying to answer this question for myself, I ask:
What would this outlay gain me if invested in my FIRE account?

So, $10,000 put into an investment account and withdrawn at 4% a year is --- $400/year. In perpetuity.

Okay, that doesn't sound like a lot, but it pays my phone bills every month for the rest of my life.

Since one of our goals is to have our basic living expenses covered with passive income, that $10,000 suddenly becomes pretty important to me. So then I sit down and balance the potential generated income against the $10,000 outlay now. And sometimes I take that trip, but sometimes I bank the cash.

I tend to spend the money if:
1. It gives us time with friends and family (many of whom are aging -- we've missed some opportunities to visit folks that we've later regretted sorely).

2. It costs us money NOT to buy it. (For example, we always have money for bulk food purchases, because we cook so much from scratch and this lessens our tendency to "go out."

3. The long-term benefit will outweigh the potential income generated. (For example, owning my home is worth a lot to me, so spending money on our down payment / fixing up our home is something we budget for and do).

Good luck deciding!

 

[CCdaCE]

Short answer:

Set up automatic deductions to pay yourself first. Until it hurts. Then back off some. We saved over 20% (of gross, including match) a couple years ago (I'm 30 now). Now, we're down to around 15% of gross, as a result of not saving all of our pay raises.

I always think of adding more to retirement savings accounts, but, I figure we save enough, and I'd rather go on a fishing trip or something. Ahh, and then the car breaks down, or whatever. Time to replenish the emergency fund.

-CC

 

[Meadbh]

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, that's hilarious! You really must work harder at spending money!



When I came into a $1m (almost) inheritance, the only splurging I did was to upgrade my hotel room to the concierge floor the next time I went on a business trip. I probably spent more than you did

 

[GoodWife]

Everytime we spend a large amount of money on a single item, we ask ourselves whether the purchase is worth delaying ER for. We just spend on what matters to US and diligently save the rest. It's a question of balance, choices and priorities.

My DH and I are not impulse buyers of anything. However, we do now and again purchase big ticket items (vacations, new car, etc.) after much consideration. Last year we bought a second home, which we figured could delay ER by a couple of years (from around 50 to 53 instead). However, having this place to get together with family and friends WHILE working toward RE was important to both of us. ER is 10 years away and we want to enjoy life now too, not just 10 years from now. I like your bottom line -- "ask yourself whether the purchase is worth delaying ER for". Sometimes it is, sometimes it isn't.

For us, we don't buy the little things so we can enjoy, and truly appreciate, the big things when we really want them.

 

[Milton]

Beware the gazingus pin!

Good post, Goodwife.

Here's a suggestion: things are rarely worth postponing ER for, while experiences might be.

For example, I might be willing to push back retirement a few months if it meant that I can take the trip-of-a-lifetime African safari (or wherever); but I wouldn't delay 10 minutes just to have a fancier car, house, or set of clothes.

Of course, some things facilitate desireable experiences. Your second home will enable family get-togethers. A motor home or small airplane might be good for travel. Owning cross-country skiis might be cheaper than renting. A stereo system can stimulate entertainment and relaxation. It's easy to think of other examples.

But purchasing chattels or real property mostly for 'pride of ownership' seems to make little sense. Like the saying goes, you can't take it with you. Also, there are all the hassles of ownership to contend with, too (e.g., cost of insurance, storage and maintenance; 'clutter' factor; guilt regarding environmental footprint; etc.).

 

[innova]

I've always believed that if you aren't saving at least 10-15% for the future, you're living beyond your means. I think the math is there to back that up.

I'm willing to trade 'crap I don't need' now for 'comfortable life later'. Its a matter of perspective. I don't feel that I'm suffering for it, except when family / friends comment on all the stuff that people in my income bracket have that I don't have.

The one area where I may be disappointing my wife is the lack of travel, although that stems more from our common lack of planning skills than a money issue.

I find I get a lot more joy out of watching assets grow, knowing I will have many options in my 40s and 50s that most folks will not. I still have my indulgences, I just realize that money is a limited resource and I have to prioritize my wants/needs... In some ways I've countered my tendency to invest 40-50% of our gross income with a flexible job that is low stress - I don't feel that I'm on the corporate treadmill and slaving to get off it.. I know I can slash my investing rate in half at anytime and still be way ahead of where I thought I would have been at this age.

What I've noticed with my friends who aren't saving 10% (and some are saving negative amounts) is that they really feel the need to 'treat' the kids, vacations, buy nice cars. I shudder to think at what that string of cars, purchased new and dealer financed every 3-5 years will cost them in the long run. Makes my frugal, unexciting, nonsexy 1997 Saturn look a little better. Of course, these are the same people that had to upgrade to HDTV (early) and buy the store extended warranty as well...

My advice to the OP is to find that balance where you don't feel deprivation (or at least unhealthy deprivation that leads to destructive spending behavior) and focus on what you really value.. which doesn't always involve money (or things).

Value people and not things,
Use things and not people

 

[BunsGettingFirm]

Ever notice how good HOMEMADE beer makes one so cogent??

He's done with his CFA, so he can afford to fry his brain cells. I have save mine for pension accounting. Oh, the fun. It's no wonder that companies started to favor defined contribution plans because the mass suicides of pension accountants meant no one is able tell what is what. I really could use a nice glass of whiskey.

 

[Sarah in SC]

Actuaries drink? Perish the thought! I thought it was the golf that led to the suicides in pension accounting. No wait, I remember, those are the hedge fund auditors. No sense of humor there, at all!
I'm on the side of the fence that says pay for experiences, not stuff. The trip to Mongolia will cost more than both of the cars we drive and the pickup truck combined!

 

[Bigritchie]

I took the monk route.

I spent nothing for 10+ years working unless I had too. Lived a life of sacrifice.

Retired at 30. Very happy I did so.

Along the way I realized that all that "stuff" you would be blowing money on is worthless anyway.

Save now, goof off later. be disciplined. And yes I travel and goof off now. If you have to justify a purchase you probably do not need it anyway.

 

[Khan]

I took the monk route.

I spent nothing for 10+ years working unless I had too. Lived a life of sacrifice.

Retired at 30. Very happy I did so.

Along the way I realized that all that "stuff" you would be blowing money on is worthless anyway.

Save now, goof off later. be disciplined. And yes I travel and goof off now. If you have to justify a purchase you probably do not need it anyway.

I wish I had come to that conclusion before I was 50.

 

[Midpack]

Yep - - I, too, am an amateur at blowing money and have much to learn!

Hilarious to hear these stories. I started a stash many years ago, just squirelling away spare dollars with the intent I'd blow it on something frivolous one day. The stash is now over $6,000 and I've consciously tried to bring myself to spend it several times and blown $100 here or there, but it still builds far faster than I spend from it. It's a (blissful) disease, I've been incredibly fortunate in this life and I just don't want for anything...

 

[TromboneAl]

We're going to try to spend a lot of money on our upcoming trip to Hawaii, but being down $85,000 from the peak of the stock market is going to make that a little bit harder.

I suggested to DW that we bring the plastic lei from the dollar store, but no, she wants a real one.