A Cure For Financial Hoarding And Over Saving

Balandra Bay, Mexico VacationAfter a year and a half of retirement life and speaking to dozens of early and traditional retirees, I’ve noticed one very alarming phenomenon.

Retired folks can’t stop saving money! When I ask fellow retirees what they are saving money for, they can’t come up with an answer. Saving money is an unbreakable habit that is robbing retirees of a maximum life of leisure.

I first began exploring the disease of saving money during retirement six months after I left Corporate America in Spring 2012. I already ran all the numbers under multiple different scenarios for months before I pulled the trigger. Yet there I was continuing to save 100% of my passive income streams and another 20-50% of my active income streams six months out.

Instead of living it up after receiving my severance check from 11 years of loyal service, I dumped the entire sum into the stock market in the summer of 2012. I didn’t even use a couple hundred dollars to go celebrate with a friend at a favorite steak house because I felt guilty leaving the workforce so early. The uncertainty of not having a bi-weekly paycheck after 13 years of consecutive work was also disconcerting despite all the planning.

From a financial perspective, investing the severance in 2012 turned out to be a good move because the markets are up 30%+ since. But from a living life perspective, the investment was suboptimal because I got nothing out of the severance except for a slightly higher feeling of financial security. Whenever money grows for too long a period of time without producing anything tangible, I always start thinking what the hell is the point and the spending itch returns.

I’d like to explore how prodigious savers can break our good financial habits in this article. Over saving may not be as serious as going into heavy consumer debt. However, going to the other extreme is not healthy either.

THE TRADITIONAL RETIREE THAT SPURRED ME TO WRITE THIS POST

After serving in the military and the foreign service for over 30 years, a close relative of mine has a lifetime pension that probably pays at least $90,000 a year. His house is paid off and he’s got no other debt. I’m thrilled he will be financially set for the rest of his life yet I’m worried that he’s been too cautious with his spending. Sure he could theoretically blow tens of thousands of dollars upgrading his house with new bathrooms and kitchens, but there’s no need for now.

I began poking at my relative for not spending more over dinner one day. I told him there was no need to save money for retirement since he was already in retirement. Furthermore, there was no need to save money to leave an inheritance since both his kids are well off. “Live it up a little!” I said in between bites at the early bird special local diner.

He and his wife love to go on cruises so I mentioned that instead of booking a 30 day inside cabin cruise with no window for $3,500 a person, go for the room with a balcony for $5,500! He brushed my suggestion away. “An inside cabin is good enough Sam! All we’re doing is sleeping anyway.” Ah, the indomitable responses of a frugal spender.

The reality is I’m projecting what I want for myself onto my relative. If being frugal makes him happy, then I’m happy for him to continue saving so much. What I’m actually not happy about is feeling like I’m not optimizing my money on living life to the fullest. I’ve spoken to many of you super savers who feel the same way.

DELAYING GRATIFICATION A LITTLE TOO LONG

It’s not cool to admit we have wants. The financial crisis taught us that being frugal is the responsible thing to do. But gosh darn it, I’ve got wants too that have been delayed for years! Here are some of my examples. Feel free to share some of your wants in the comments below.

* Car. Moose is now 13 years old with roughly 130,000 miles. I bought him for only $8,500 back in 2005 when he had 78,000 miles. Brand new he cost over $45,000! I love Moose but he’s got a lot of electrical problems as I’ve mentioned in the past. I’d like a new Range Rover Sport, but I feel guilty spending $75,000 cash on a car that I don’t need. I also considered buying a new Nissan Sentra for only $18,000 out the door, but also stopped short largely because I feel I’ll get sick of the car after a year.

Based on the comments about buying an SUV as a tax deduction for my business, I’m encouraged to “find happiness elsewhere” even though I’m primarily concerned about safety. I thought the tax deduction post would help spur me to finally upgrade, but instead, I feel as tightfisted as ever. I’ve made a decision on what to do which I’ll share in an upcoming post.

* Laptop. I run an online business for goodness sake and I still can’t get myself to upgrade to a new Macbook Pro Retina display 13″ laptop for $1,299! I’ve had my Macbook since 2007 and it works great after I installed another 2GB of RAM a couple years ago. The only problem is that it’s about a pound too heavy and a little thicker than desired compared to the new laptops.

Perhaps part of the reason why I don’t want to upgrade is because I know Apple products sell at such a huge premium to other comparable PCs. At the same time, I don’t want to buy a PC due to the Windows operating system and the plethora of bugs and hackers. All I have to do is wait one more year and Apple will come out with a thinner, faster, more powerful product. I’m also on strike because of how poorly Apple’s stock has done. It’s highly unlikely I’ll be upgrading for another year.

