Posted by Dave on December 3, 2013
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?
Posted by Dave on November 26, 2013
I had a really good time during my University years. I ate a lot of food, drank a lot of beer and other beverages and did a lot of sitting around, perfecting useless moves on Tony Hawk video games for the PlayStation. As a result of this kind of lifestyle, I was able to wear fairly large pants by the time I graduated. Around the time I was finishing school, I played in a 3 on 3 hockey tournament, taking part in 3 or 4 games over the day. By that evening, I was so worn out I was physically ill – it felt like I had been in a car crash – not just skated around in circles in a tournament that didn’t even require shoulder pads (non-contact).
I decided after my hockey experience that as much fun as it was to eat 4 full meals in a day (who doesn’t like second breakfast?) along with a late night snack of Chinese Food or 800 calorie pita wraps after drinking “all” of the beer, there was a downside – mostly the not being able to breathe after walking up a flight of stairs.
I read a lot of diet and fitness books, started moving around and lifting heavy things. It turned out that once I changed everything I was previously doing, I was able to get into much better shape. I could now move around for an extended period of time without feeling like I wanted to die (I still got very sweaty though, apparently there’s no stopping that).
Around the same time period, I was changing my finances around as well. I moved from a time when I was spending student loans on very non-school related items, to paying them off and saving enough to pay cash for a fairly nice car. Looking back, I would have preferred to have bought a car for about half the price and have had that money invested for a decade, but I’m glad I didn’t continue on with my “spendy” ways.
I keep my finances in order, to the point that I will hopefully be able to achieve financial independence by age 45 for the same reason why I stay in shape – in case I want to do something. That “something” may be an 8 km walk after staying out past the last bus and still having to get home at 1:30 in the morning. Or that “something” could be a lesser-paying career that is interesting or fulfilling at some point in the future.
Maybe that moment will never come, but I prefer to be prepared, rather than having that feeling I did about 10 years ago of wanting to do something and it making me sick.
Do you have a “Something” that keeps you motivated?
Posted by Tim Stobbs on November 22, 2013
I have to admit I’m a bit confused by people that ask me “How can you live on so little?” I think it comes out of the fact that I don’t really see it as a challenge, I’ve been living this way for years and I’m happy. Doing it now is so easy for me I really don’t get what the big deal is. Lots of people live on about $35,000/year. It is not that hard.
I suppose the real question is: how do you not spend it all when you could? Ah, now that is a good question. For example, one of my greatest weaknesses is historic houses….I LOVE THEM. The hardwood floors, the detailed molding, stained glass and all the other little details…case in point a house like this is like house porn to me. Yet the house I just linked to is listed for $997,000. Yet here is the funny thing…I know I could buy that house if I want. How? I own a property worth ~$400,000. If you sell that and with my income I could get a bank to give me a nearly $600,000 mortgage to buy that house.
So you might think I’m excited by that idea, which I am a little bit. Yet I can also see the other side of this situation. If I did own that house it would a upkeep and spending black hole. You need the cool furniture to match the house, so that is some more money. Cleaning the thing would be a horrible event, which I would likely then contract out for more money. I also know property taxes and heating the damn thing would consume even more cash. In the end, yes I could have my dream but the rest of my life would suck in order to do it, since I would have to work another 25 years just to pay for it, so what would be the point?
In summary, I can see both sides of most of my dreams and realize that just about every dream you have also comes with some tarnish that goes with the shine. Most people are blinded by the shine and don’t notice the tarnish until after they own it. I can usually spend some time realistically assessing my dream and can see most of the tarnish prior to doing it. Everything has its downsides as well as positives. You are the one that has to assess what a dream is worth to you.
This may come across as a very negative way to think about things, but I rather think it is injecting some reality into a internal debate. Also people tend to overrate the impact of their dream purchases, heck I even fall victim to it once in a while. So next time you are looking at a temptation, pull a Janus and look at both side at once. Your future self will thank you.