Greater LBYM inspired by falling market?

[W2R]

Several of us have said that when markets fall, we plan to spend less than our usual SWR during a thriving market. I know that during 2008-2009, I wanted to spend less than I had been spending.

Are you starting to feel that way, yet? I am already thinking of putting off some furniture purchases, and I haven't browsed on Amazon even once since that first drop last week. We seem to be gravitating towards less expensive restaurants, and I am starting to turn the thermostat up when I can bear it. None of this is actually necessary, but it almost seems instinctual when faced with a falling market.

 

[Spanky]

It's a little late for us. We have already booked our flights and hotels for a trip to Seattle and Vancouver. We may refrain from spending too much there.

 

[FIREd]

We did cut expenses by 10-15% in 2008. And for the past few weeks, again, I have not been in a mood to spend money. I definitely feel like we should be hunkering down.

 

[kumquat]

I'll start to consider it when our SWR is > 4%. Who knows, the market can rise as fast as it falls.

Meanwhile, I'll just convert some cash to dividends. I've never owned a stock that cut it's dividend, but there's always a first time.

 

[crispus]

We have been spending less on groceries. We buy hamburger and hot dogs, make omelets for dinner once a week, lots of salads, and local produce. I am considering giving up cigars (about $100 per month). No trips planned for the next 6 months. Still keeping our $125 per month cell plan and $165 cable/phone/Internet plan for now.

 

[Purron]

Yes, DH and I do plan to tighten our belts a bit. Not putting on the tin foil hats but do want to be a bit more cautious given recent events.

 

[JmfromTx]

I'm not making any changes at this time. I already live below my means and my budget includes a very small amount of savings each month. If things keep going south I won't hesitate to cut back. I'm watching and waiting for now.

 

[clifp]

The short answer is yes. Any six figure down days get my attention.

I had planned on making offers for two rental properties in Las Vegas. I suspect I am only going to make one offer since I am not comfortable borrowing money in this environment.

Second I was toying with getting a new/newer car next year. Mine is 9 years old and certainly shows it age, but is running ok. That thought is now postponed for at least a year.

You multiply changes of mind like I have by many million of investors and it has a real impact on the economy. This in turn impacts also affects corporate earning. Lower earning also impacts corporation ability to payout dividends (although thankfully most corporations with the possible exceptions of banks have strong balance sheets).

Having lived through several dividend cuts in 08/09 I am not anxious to repeat the process. Dividend cuts bother me more than 600 point days. This is in turn will cause me do some belt tighting and like you it is instinctive.

The self fullfilling prophecy is the truly scary part of a a bear market.

 

[Moemg]

It's a little late for us. We have already booked our flights and hotels for a trip to Seattle and Vancouver. We may refrain from spending too much there.

We saved a lot of money on our trip to Vancouver in May by using Entertainment online . It is $4.95 a month and gives you access to the discounts for all the cities .We got two for one tour tickets and admission to several attractions plus two for one at some restaurants including the one in our hotel . Vancouver was beautiful .

 

[MasterBlaster]

LBYM ispired by falling markets is just the "wealth effect" in reverse. This is a well known phenomenon.

Wealth effect - Wikipedia, the free encyclopedia

» What is the Wealth Effect?

 

[FreeAtLast]

Since I am only Semi-Retired and still have a paycheck I do plan to continue spending on things that I want to get done before full retirement. I just had a dental implant done today. i also had a $1500 auto repair bill.

I will buy if I can get a great deal for my money. I may not take that vacation that I was going to take after Labor Day. I will go to a friends wedding in October.

I guess you are correct. I am watching the cash outflow more carefully. No drastic cuts yet.

 

[bbbamI]

Greater LBYM inspired by falling market?

Yes....I'm taking $1k instead of $2k for a spur-of-the-moment night of gambling.

 

[KingB]

We had plans for some home improvement projects (hardwood and ceramic flooring, etc.) over a 3 year period. In case things get worse than I anticipated, DW and I agreed to defer these expenses until things improve.

If many people are thinking the same way, I guess this will cause some ripple effect as less money will be injected into the economy, more unemployment, ....

 

[ziggy29]

Not really -- I make sure we set $X aside every month for savings and investments. If we do that I'm happy. Crappy economic times add concern for sure, but I think we've found a balance between too much living for today and depriving ourselves for a future there's no guarantee we'll see.

Plus, I haven't invested "new money" in my IRAs for a year now, so we have a lot of cash to start using. I have some of my accounts on autopilot but not these yet. Thus we have a lot of underinvested accounts that I'm thinking I need to start gradually working into being invested.

 

[haha]

Having lived through several dividend cuts in 08/09 I am not anxious to repeat the process. Dividend cuts bother me more than 600 point days. This is in turn will cause me do some belt tighting and like you it is instinctive.

I agree here. I had minimal div cuts in the last recession, and overall my portfolio income increased, as increases outweighed the few cuts there were.

I have 2 out of 15 holdings that may have soft dividends- WY (a REIT), which I bought for the trees, not the dividend, but they are not earning it so it may disappear. WY is quite leveraged to homebuilding. I would imagine a REIT with no dividend will hit the skids fast, so I'll just buy some more- though I would prefer to buy it all cheap rather than just some of it.

Also I have an oil and gas MLP that has no debt, but does not pay a fixed dividend. The payment is just a passthrough of royalties received in the previous quarter +1. If we get into a recession, NG prices will surely lose more ground, thugh they are low enough already! Anyway, this dividend floats up and down, but in the many years I have owned it it has never been missed totally.

