when is it ok to spend?

[Sojourner]

A perennial conundrum for many FIRE folks, myself included. Here are a few recent discussions on this topic.

http://www.early-retirement.org/forums/f29/learning-to-spend-after-years-of-saving-86419.html?highlight=frugality
http://www.early-retirement.org/forums/f27/does-frugal-living-ever-change-in-retirement-95673.html?highlight=frugality
http://www.early-retirement.org/forums/f29/cant-stop-savers-mentality-88444.html?highlight=frugality

My personal experience is that it's quite hard to go from a lifetime of frugality and an extreme saver's mentality to a more liberal, worry-free spender's mentality. I'm trying, and getting a little better year by year, but it's a slow process. Seeing my NW increase substantially over the past few years has helped a lot.

 

[Lsbcal]

...
My personal experience is that it's quite hard to go from a lifetime of frugality and an extreme saver's mentality to a more liberal, worry-free spender's mentality. I'm trying, and getting a little better year by year, but it's a slow process. Seeing my NW increase substantially over the past few years has helped a lot.

Care to share any specific instances on where you have moved from frugality to more liberal spending? I think this would help a lot of others see the light.

 

[T-Minus]

Year 1 in retirement was a continuation of pre-retirement frugality...just not with income. All financial planners and retirement tools had said I was good-to-go (i.e. 100%) 2 years earlier, but I consider them all wild and reckless! So I went OMY to further pad the safety margins, and another OMY to buy my dream car, buy my wife a horse, plan our downsizing and relocation, and to plump-up the travel and hobby accounts.

This year (Year 2), we loosened up our spending a bit, and have budgeted 10% more total spend. Yes, it feels like we’re living large, but we’ve only barely cracked a 3% WR. New things we’re spending on include a Spotify family subscription, a gym membership, higher quality food and dining out, and a gardener that comes monthly.

Next year (Year 3), the plan is to bump the total budget up by another 10%. Maybe like others, we’ll fly “up front” or rent a VRBO for a summer month by a beach somewhere...

We did intentionally shift our focus from buying things to buying experiences though... So, you can shift a little at a time, not all at once.

 

[audreyh1]

Well it's like being a kid and having a cool toy. Here it is on my wrist:

It looks cool in a sporty sense which is just right for me.
Lots of ways to customize it and you can see my current choices.
I can receive calls while driving since our car doesn't have Bluetooth (too old).
I can call if I get injured out in the boondocks while running (peace of mind).
I can get very accurate walking/running stats since I'm a data junky.
I can see my activity levels (lower right on the pic) for the day. Includes standing up enough, exercise, moving calories.
When out for a run I can easily see pace and heart rate.
I use it with the reminder app "Due" to get notices of upcoming appointments or things to do.

etc., etc.

Cool!

That reminder app is also really useful for shopping lists. DH and I share lists which makes it super handy as is checking off the list on your wrist when out shopping. And you can tell Siri ti put something on any of the lists.

 

[Sojourner]

Care to share any specific instances on where you have moved from frugality to more liberal spending? I think this would help a lot of others see the light.

The main one that comes to mind is spending more than the absolute minimum on flights, hotels, and AirBnb rentals. I've realized that comfortable travel and lodging is very important to me, and since I am spending far less overall than FIRECalc says I can, I have loosened the purse strings in these areas. For example, I'll book a flight that leaves at 10:30am as opposed to 7:30am even though it may be $30-$40 more, because I loathe getting up at 5:00am to rush to the airport. I'll also spend more to rent a comfy, secluded, highly-rated AirBnb apartment instead of settling for a 2-star hotel/motel room that is likely to be noisier, shabbier, and possibly dirtier.

One other category that comes to mind is wine. I'm much more likely to spend $20, semi-regularly, on a really good bottle of "reserva" Tempranillo than I used to be. As the saying goes, life's too short to drink cheap wine, and since my budget easily allows for it, I'm getting more comfortable paying for (and truly enjoying) the good stuff.

 

[YVRRocketSurgery]

Not retired yet. My personal plan is to build up enough of a nest egg to allow for a fat fire above our minimum goals that would also act as a buffer should we need to cut costs. Currently in our working years, we're not tracking towards a budget. Our incomes are generally high enough against our typical annual spend that we can just track and analyze our spend.

