Transitioning from saving to RE.

[Danmar]

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Originally Posted by Nords It's a tough transition if you've been averse to spending. In REWahoo's case, he had his eye on an RV or two, along with maintenance & repairs, and then gas prices jumped right up to help him spend his money. Our top two expenses over the last decade have been home improvement-- stamped-concrete sidewalks/lanai/driveway and a new familyroom. Both were eye-wateringly expensive but we knew they'd be necessary. We spent almost a decade planning & pricing both of them, but they've brought us tremendous enjoyment. Someday they'll bring our heir more resale value than they cost. Our #3 and #4 expenses have been our Priuses. Again both very spendy, not at all frugal, but totally worth the money in their utility & engineering. Otherwise... surfing is pretty cheap. Spouse and I run a thought experiment all the time: "Let's spend $10K!" and the answer is usually "What the heck for?" To make the transition from saving to spending, you have to figure out what brings you value. If you value travel, then think how you'll feel in 20-30 years if you haven't fulfilled your values... or if you're no longer able to enjoy it. Once you figure out what you value, then you can go about figuring out how to find the bargains that will make it enjoyable.

Good post. Each person's utility function will be unique. What one person thinks is a waste, another will think is a necessity. The real key is equating your utility to the available income. If you just can't spend the available income, think about giving some of it away. In our case we have no problem spending and giving it away,

[Chuckanut]

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Originally Posted by ocdokie I obsessively track every expenditure to be certain we're well below our self-imposed limit. When we were working, one of our joys was traveling in Europe for two weeks each year, but now, I hyperventilate even thinking about shelling out money for a trip. (What if we regret this expense later?) Our expenses for a typical trip were between $6K and $7K. DH wants to start traveling again while we're healthy enough to do it, and thinks we can spend about $10K per year on traveling. However, I can't seem to unstick myself from saying "no" to unnecessary expenses.

I think the suggestion to take a year's worth of 'spending' and put it into a separate account is a good one. That is what I am getting ready to do myself. I will withdraw a year's worth of money from my investments and deposit it into an account that is separate from all my other investments. I will instruct the mutual fund company to send me a check every month - just like a paycheck. I will use those funds to live on and 'save' part of it for fun things like travel.

Since you are already tracking your expenditures so closely, I am certain you can easily establish a budget and do this. Problem solved.

Who has the cartoon with the guy walking past the graveyard? The one that reminds us that time is more valuable than money.

[rescueme]

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Originally Posted by Chuckanut Who has the cartoon with the guy walking past the graveyard? The one that reminds us that time is more valuable than money.

Per your request (don't tell Nords - he thinks I post it much too often):

[PaddyMac]

We are 50/51 yrs and hoping to semiretire in 5 years and fully retire in 10. We got back yesterday from a trip to Europe that cost about $7K. There were many enjoyable moments, and since my family are all in Europe we have to go over fairly regularly (every two to three years or so depending on events). But we have come to realize that our favorite vacations are when we don't have to deal with airports (this trip was a litany of issues - we're still waiting on our luggage....).

We love to get in the car and drive thru the wide open spaces of the Southwest and enjoy the amazing scenery. I'm thinking of missing a few family parties in Europe the future as it's just so expensive there; we can get 3 times as much vacation time in the US and be far more relaxed when we return. As someone mentioned, you have to find your comfort point with spending on travel. A work in progress here...

[aida2003]

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Originally Posted by ocdokie W2R, I'm envious. I just can't seem to spend money happily. DH and I both retired in mid-2010 -- he at 59 and I at 52 -- and we haven't reached your worry-free level. According to FIRECALC, we allegedly can spend $100K per year for 40 years with 100% success. Even though our expenses, including taxes, have settled into about $50K annually (with the biggest by far being health insurance), I obsessively track every expenditure to be certain we're well below our self-imposed limit. When we were working, one of our joys was traveling in Europe for two weeks each year, but now, I hyperventilate even thinking about shelling out money for a trip. (What if we regret this expense later?) Our expenses for a typical trip were between $6K and $7K. DH wants to start traveling again while we're healthy enough to do it, and thinks we can spend about $10K per year on traveling. However, I can't seem to unstick myself from saying "no" to unnecessary expenses. I'd welcome any advice on how my fellow retirees balance the need to watch expenses with allowing yourselves some expensive "unnecessary" pleasures.

