When/how do you splurge?

[doneat54]

Giving lots of thought to financial management post retire (77 more working days....). I have always had this idea of managing an income stream and a budget that includes modest vacations, travel and dining out, something we put a very high value on. But than had this idea if the portfolio grows beyond what I would call a robust rate, then I would allow us to skim the cream off and go blow some money on some other travel or whatever, while we are still young. On top of that, I have a hobby business that produces very sporadic but sometimes good income, and that money has always been "gravy" (ie.: not earmarked for anything in the budget); and on top of that, I will probably actually collect unemployment in 2017 as I am technically getting laid off at the end of the year.... So I am thinking of pushing all of this to a slush fund that I can spend from guilt-free.

Wondering if/how others allow themselves a "When the $$ is there, spend it!" fund. We are thrifty and frugal, but we also have no problem living and spending when there is bonus cash popping up.

Does anyone track the portfolio growth and allow themselves to splurge when it grows beyond some established number?

 

[LOL!]

I go for experiences, but with no hassles. So if there is a concert, play, or performance or event that I want to see, then I get front row tickets, fly there, have a driver pick me up at the airport, go to dinner, then the concert, and a nice hotel, then fly home the next day after a great breakfast.

 

[ExFlyBoy5]

For me, it's one good trip a year. We travel fairly often anyway, but once a year, we go all out. Business class flying, the best food we can find and usually rent a house instead of staying in a hotel. I think with our next trip like this, we are going to get a chef for a few of the meals. It's definitely a splurge for me!

 

[doneat54]

Thanks, but for this thread I was more curious as to how folks funded the splurges, if they skimmed a fast growing portfolio, etc. Or when do you allow yourself to splurge??

 

[ExFlyBoy5]

Thanks, but for this thread I was more curious as to how folks funded the splurges, if they skimmed a fast growing portfolio, etc. Or when do you allow yourself to splurge??

Ah, gotcha...my bad. Ours is dictated by dividend returns and "left over" funds from the maintenance budget for our primary home/rental property. So far, even with the splurge, there tends to be left over money in that "fund". It's somewhat entertaining to me that I figured that in retirement, my nest egg wouldn't grow very much, but we have been "lucky" in that it's growing MUCH faster than I thought it would.

We have been giving thought to selling the rental property (it has appreciated considerably over the last 4 years) and then using the proceeds to fund these splurges, BUT...the ROI on the house is currently about 8%, so I am having an internal debate if I want to "get out" while it's so good or risk a RE bubble. Sorry....a little off topic...back to your normally scheduled program!

 

[gauss]

Giving lots of thought to financial management post retire (77 more working days....). I have always had this idea of managing an income stream and a budget that includes modest vacations, travel and dining out, something we put a very high value on. But than had this idea if the portfolio grows beyond what I would call a robust rate, then I would allow us to skim the cream off and go blow some money on some other travel or whatever, while we are still young. On top of that, I have a hobby business that produces very sporadic but sometimes good income, and that money has always been "gravy" (ie.: not earmarked for anything in the budget); and on top of that, I will probably actually collect unemployment in 2017 as I am technically getting laid off at the end of the year.... So I am thinking of pushing all of this to a slush fund that I can spend from guilt-free.

Wondering if/how others allow themselves a "When the $$ is there, spend it!" fund. We are thrifty and frugal, but we also have no problem living and spending when there is bonus cash popping up.

Does anyone track the portfolio growth and allow themselves to splurge when it grows beyond some established number?

The main differences between my approach to financial management Pre vs Post retirement are as follows:

- Pre-Retirement I was more of a risk taker. Margin/Futures etc..etc. The thinking was that if I lost too much I could always earn it back. On the plus sign I could shorten my time until ER.

- Post-Retirement I knew that this now had to stop. I moved everything into index funds and let the market do its thing. I actually moved into Balanced index funds so that I would no longer need to fret when some event was pending -- my funds were rebalancing themselves daily and I no longer needed to track them closely. This gave me much emotional relief. I had basically won the game (ie ER'd) and just need to live my life now. No longer trying to maximize returns.