* Sunglasses. It’s literally always sunny here in California and a pair of sunglasses is a necessity. But after losing a pair of $215 pair Maui Jim’s last year, I decided to just buy a cheap $15 pair when I was in Hawaii this past Spring. They look fine and work well with polarized lenses, but the plastic is finally starting to fray. I like these pair of iodized plastic Prada shades for $270 after tax, but I feel absolutely stupid paying 18X more for shades that I might lose, so I don’t.

But what is $270 for an item that is used every single day and looks pretty good? Nothing, especially since I can lose thousands of dollars in the stock market on any given day. Guys don’t have many accessories, and I would hardly call a pair of $270 shades over indulgent compared to the money women spend on shoes, bags, and clothing. I ended up going to Sunglass Hut and buying me a pair. But I’m still thinking about whether to return the shades given it has an awesome 90 day return policy.

* Watches. I’ve been a watch collector ever since I bought my first Kinetic Seiko watch in Kobe, Japan 25 years ago. Now that I’m into diving I’ve been eyeing the latest Panerai Submersible watch. The PAM 502 is a beast that can go down 2,500 meters = 7,500 feet. Of course I’ll never go down that far, but it’s a good looking watch that would be fun to strap over my 3 mm wet suit. The watch costs $12,500 and will last forever.

Spending money on watches is purely an unnecessary luxury given our smartphones tell time just fine. However, luxury watches are always increasing in value. The Rolex Stainless Steel Daytona cost $10,800 back in 2008 and now the retail price is $13,500 if you can get one, for example. Despite my love of watches, I haven’t added to my collection in five years because of the downturn and career change. Now that income has stabilized, perhaps I’ll go waste some money again.

* Vacations. This is the big one which I’ve finally made progress conquering. I always value experiences over things. But for the first 10 years of my working career, I felt bad paying for connecting flights so I always flew direct wherever I went. I didn’t like to pay 50 Euros for the hop-on-hop-off buses so instead I walked for seven hours 90 degree Naples heat. It felt weird spending more than $200 a night for a hotel while carrying a mortgage, so I downgraded to hotels that cost $125 and under.

Now that I have lots of free time I finally decided to stop being so parsimonious on vacation. I ended up spending roughly $20,000 on six weeks of travel in the summer of 2013 and don’t feel a lick of remorse. The memories are magical and I’m willing to spend the same amount to continue experiencing more. Read: The Key To Taking An Expensive Guilt-free Vacation.

THE CURE FOR FINANCIAL HOARDING

Now that I’ve shared with you the main things I feel uncomfortable spending money on, I’d like to discuss some strategies for getting rid of financial hoarding.

1) Research who died at your age or earlier. Although the median lifespan is around 80-84 for men and women, chances are we will die much earlier! And if we die earlier, we are really screwed if we didn’t calculate an earlier life expectancy since we’ll have so much more money left behind. Princess Diana, Marilyn Monroe, and Bob Marley all died at 36, my age now. Holy crap! I suggest you look online for other people who died your age or earlier. It will really galvanize you to stop being so frugal in your ways.

2) Change your life expectancy time frame. I budgeted for a life expectancy of 60 because it helped force me to save a ton and retire early. By retiring before 35, I hope to spend 25 years of freedom before I croak. If I didn’t die at 60, then hurray! Each year beyond 60 is a gift. Once you are financially independent or retired, it’s a good idea to ask yourself how you would spend your money if you only had a year left. Would you buy that Porsche 911 Turbo you’ve always wanted? Would you book a first class ticket to Palau to go scuba diving with whale sharks? Would you take your entire family on a cruise to South America? I sure as hell would on all three. Hopefully all of us have years of good living to come.

3) Old fashioned budgeting. One of the main reasons why retirees continue to save during retirement is due to the irrational fear of going broke. FI/retirees are generally older than the median population and have seen some horrendous economic cycles. Compare FI/retirees with bright-eyed 20-something year olds who have only seen a bull market and the outlook is completely different. The more one budgets and keeps tracks of one’s finances, the more confident they will be in spending more. I know I can live somewhat comfortably off ~$100,000 in passive income in San Francisco, but I continue to save due to potentially having to support more people in the future. It’s because I don’t know exactly how much it costs to support a family of four that I’m afraid to spend all my passive income even though the principal is never touched.

