When you start saving towards an early retirement, you understand that your net worth will steady increase, but I don’t think many of us consider what that changes in your life.
The first most obvious change becomes the ability to self insure on more minor things. You don’t buy the extended warranty because if something stops working you can just buy a new one. Then later on when you have even more saved you can raise your home insurance deductible since you can handle even larger costs.
While those did cross my mind, I didn’t realize another insurance adjustment you can make down the road is having less life insurance. After all life insurance is about replacing lost income and when you have a large amount of money saved you really don’t need to replace as much income. So right now I’m in the process of reducing our life insurance coverage by half. We previously had $500,000 each for coverage, but that is becoming obviously overkill with the steady increase in our investment net worth.
Yet the most profound change of a growing net worth I have noticed is the ability of increased choice. Money ceases to be a major barrier to your decision making process, the question of ‘can I afford this’ isn’t relevant to many discussions. Instead your questions turn to: do I want this? Will this be a good value for my money? If there another choice I would prefer to do instead?
More money also allows for more opportunities in your life. For example, a real estate deal comes up that is attractive, if you have enough money to invest you can potentially take on something that otherwise would be out of reach.
There is also a dark side to having more choice, your ability to put up with bullshit and crappy situations goes down hill since you know you can walk away from many more of them. For example, for most people walking away from your job after a crappy week isn’t a valid option, since you have bills and a mortgage to pay and usually not enough savings for a long period of not working. Yet when you have several years of living expenses saved up, the situation changes and you can walk away. Then I find I have to take a break from the situation and determine if the issue is temporary and if I can cope with it. Or if the situation is more permanent in nature how to get around it or determine a threshold at which I won’t put up with it anymore. I once spent six months in a really crappy job situation and it was too long as I was become someone I didn’t like. So now I have a much shorter fuse.
Overall I find having more choice just causes me to think more about my options. So while that can be a good thing, it can also result in over thinking about some situations. So what do you enjoy most about your increasing net worth? Or what is the worst part of it?