Having what I would classify as a fairly aggressive retirement plan, much of my money is focused to achieving this goal. I would say that most of the time I weigh the opportunity cost of making a purchase against either the time it took me to make that money, or what else I could use this finite resource on.
This kind of overthinking on any kind of purchase decision drives my wife completely nuts. When we first got together, I would start talking about a purchase, research it for a week or so, get excited about it, explain the benefits to my life that this new thing would make…then promptly decide I didn’t really need it anymore. The over-analyzing (I think) has helped me avoid becoming a hoarder, because I, like most people, enjoy a good deal on stuff. Things like useless kitchen gadgets or appliances would be stacked up like cord-wood in my kitchen if I had bought every “cool” thing that I’ve had my eye on (although I still ended up with a graveyard of stuff that I feel bad throwing out once in a while).
Next week, my wife and I are going on a very non-retirement-friendly trip to Mexico. Besides the money being spent, the volume of food and drinks I will more than likely consume while away is probably double what I would normally partake in. Couple the trip with the Christmas parties I have been taking part in, and plan to attend when I get back, and I’m going to be until the end of January before I fit into my pants.
These kind of large expenditures allow my wife and I to better prioritize our finances. I think that having a “side” goal that is relatively inexpensive (and results in a considerable amount of short-term fun) allows for a lot more buy-in for both of us. We have this extensively planned long-term goal of retiring in about a decade, but there are things that my wife and I enjoy doing (trips are more of my wife’s thing) that make the long-term goal more feasible to get to.
Part of the reason that we decided on a retirement age of 45, compared to say 40, was that after reviewing the savings rate necessary to retire at 40, we could see that there would be very little flexibility in our spending – it would essentially result us in being 100% focused on retirement and forgetting about any trips, or large (probably unnecessary) purchases. The 5-year buffer was built in on purpose in order match our priorities.
How do you decide your “fun” expenditures if you’re saving for early retirement? Do you focus entirely on your retirement goals, or do you mix in some of these larger expenditures?