-gauss

p.s. To answer your direct question while working I logged my expenses for decades and always spent what I wanted with the caveat that I knew that any extra spending would push out ER. When my income streams exceeded my unconstrained spending I knew that I had enough and pulled the plug when the circumstances were right. I suspect I will continue the same unconstrained spending in retirement but realizing that an excess spending could reduce my plan's robustness. Bottom line is that I track but do not necessarily budget on a continuing basis.

 

[Rustic23]

"When the $$ is there, spend it!"

What does this mean? If your income is largely from a portfolio of some sort, how do you know the excess $$ are there?

I believe, may be a miss-belief, that the 4% rule is base on some performance of the market over time. FireCalc for instance shows me there are times when I would have come real close to 0 and others when I would have flourish. i.e. I may have a lot of surplus funds this year, but next year my portfolio could be cut in half. So the excess of one year is the protection for another. When is excess, excess?

Now if you excess comes from money budgeted from this years income and not spent, that would be easier. My example there is, I budget $$ for appliance replacement. I now have enough saved to replace all the appliances plus inflation. So those dollars budgeted each year are surplus.

 

[FIREd]

This how we decided to manage our guilt-free splurges:

We set up three savings accounts, one for DW, one for me, and one joint. The individual savings accounts are used to fund individual splurges (hobbies, shopping, etc...) while the joint account is used for big things like travel and home improvement projects. The money in those accounts has no other purpose than to be spent on fun stuff, so we have no guilt spending it.

All three accounts are funded monthly using whatever is left after paying the bills. It is split between the 3 accounts (25% going to each individual account and 50% going to the joint account). If we do get extra income (not generated by our investments) , it is split the same way between the 3 accounts.

But I do not cash in on investments (beyond my allowed WR) to fund those accounts which are reserved for frivolous spending. The only situation where I might skim off the portfolio (exceed our max allowed WR) is if we are hit with a huge medical or home repair bill. We save for medical expenses and home repairs on an ongoing basis and our savings should be adequate to handle most situations, but maybe not all situations...

 

[RobbieB]

I love to splurge and do it regularly. No guilt whatsoever. Don't even think about it, not worried. Getting a nice monthly statement makes me especially to eager to order up some exotic food off the internet. And some nice wine to go with it.

More worried about leaving a big unspent "stash-o-cash" that I could have had fun with.

 

[kcowan]

Yes I think you need to budget for splurges with your SWR. When you actually take them then become moot. You might feel better dipping into that pool during a good year but it is immaterial. You could eat into it through dining and entertainment as easily as taking a trip.

 

[scrabbler1]

Because I build into my budget a surplus, or cushion, to allow for small, unforeseen expenses, I sometimes use that money to splurge on things. It might be a small spending spree on gifts or going out to eat a few extra times, or to travel once in a while.

 

[W2R]

I do like I did before retirement. I mentally set aside unspent income, it piles up, and then eventually I might spend it (like I did last year when I bought my dream house). Of course, in a bull market there is more left over because my WR is a percent of my portfolio value on 12/31 of the previous year. My portfolio is bigger so my withdrawal is bigger too and there is more to set aside.

Sorry if this is not clear but I tried; I'm in a rush at the moment.

 

[2017ish]

Yes I think you need to budget for splurges with your SWR. When you actually take them then become moot. You might feel better dipping into that pool during a good year but it is immaterial. You could eat into it through dining and entertainment as easily as taking a trip.

I do like I did before retirement. I mentally set aside unspent income, it piles up, and then eventually I might spend it (like I did last year when I bought my dream house). Of course, in a bull market there is more left over because my WR is a percent of my portfolio value on 12/31 of the previous year. My portfolio is bigger so my withdrawal is bigger too and there is more to set aside.

...

We are still in planning stage, but this is what we will do. With a constant percentage withdrawal rate, we will be in a position to spend more on discretionary items when the portfolio is up--in exchange for which we'll have to cut back on discretionary when it is down. Granted, we have a very large share of discretionary built in at the baseline, which makes it easier.