In retirement, I don't think our core spending philosophy will change; which is to try to spend thoughtfully on things we will appreciate, enjoy, make us more efficient, etc. However, we'll likely splurge a bit more. The extent of our splurges will be dictated from a combo of how well our nest egg did the previous year and a more holistic view of how well it's doing against where we are in life (age, health, etc). I expect to track/budget to an annual top end spend. And while I accept the max is going to fluctuate, the hope is that most/all of the variability is the tranche above what we would consider our base spend.

 

[jollystomper]

For us it has become a little easier once we started executing my retirement plan and the results were better than expected. .We expected in the first year to spend a certain amount form our cash, as I had projected that my pension would cover our basic regular spending and the cash would be for mainly "fun" things. 10 months later it looks like we will spend just over a third of the cash what I had projected this year, even after spending more on items like vacation travel/lodging and more "toys" for our major hobbies. My pension plus reduced expenses in certain areas due to retiring actually meant in several months we still had a positive cash flow. Seeing that makes it more comfortable to spend.

The biggest challenge now is (a) having the desire to get a "splurge" item - hesitation not out of frugality but just not really wanting the item, and (b) ensuring that a "splurge" item will not increase our work to keep/maintain the item, and/or add to household clutter.

 

[jimandthom]

We live in a 1900-- 3 story that we are renovating for our declining years.

Many tasks that we have been hiring out, we would have done ourselves even just a few years ago. We are reasonably competent on many of these things.

Not in any order, but we decide what to hire out based on

--- time is more valuable than money since we both retired and
--- potential for body aches the next morning

The last one is increasingly the most used reason.

 

[sengsational]

For example, I'll book a flight that leaves at 10:30am as opposed to 7:30am even though it may be $30-$40 more, because I loathe getting up at 5:00am to rush to the airport.

Same here. I still haven't managed to spend the typical 5X to get just a wider seat, but I just bought my most expensive airline tickets ever to get lay-flat seats for a trans-Atlantic.

...life's too short to drink cheap wine, and since my budget easily allows for it, I'm getting more comfortable paying for (and truly enjoying) the good stuff.

Or beer. I mostly only drink compelling beer nowadays.


Continuing the examples of blowing a bit more dough: Books. If I saw a book that I thought I'd like and it wasn't at the library, I'd often just forget it. Now I just buy the dang thing.

 

[jebmke]

We "learned" how to loosen up the purse strings by giving money away.

 

[Lsbcal]

...
Continuing the examples of blowing a bit more dough: Books. If I saw a book that I thought I'd like and it wasn't at the library, I'd often just forget it. Now I just buy the dang thing.

I just get in line and put a library hold on books. But if we are going on a trip I might just buy it Amazon for the Kindle app. If the book is a reference I'll quite often buy it.

 

[HadEnuff]

When the perceived value of what you are buying exceeds the perceived value of the money you are spending.

 

[HI Bill]

What's your age now, and how far are you from collecting a pension and/or SS?

In the FIRECALC, I've been using a 4.7% withdrawal rate. The risk with that is that 17 to 20 years from date of first distribution, I run out of $. But SS kicks in at year 17. If I make it to year 17 with no serious degredation of the accumulation, then the freedom to spend will open up quite a bit. If you want to spend as much as you can probably spend safely annually, use VPW to guide you. That way, you can spend everything, but it does result in an increasing distribution % with time, assuming the markets don't encounter a really bad sequence of returns.

 

[chilkoot]

Once I’ve made the decision to buy something I’ll shop around, at least a little bit, just out of force of habit. Sometimes it’s just a matter of checking Amazon.

But when it’s a case of “Can I afford this or not?” I usually just say to myself “I’ve saved for 50 years. It won’t break the bank. If not now, when?”

 

[mortal]

I use 3% as my 'planning' SWR. As of this year, I can support my current lifestyle at a 3% SWR. I'm not planning on retiring until I can support myself at the median household income, so I've got about a decade left to retire, but in the meantime I'll increase my spending in line with a 3% SWR. The way I figure it, if my retirement fails at a 4% SWR, it's my problem. If it fails at 3%? It's the world's problem

 

[ER Eddie]

Subscribed. This is something I'll have to figure out, too, pretty soon.

I'll share a brief personal anecdote. In 2013, I was in the hospital and almost died as a result of a minor surgery that went majorly wrong. During that process, I had a "bright light" (not NDE) experience and what I consider to be a message from a higher plain of existence. The basic message was "Stop being such a tightwad. Stop hoarding money. Spend more freely. Enjoy your money." It seemed like an odd message to get from the spiritual realm (you'd expect something more along the lines of "give your money away" or "focus on other things besides money"), but that's what I got. "Loosen up the purse strings. Don't worry about money so much. Spend freely, enjoy it. That's what it's there for."