Believe me, you're not alone here. I'm not even close to your age, but I already worry in my mind once in a while. I don't focus on this topic yet, because who knows maybe we'll end up working until we're in our 60's, but I do have a nagging thought here and there about transitioning from employer's paycheck to our own. We like traveling in Europe but we also have to go there since we're both Europeans and our families reside there, but spending $10K+ (for 4 of us and no hotels or B&B's mostly) while we work is one thing, but I'll probably need a shrink's help in 20-30 years.
I think Nord is correct...we're averse to spending. Not sure it's good or bad.

[marko]

It IS a tough transition.

I got my head around it by tellining myself that the portfolio is making a lot more than I'm withdrawing so its sort of "spending a little of my income".

[Dog]

I agree with W2R. We are wired to save or "hoard" (DH accuses me of doing). Save this year for your trip in 2013. You will probably enjoy that you are saving for the trip and you know that it won't impact your 2013 spending. It's funny the games we have to play to let go of $$$.
Also, consider it an "investment" in your marriage.

[ocdokie]

Thanks for your ideas, everyone! I'm glad to see that I'm not the only one who has a "stuck point" or two while transitioning into retirement.

I'm definitely in the class of folks who will have to trick themselves into enjoying spending money on non-necessities like travel. (I already do this to an extent, because when we get a tax refund my reaction is, "Whee! Free money! Let's spend it!" That thought lasts only a few minutes, though; then my inner miser steps in and the money goes into savings.) So, as several of you have suggested, I'm going to try budgeting for travel, and actually setting money aside that I've "saved" for it. I also think it will be helpful for me to obsessively research travel bargains so I can feel as if I'm making the best use of our travel funds. That might not be so easy, because I've reached the age when the youth hostel option no longer appeals.

[tuixiu]

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Originally Posted by scrabbler1 I am up about 33% since I ERed in late 2008.

If you were able to look around at the economic wreckage with unknown conclusion in late 2008 and decide you could retire early, you timed the ER pitch perfectly and knocked it out of the park.

[heyyou]

Could the OP use behavioral tricks to save for travel by withdrawing just a little more than the usual expenses for a dozen months, thus saving for the big trip from monthly income?

DW and I save for the annual property tax bill using that method.

[foxfirev5]

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Originally Posted by heyyou Could the OP use behavioral tricks to save for travel by withdrawing just a little more than the usual expenses for a dozen months, thus saving for the big trip from monthly income? DW and I save for the annual property tax bill using that method.

In our preparation for retirement DW and I use a monthly HOA fee, auto fund and travel fund in separate accounts. Using the HOA funds to pay our annual taxes and insurance was the start to monthly budgeting.
Always having enough saved for the next car has been used for quite a while now. However, the travel fund may be a mental block.

One minor reason for delaying Er has been my reluctance to spend much cash for travel. Over the years I've been conditioned with the various travel perk programs to the point we spend about 3 weeks a year on low or no cost travel. At this point I'm at work and my Er'd DW is with me in a NYC suite that I never would use MY money to enjoy. I seriously think that while we enjoy travel I would have hard time parting with my retirement funds to hit the road.

Of course I may just be looking for an excuse not to ER

[traineeinvestor]

Quote:

Originally Posted by heyyou Could the OP use behavioral tricks to save for travel by withdrawing just a little more than the usual expenses for a dozen months, thus saving for the big trip from monthly income? DW and I save for the annual property tax bill using that method.

Behavioural tricks have thei place, but didn't work for me.

I put aside a bit of money each month for discretionary spending (aka vices). I keep telling myself that the money is there to be spent....the problem is that I just don't get around to spending it because, when I really think about something, I usually end up saying I don't need it or I'd end up feeling like I've wasted my money. It's been building up for years and I'm trying hard to convince myself that I should blow it all on something to celebrate FIREing next year.....the let's spend $10K thread had some good ideas: http://http://www.early-retirement.o...ml#post1226767

Plan B: simply let DW know. I'm sure the problem would go away shortly thereafter.