 

[doneat54]

This how we decided to manage our guilt-free splurges:

We set up three savings accounts, one for DW, one for me, and one joint. The individual savings accounts are used to fund individual splurges (hobbies, shopping, etc...) while the joint account is used for big things like travel and home improvement projects. The money in those accounts has no other purpose than to be spent on fun stuff, so we have no guilt spending it.

All three accounts are funded monthly using whatever is left after paying the bills. It is split between the 3 accounts (25% going to each individual account and 50% going to the joint account). If we do get extra income (not generated by our investments) , it is split the same way between the 3 accounts.

But I do not cash in on investments (beyond my allowed WR) to fund those accounts which are reserved for frivolous spending. The only situation where I might skim off the portfolio (exceed our max allowed WR) is if we are hit with a huge medical or home repair bill. We save for medical expenses and home repairs on an ongoing basis and our savings should be adequate to handle most situations, but maybe not all situations...

I like that!!

 

[Sunset]

Haven't done it yet, although last year I had no trouble spending ~30K on a new vehicle.
We spend below our SWR, so I'm just planning a splurge as simply we do something we want to do, and pay for it. No special pile of $$ to use.

 

[RunningBum]

No special accounts. I use a variable percentage withdrawal method, so I have a budget amount for the year. If I'm spending less than that, I'm more willing to splurge a bit. At the end of the year I recalculate what I can spend next year, so if I've had good investment returns, the benefit is spread over many years. I like this better than saying I can splurge on the excess, because the next year might be a down year and I might regret splurging and having to cut back on other things more essential to me.


Another thing to watch for is to not get carried away with splurges if I've had a clean year on major repairs or replacements of things like cars. Those expenses will come up at some point and likely put me over budget, so I like to stay under budget other years.


Sometimes I think it would be good to have an account for every day expenses, an account for large irregular expenses, and an account for extras so I could better monitor these things, but that may be overthinking it. Mostly I'm happy to have a good buffer and not have rich tastes, so I don't worry too much.

 

[DrRoy]

I do not have a special account or formal system, but I am comfortably FI, and will RE in 7 mo. For a couple years we have been spending much more on travel and other experiences, like concerts. I always comes from income that is beyond what we need for regular expenses and saving.

 

[eta2020]

We always splurged on nice red wine and good quality food and we always split one bottle in the evening which comes to arround 7k a year on wine.

Otherwise we are quite frugal given our level of income.

 

[2017ish]

We always splurged on nice red wine and good quality food and we always split one bottle in the evening which comes to arround 7k a year on wine.

...

Splurge? Nah, necessity of life at our house. (Envy that 7K a year on wine, we have good intentions, but DW has inched along up the pinot curve and the cellar is constantly needing to be fed....)

 

[eta2020]

Splurge? Nah, necessity of life at our house. (Envy that 7K a year on wine, we have good intentions, but DW has inched along up the pinot curve and the cellar is constantly needing to be fed....)

You could make a good friend

 

[bclover]

Vacations and spending money are in my budget just like any other bill. I love to eat out, enjoyed it before I retired so I knew that had to be part of my monthly expenses.
I admit to loving expensive bags and footwear but it's not something I do often. I treated myself to a Channel bag 5 years ago for my 50th. That was it. So I don't stress about splurging on one every 7 or 8 years

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[Ronstar]

I splurge somewhat on woodworking tools/supplies and photography stuff, and starting to splurge a little on exploration to get to photography hot spots. If spending is above budget, it's always in these areas.


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[brett]

We splurge on travel. Usually two overseas trips per year, two-three months per trip.

 

[RunningBum]

We splurge on travel. Usually two overseas trips per year, two-three months per trip.

So, you only splurge half the year, huh? Good for you!

 

[grasshopper]

Our regular expenses that maybe include a week or 2 somewhere is just part of the 2/3's of our available SWR. This year with our Galapagos/Machu Picchu trip is the first year in 10 years of retirement that we spent all of our SWR.