Maybe I’m Just Overpaid?

My wife and I had an interesting conversation the other day, which I thought was an applicable topic for a post here.

The gist of the conversation was – what would we do with the money we are currently using to achieve financial independence, if our income was cut significantly?

We are currently saving somewhere around 65% of our take-home pay, at this time making extra mortgage payments to get our house paid off as quickly as possible. Eventually, this money will be funneled to investment accounts, building our asset base outside of real estate, with the intention of having enough cashflow from investments to sustain our lifestyle – which would allow an exit from the workforce, or at least much less need to work.

So, what if we used the money being spent on our house and retirement savings and just blew it all?

We tried to think about what we would spend all this money on. The amount of excess dollars would be over 10 times the amount we spend on “variable” (usually fun) stuff in a month. We could pay with cash for a new car every few months. We could go on a pretty fun trip once a month, instead of going away once every 18 months or so that we do now.

If we did spend the excess, we would probably just end up with more stuff than we need or really wanted, just to have – we would be like kids who get spoiled at Christmas – too many toys to even enjoy any of them. Like the kids, we’d probably end up back with our favourite activities, which don’t cost very much to do and have sustained us to this point.

My wife and I having more money could probably be compared with most people finding cheap credit, which they see as almost “free” money. Home Equity Lines of credit or introductory credit card offers allow people to think they have way more money than they actually do. Most people I’ve seen in these type of situations don’t use that money wisely, and end up in worse shape than if they had just lived “smaller”.

Part of the reason saving for early retirement works for us is that we don’t have a ton of “wants”. Saving a significant portion of our income isn’t forcing us to make hard financial decisions, and having a low demand for “wants” in retirement will allow us to live fairly cheaply (the other obvious fact is that combined we make a considerable amount of money relative to our lifestyle). I think if I had an expensive hobby (say something car related), early retirement would be much more of a inconvenience and I probably wouldn’t stick to it.

Do you feel like you’re giving up stuff in order to work towards early retirement? Is savings a chore for you?

8 thoughts on “Maybe I’m Just Overpaid?”

  1. Dave, my wife and I daydream about what our live might look like if we spent all of our income, instead of stuffing it into the ER/FI fund, much like you are doing.

    But at the end of the day, our daydreams about what our life would be without mandatory employment are much more exciting. We will still have enough saved to do everything we want…. the lifestyle which makes us happy is a naturally inexpensive one – lots of outdoor hobbies etc….

  2. Saving is a chore, and if you want to make the saving happen a lot faster, look at increasing the income side of things, the same way you look at decreasing the expense side, and things will be put into perspective a lot better.

    My short term goal is to make enough through investments / real estate etc, to have my wife stay home with the children. Should be a doable goal within the next two years. Then it will be working on getting me to make enough for me to do the same.

    ER is definitely on my plate, and it is only 9.5 years away or less. 🙂

  3. I’m only saving about 50% of my take-home pay, but I want to eventually work my way up to 65% like you 😀 I’d rather spend any excess savings now, but early retirement means more to me 🙂 I thought your house was already paid off according to your latest investment update post.

  4. Every time I pick up the mail or dog sit for a vacationing friend I feel that I am missing out and it is frequently frustrating.

    I am very worried that I won’t be alive or healthy enough to do anything when I get to retirement and that I should be doing more now. I work in health care and see far to many people who don’t make it to the end of their working lives and I don’t want to give up too much to save. I also don’t want to have to work longer because I have spent too much now.

    I haven’t figured out what the right balance of saving and living for now is.

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