How do you decide you've saved enough?

[spitting_llama]

Hello everyone. I've been lurking for some time now, and have been considering my financial situation a lot lately. Since very few of my friends will talk about saving (you know, big house, 35k for a car, best clothes, vacations twice a year), I thought I would ask the opinions of complete strangers on an internet message board.

A little backgroud: I'm 32, single, and have around $475,000 in cash, MF, and stocks. Growing at 8% , that would be worth $4.1M at age 60 if I stopped saving now. I'm saving around 30% of my gross income each year and have a mortgage, but that is my only debt.

That being said, I also feel like I've been missing out a little on life up to this point, since I have been a saver. Should I ease up a little on the saving and start enjoying life a little? Not completely eliminating saving, but cut back to 15% gross income, and maybe go on a vacation or buy a new (to me) car. How do you make that decision?

 

[Buckeye]

Depends on what age at which you want to retire and at what spending level.

 

[firewhen]

I think you have already answered the question in that if you feel the need to ask it, you probably feel a lacking. Enjoy yourself! You are already at a half million at a young age. As you said, you can still save, even half as much, so the portfolio will continue to increase.

It also is not an irreversible decision. Spend some more this year, and see how you feel. If you feel more complete, continue to do so each year. If you regret the spending at the end of the year, you can always throttle back some.

The only reason I would not do the above, would be if you wanted to ER as early as possible. You do not mention that as a concern, so it probably is not. We all need to balance enjoying today with saving for tomorrow.

Believe me, this advice is coming from a fellow avid saver, so I do not give it lightly. Unfortunately for me, almost no amount is enough, but I think we still do enough fun things to not feel deprived.

 

[Patrick]

Plan for tomorrow but live for today. Time for a vacation.

"Sha-la La-la-la-la Live for today..." the Grass Roots

 

[virginia]

You definitely need to retain more to use for yourself now. If you feel like you're doing without - at this point, there is no sense in that.

I think it's worth it to be frugal so that you can start to enjoy life later. You've really done that already. I'm thinking that at a SWR of 4%, at 4.1 million you will be living off of far more than you do now - I say enjoy it. Life is too short to have the means and deny yourself just to do it.

And that's coming from one of the most frugal people ever-

 

[Financial Jungle Guy]

28 years is a long time to wait for retirement when you already have half a million. How about semi-retirement within the next 10 years? Enough time to build a million dollar portoflio to yield around $30,000 worth of dividends. That should cover your essential expenses, and income from semi-retirement is just play money.

 

[CyclingInvestor]

I made my decisions based on wanting to be able to be FI as
quickly as possible, because early on in my career a number of
my coworkers were laid off (aerospace programming) and had
serious trouble getting new jobs. I did not want to be in that
position myself. This did not mean denying myself the things I
wanted, but I decided to make the things I wanted inexpensive.

When 4% of my investment $$ was equal to my annual spending,
I considered myself FI, but I did not retire because my job was
going along very smoothly.

Two years later in 2006, the dividends (2.5%) on my investment $$
were more than enough to live on when my working conditions went
from excellent to crappy. That is when I decided I had enough,
and retired. Being able to do so at 48 when i needed to made the
earlier sacrafices worthwhile.

 

[chinaco]

Using 4% SWR of the portfolio as a general guideline against expected general expenses. But also considering other factors and income streams like health care expenses, age, time to SS, Medicare, etc...

 

[Helen]

spitting_llama,

You could certainly cut back on the savings for a while and catch up on your personal needs.

I've had to do that this year to put some money into my house. Had I not done this it would have cost me a lot more money in the long run.

At your age, there are probably a lot of things that could improve the quality of your life. For me, as I age, there is less and less I want in the form of materialism.

You are way ahead of the game, good going on saving so much at such an early age !

 

[Rich_by_the_Bay]

It's too complicated a question for any stranger to answer for you, since we don't know your lifestyle expectations, financial obligations and a hundred other factors. But you still need some kind of ballpark rules of thumb to get you on track.

The one I always found most useful is to estimate what annual expenses (today's dollars) you think you will need in retirement, including health insurance, after taxes. Multiply that by 25 and you have a conservative starting point.

Sit down with FIRECALC and run as many credible scenarios as you can think of. You'll find that a consistent range of current savings seems to emerge.

 

[TromboneAl]

Another variable is how much you like or dislike your job.

Another possible useful piece of advice: Look at expenditures on a case-by-case basis. Would I rather buy this car, or retire 8 months earlier? Is it worth it to go to the movie theater for $15 versus get a DVD from the library for free and make popcorn at home.

IOW, it doesn't have to be an all-or-none decision on spending.

 

[Mwsinron]

"How do you decide you've saved enough?"


When my nest egg will generate enough to meet my yearly expenses. Along with X amount of cushion I feel comfortable with. We plan on the more conservative side of things.

I guess it comes down too how long do you want to take for FIRE.