Ha

 

[Meadbh]

Greater LBYM inspired by falling market?

Yes....I'm taking $1k instead of $2k for a spur-of-the-moment night of gambling.

Wow. I had a spur-of-the-moment night of gambling about a year ago. My limit was $50. I guess I'm cheap!

 

[Spanky]

We saved a lot of money on our trip to Vancouver in May by using Entertainment online . It is $4.95 a month and gives you access to the discounts for all the cities .We got two for one tour tickets and admission to several attractions plus two for one at some restaurants including the one in our hotel . Vancouver was beautiful .

I will check it out.

 

[bbbamI]

Wow. I had a spur-of-the-moment night of gambling about a year ago. My limit was $50. I guess I'm cheap!

Ahhhh....maybe...maybe not. Could be you just enjoy spending your money in other ways.

 

[ERD50]

No way.

We've had dips like this about five times in the last five years. We haven't recovered to the levels we had after the 2007 drop - does that mean I would be depriving myself for the past 3.5 years?

I plan on a fairly conservative average WR. The whole point to the FIRECALC runs is to show how a portfolio would perform through these kinds of ups and downs with a steady, inflation adjusted withdraw. Seems awful early to decide this dip is different.

If you are planning on a > 4% average WR, I guess I could understand. That may well need a variable spending model.

-ERD50

 

[Telly]

No change. I was DIY & LBYM before early retirement, and remain so after. It never included re-using saran wrap, nor washing out tin foil, so won't start now

What I will do is pay more attention to the market daily (what a drag on my karma) so if it drops to my lower rebalance point, that I increase my equities holding. Back in March or so of 2009, I missed it, my Equities allocation went 5 percentage points below my low-end trigger and I didn't know it, didn't realize it till days later, an opportunity missed.

 

[SteveR]

We are still struggling with the shop expenses but we did scale back on the renovation and I did all the lighting purchases (no shipping and no tax and no middle man to take a 10% cut); I also did the installation of nearly 200 feet of track lighting.

We repainted but fixed rather than replace the floor. That saved us $6000 right there. The parts cost me $100 and it took me 8 hours to replace a 200 sq. ft. floor section.

We are cutting back on sales; may seem counter-intuitive but she has already had many sales in the past several months and we are already operating very close margins so no major sales for a while to see if we can pay off the shop upgrade expenses.

On the home front, I am doing more and more plumbing and electrical and mechanical parts replacement rather than hire it out. As long as I can find parts I am OK. We have a Wolf steamer that requires an authorized repair center to supply the parts so that is on hold for a while.

We have also cut back on charitable donations and are doing more volunteer time rather than $$$ right now. We have also dropped a number of charities and adopted only local ones that we know personally.

We are backing off on travel of any kind. We have taken no vacation trips this year and have none planned. Family visits for short periods yes but no fun trips for a while. The motorhome is parked to avoid fuel cost and insurance is scaled back while it sits.

No significant home purchases, minor clothing replacements only and no new cars or new toys of any kind. My car is 11 year old with over 100k on it already. DWs car is a 2007 and should last another 7 if she can keep from playing bumper cars with it for a while.

Our investments are a mix of security types but we are still pretty heavy in equities to fund our living expenses for the long haul so most of our nest egg is designed for use 20 years from now so I don't sweat that too much right now; just the close in cash flow stuff and will be coming from equity sales in the near future.

We are prepared to hunker down more if insanity prevails in the markets and the world. We are looking at melting down some gold jewelry we don't need to raise some capital.

 

[easysurfer]

Down market or no down market, ever sinced FIRE'd been practicing LBYM pretty much all my life (out of habit).

But yes, probably will LBYM even more. Over the last week, been thinking alot about do I hire someone to do handyman more or not. Decided to do that on my own, now will surely try that. (Already took down old ceiling fan, put one up. Tommorrow, looking to replace old faucet, and fix leaking garbage disposal). By not hiring someone, probably saved several hundred dollars.

 

[old woman]

I plan to keep working past my goal of 65 now. I had reached 110% of my savings goal with 2 years to go so I had a great cushion. Now I will work the two years to medicare plus what it takes to recover my investments.

I bought pretty much all new top of the line appliances on Sunday but lost about 50k Monday plus 55K the last couple of weeks. I am usually pretty cheap but all new appliances were mostly needed and why cheap out on something that will last long term and make the house look nicer when I sell to retire?

Working 3 more years instead of 2 more years will make up for many spending splurges as long as I am still very careful on day to day things.

 

[kumquat]

It never included re-using saran wrap, nor washing out tin foil, so won't start now

Don't tell us you use new stuff for hats? How LBYM is that? The rest of us re-cycle.

 

[Alan]

Several of us have said that when markets fall, we plan to spend less than our usual SWR during a thriving market. I know that during 2008-2009, I wanted to spend less than I had been spending.

Are you starting to feel that way, yet? I am already thinking of putting off some furniture purchases, and I haven't browsed on Amazon even once since that first drop last week. We seem to be gravitating towards less expensive restaurants, and I am starting to turn the thermostat up when I can bear it. None of this is actually necessary, but it almost seems instinctual when faced with a falling market.

Although the markets have fallen heavily our savings are still up on the year (as of 8/9). If the savings take a big hit and the WR gets up to >3% then yes, we'll cut back.