4) Write your list of wants out and see the light. You’ll find that the combined cost of things you realistically want won’t cost you that much money as a percentage of your net worth. Even if it does cost more than you think, once you have the monetary figure you’ll figure out a way to earn more or budget for these items if you truly want them. If I add up the cost of a new car, laptop, sunglasses, watch, and blazer we’re talking anywhere from $30,000 – $110,000 largely depending on what car I get. If I bite the bullet and buy everything, at least I won’t have such cravings for at least another three to five years. Add on the incremental amount of upgrades I want to spend on 10 weeks of vacation a year, and perhaps we’re talking an additional $10,000 – $15,000 a year. Knowing the maximum figure you need to spend is like knowing your maximum downside in an investment. Once you know, you feel more comfortable going forward.

IRRATIONAL FEAR OF GOING BROKE

I have a fear that my online business will go kaput and Big Government will confiscate all my land while causing stocks to crash. Some have questioned why I have such a large CD balance and it’s exactly for these doomsday type scenarios. I don’t want to be illiquid if investment opportunities arise either. Besides, 3.75%-4% is a solid risk free return when the 10-year yield is under 3%.

Even if the doomsday scenario occurs I could still live off my CDs for at least 20 years by withdrawing ~$60,000 a year. Maybe I could live off my CDs forever without touching principal given it spits off ~$35,000 a year in interest income. Money would be tight, but when you’ve got no mortgage and free beaches, ocean, and mountains in Hawaii, life can still be good. Furthermore, health care for a family of four making $40,000 would only cost $1,965 a year thanks to all the ACA subsidies! It’ll just be hard sending the kids to Punahou.

Old habits die hard. If you are a financial hoarder, it’s time to be smarter about spending over your life cycle. Restricting your spending when you are young, only to die with too much is the mirror image of spending too much while you are young, and dying in debt with nothing to leave behind. At the very least take your required minimum distribution (RMBD) by age 70.5 even if you don’t need the money. If you don’t withdraw, the government will slap a nice little penalty and we can’t have that!

RECOMMENDATIONS FOR BUILDING WEALTH

* Manage Your Finances In One Place: One of the best way to become financially independent and being more balanced with your spending habits is by signing up with Personal Capital. They are a free online platform which helps you keep track of your net worth, your budget, and your retirement portfolios. Once you have a good grasp on your finances, you’ll have less of a tendency to hoard because you’ll have a much better idea of where you stand financially.

Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing. The best tool is their Portfolio Fee Analyzer which runs your investment portfolio through its software to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was paying!

* Save with an online bank. I’m a fan of EverBank because they currently offer one of the highest rates for first time savers up to $50,000 at 1.1%. It’s an absolute waste of money to keep cash sitting in a bricks and mortars bank earning 0.2% because it’s easy to access your money online nowadays. Click the widget below to discover more options if interested.

Photo: Balandra Bay, La Paz, Mexico, FS.

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Frugal Sage says

    Not a retiree. But I’ve actually worried about this, as I used to have a terrible time spending anything at all.

    The plan I hope to implement is as follows. “Live one year behind reality.”

    At the start of each year I will know exactly how much I can spend for that year, as it was already earned / determined from the year before.

    Break that money up into 15 parts and live off that for each month. This leaves a nice safety buffer in case of one-off expenses or emergencies etc. I can then choose to spend it however I wish while living life as per normal. If money is left over at the end, then it’s holiday time. Pick a new country and go.

    Rinse and repeat.

    Your mention of budgeting is key. You need to know how your money is being spent to know how much you CAN spend.

  2. dojo says

    I also run an online business and could never ‘force’ myself to pay so much for an Apple product, when I was always able to find something in similar ‘specs’ at 1/4th of the price. Yes, I’m using Windows and NEVER dealt with any issues.

    I do keep my laptops until they break, so you’re not frugal, you’re just smart. I don’t see why I’d change a perfectly functional piece of equipment just cause the producer created something new.

    We do tend to spend more on travels (it’s one of the things we do love in life and will pay accordingly), otherwise we’re very pleased with our way of living (which might seem pretty frugal to some). We’re happy right now, so probably retirement won’t change our ways too much. There’s one thing to maybe let loose a little and something else to just squander money. If you’re used to not paying for any stuff you don’t feel makes you happy, it will surely be difficult to turn off the switch :)

    • Ricky says

      If you’re happy and satisfied, that’s great. Just know that people don’t choose Apple for specs alone. There is no other computer out there that integrates a super high pixel density screen with great software like Apple does. The build quality, durability, and quality are also all reasons to pay a little more upfront.