 

[Nords]

Should I ease up a little on the saving and start enjoying life a little? Not completely eliminating saving, but cut back to 15% gross income, and maybe go on a vacation or buy a new (to me) car. How do you make that decision?

It sounds like you already know you've slipped over the frugal line into deprivation!

T-Al's nailed it. Ask yourself if the object or experience you're spending the money on is worth your hourly rate.

Once you have your LBYM skills you can loosen the reins once in a while and live it up a little. You can always clamp back down if it's necessary but you'll probably find it's "easier" (more satisfying) to LBYM than it is to throw money around.

Spouse had an interesting observation the other day: "It's going to take as much time & effort to get rid of this ER portfolio as it took us to put it together!"

 

[dex]

you've been given some good answers - one word

Balance

 

[spitting_llama]

Thanks for the replies everyone. I have no idea what FIRECalc is, but it sounds like a lot of you rely on it quite a bit. Maybe I'll go check it out.

I think another factor is the fact that I'm an actuary. I'm sure you all know how tight actuaries can be, so that is part of the reason I'm "money-wise". I really enjoy the people I work with, but am so-so on the actual job. While it can be challenging at times, which I need, a lot of the time it is very repetitive.

I agree I need to find a balance, but my life up to this point has been solely trying to further my career. Exams, overtime, special projects, they're all done so I can move up the proverbial ladder. I'm now at a point where I feel like I've worked hard, but now it's time to play a little. But I also want to retire early (how early, I don't know), buy a motorhome, and follow my favorite college football team. Choices, choices.

Dex, you're right, it's all about balance. Guess I'll have to figure that out.

 

[Khan]

Thanks for the replies everyone. I have no idea what FIRECalc is, but it sounds like a lot of you rely on it quite a bit. Maybe I'll go check it out.

A calculator.

Extreme lower left corner of the page.

 

[citrine]

If you feel that you are missing out....then you are being too frugal.
The best words of wisdom that I have ever received:

The joy is in the journey.

There is a set amount that I save and invest....the rest I use for things that make me feel fulfilled and happy.....and make some donations to make the world a better place.

 

[MasterBlaster]

The one I always found most useful is to estimate what annual expenses (today's dollars) you think you will need in retirement, including health insurance, after taxes. Multiply that by 25 and you have a conservative starting point.

That's not quite right, you need to estimate your annual expenses, including health care AND taxes then multiplty that amount by 25. The difference being that any taxes due must be paid out of the portfolio and portfolio earnings.

 

[Arc]

Hello everyone. I've been lurking for some time now, and have been considering my financial situation a lot lately. Since very few of my friends will talk about saving (you know, big house, 35k for a car, best clothes, vacations twice a year), I thought I would ask the opinions of complete strangers on an internet message board.

A little backgroud: I'm 32, single, and have around $475,000 in cash, MF, and stocks. Growing at 8% , that would be worth $4.1M at age 60 if I stopped saving now. I'm saving around 30% of my gross income each year and have a mortgage, but that is my only debt.

That being said, I also feel like I've been missing out a little on life up to this point, since I have been a saver. Should I ease up a little on the saving and start enjoying life a little? Not completely eliminating saving, but cut back to 15% gross income, and maybe go on a vacation or buy a new (to me) car. How do you make that decision?

Yes

 

[Fireup2020]

Yes.

Welcome.

Ditto to Citrine's post. Carpe Diem - but not at your financial goals' expense!

 

[pj86]

That being said, I also feel like I've been missing out a little on life up to this point

A significant other might be the cheapest solution to enjoy your life more. At your age, I can imagine your friends are getting married, get children, ... maybe you want that more than you admit here?

On the other hand, after a divorce this might turn out to be your most expensive form of pleasure ever. But still, it might be worth it.

 

[goosecat]

Money is not just useful for material things or events, it allows you to buy free time (e.g., ER or partial retirement) and for many people that is more valuable than almost anything they could buy.

So if you are concerned about oversaving, just think in terms of how much you are "spending" to buy free time.

 

[bow-tie]

Money is not just useful for material things or events, it allows you to buy free time (e.g., ER or partial retirement) and for many people that is more valuable than almost anything they could buy...

Amen to that.

 

[accountingsucks]

Money is not just useful for material things or events, it allows you to buy free time (e.g., ER or partial retirement) and for many people that is more valuable than almost anything they could buy.

So if you are concerned about oversaving, just think in terms of how much you are "spending" to buy free time.

Agreed...I am very frugal, to the point that some crticize my saving habits and I'm told that I am too concerned about money. It's the exact opposite...I don't care about money, I just care about getting to what I consider freedom (out of the corporate BS grind) as soon as possible.

 

[bots2019]

Agreed...I am very frugal, to the point that some crticize my saving habits and I'm told that I am too concerned about money. It's the exact opposite...I don't care about money, I just care about getting to what I consider freedom (out of the corporate BS grind) as soon as possible.

This is exactly how I feel...