Maybe that is just a personal revelation that was meant for me, and others won't relate, but it stuck with me. I can't say that my frugal nature turned on a dime (so to speak), but I'm considerably freer with my spending than I was before that.

 

[Ronstar]

As I get older, I'm shedding my frugal ways. As one gets older, it becomes ok to spend. Isn't that the purpose of saving for almost all of our lives?

 

[Lsbcal]

Subscribed. This is something I'll have to figure out, too, pretty soon.

I'll share a brief personal anecdote. In 2013, I was in the hospital and almost died as a result of a minor surgery that went majorly wrong. During that process, I had a "bright light" (not NDE) experience and what I consider to be a message from a higher plain of existence. The basic message was "Stop being such a tightwad. Stop hoarding money. Spend more freely. Enjoy your money." It seemed like an odd message to get from the spiritual realm (you'd expect something more along the lines of "give your money away" or "focus on other things besides money"), but that's what I got. "Loosen up the purse strings. Don't worry about money so much. Spend freely, enjoy it. That's what it's there for."

Maybe that is just a personal revelation that was meant for me, and others won't relate, but it stuck with me. I can't say that my frugal nature turned on a dime (so to speak), but I'm considerably freer with my spending than I was before that.

Odd messages from higher plains. Sounds almost poetic. I’d go with it.

 

[38Chevy454]

It's a good question, as so much of our working life we were focused on accumulating. Then once over the transition to withdrawal mode it takes a different mindset than we are accustomed to. For me it has been tough since I did several things right after retiring that spent a lot of money:
1) Sold house and moved cross country 1500 miles.
2) Bought new construction house with big detached garage.
3) Put in-ground pool in back yard.
4) Installed all landscaping around house and detached garage.
5) Put up back yard fencing (730 ft, that was lot of work).
6) Performed lot of work adding electrical, air lines, building mezzanine, installing car lifts, and finishing out inside detached garage.
7) Many small projects for new house like changing light fixtures, adding shelves, custom window blinds (wow, they add up quick!), and just setting it up for living.


All of the above cost money and it was a big chunk, but I knew it was coming and had it planned in. Still was tough to overcome the reluctance to withdraw those large amounts. Several hundred here, few thousand there, pretty soon it adds up to real money. The best part though being retired is that I could do most of the work myself saving quite a bit vs hiring out the work. So even though I was spending a lot, I was also minimizing the expenditures quite a bit.


Being an engineer, it is easy for me to understand the logical part and see the math and how the numbers work out. What caused the biggest adjustment for me is the emotional part of the transition form accumulating to withdrawing. Fortunately the market has done well since retiring, so that has helped a lot with seeing the numbers stay higher.

 

[tmitchell]

Fortunately the market has done well since retiring, so that has helped a lot with seeing the numbers stay higher.

Yeah this still keeps me up at night. I know we can't time the market, but it just seems inevitable a correction is looming. I will be very curious to see how everyone fares emotionally in the next downturn. I was just getting started investing in 2008 but I remember thinking I was doomed.

 

[RobbieB]

Me thinks you are doomed if you don't invest -

 

[audreyh1]

Once I’ve made the decision to buy something I’ll shop around, at least a little bit, just out of force of habit. Sometimes it’s just a matter of checking Amazon.

But when it’s a case of “Can I afford this or not?” I usually just say to myself “I’ve saved for 50 years. It won’t break the bank. If not now, when?”

Even though we spend more and are willing to pay up for quality, we always shop around for the best deal once we identify what merits a purchase.

Just because one is spending more, it doesn't mean you're not still looking for good deals.

 

[RobbieB]

I no longer look for good deals.

I do wait for them. The lobster and wagyu guys are always sending me "incentives" in the email.

 

[Lsbcal]

Even though we spend more and are willing to pay up for quality, we always shop around for the best deal once we identify what merits a purchase.

Just because one is spending more, it doesn't mean you're not still looking for good deals.

Exactly my sentiments too.

 

[Koolau]

Now that I have several years under my FIRE belt, I've learned to loosen the purse strings some - maybe not as much as we could afford, but a lot looser than when we first FIREd. Still, at the back of my mind are the potential black swans. If, for instance DW and I BOTH ended up in $100K/year "homes", our savings could be wiped out quickly. So, I suppose we either die penniless (black swan mode) or "rich" because we were too careful. Hoping for the latter, but YMMV.