        • dojo says

          Have used both ‘systems’ (our good friend has a top notch MBP) and wasn’t that thrilled with the Apple products. I can do my job very well on my Windows 8 Lenovo. I am a graphic/web designer and never felt the need for a ‘retina’ or any type of stellar display, my 17.3 inches display works perfectly. I am savvy enough to NEVER need any support from anyone. I can read tutorials and fix my stuff, not to mention that, if anything really breaks, my father has been doing computer repairs since we had them in my country (almost 20 years ago), so I’m covered with it, too.

          It’s indeed a personal choice and my laptops (from which one worked for 6 years perfectly, till I decided it’s really time to change) have worked perfectly, earning me a very good living. So, at the end of the day I had to choose between paying 560 for a ‘normal’ laptop or 2500 for an Apple ‘book’. I chose the first and spent the rest of the money getting myself a smaller laptop (for reading or taking to conferences, so that I don’t carry the big one), a tablet (Nook tablet, not iPad for the same reason – does what I do and works perfectly at 1/3 of the price), a good DSLR camera, a camcorder and some clothing (am a woman at the end of the day, I gotta have clothes :)).

          Anyway .. don’t want to turn it into an Apple vs. the world debate, I’m happy outside of the Apple ecosystem, while others have received some amazing value for the money with it. :)

  3. Tara @ Streets Ahead Living says

    I don’t think I’m being too frugal, but as someone who rarely eats out and packs a lunch everyday, I do get jealous when my coworkers go out for lunch. Obviously doing so is a waste of money ($15/day is the average around me) but it can be hard to not tell myself I’m not living enough!

    How about this for a worst-case scenario home: I’ve always had a fascination with self-sustaining houses… you know with composting toilets, solar panels, rainwater collection, deep well, etc. etc. I always feel that would be my doomsday house… somewhere in the woods in the Appalachians.

    But I think of situations like you say, where what is the worst that could happen and sometimes I have to tell myself to calm down and not put the cart before the horse. It’s a natural inclination to try to protect ourselves from damage but sometimes those far reaching worst case scenarios can make us more anxious than necessary.

    • greg says

      “I don’t think I’m being too frugal” — I agree =P

      “I do get jealous when my coworkers go out for lunch” — to me, this feels a bit like what Sam was talking about. Although I used to feel the same, I now do not. I literally desire much less than I did before.

      IMO finding a baseline driven by true, deep needs and happiness is important insomuch as that it can avoid setting a higher baseline out of fear of even trying a lower one, thereby rocketing the other way: losing out on opportunities that allow more highly-valued freedom. Of course, one might find the baseline really is higher. But pushing the limits (on both ends of spending) every now and then is very useful for me.

  4. Elisabeth says

    I understand what you are saying about enjoying your life.

    But Frugality isn’t a disease. Yes, I save money for financial security. But a frugal life also comes from a place of morality. Using fewer of the planets resources, finding happiness in yourself and other people instead of in material things, maintaining humility and empathy in face of desperate poverty throughout the world, etc. No matter how “hard” I work, I’ll never feel like I deserved my wealth more than anyone else struggling through our laps around the sun. Profligate spending like $10,000 for a watch will always seem extremely wasteful to me.

    • Financial Samurai says

      Given your stance, may I ask what percentage of income or wealth you donate to poverty? Or whether you’ve done any volunteering work to help alleviate poverty?

      Perhaps giving money away to a cause is equivalent to saving.

      • Elisabeth says

        I give 3-5% to charity at this point but also volunteer a couple hundred hours a year. Helping poverty doesn’t necessarily help the environmental problems of overconsumption in first world countries, though.

        • Elisabeth says

          Obviously you can spend your money as you please. Your sheer condescension towards people who are opposed to ostentatious overconsumption has lost you a reader, though.

          • Financial Samurai says

            It’s too bad to lose your readership based on JimL’s question. The point he is trying to make is what makes your consumption better than his or anybody’s for that matter?

            I’ve listed the things I’m considering buying, but haven’t. Yet you are judging me for simply thinking about buying even though I’m saving 50% of my income in retirement. I dont think it’s bad you only donate 3-5% to charity when i donate multiple times more on a percentage wise, and most likely on an absolute dollar base too.

            Judging people is only natural, but it’s going to make you less happy IMO. Good luck!

  5. Ben @ The Wealth Gospel says

    Great post! I’ve never thought of having to worry about saving too much in retirement, but I guess old habits can die hard. I probably won’t have too much of a problem spending all my money on traveling and charity though :)

  6. MH says

    For the sake of all that is good get a Patek or ALS, not a Panerai.

    And if you spend a lot of time on your computer, I think its worth it to upgrade to the latest retina macbook pro. I did last year and it is easily the best computer I’ve ever had. Or, if you don’t need a lot of horse power, the 2013 Air gives you all day battery under light load. I think if you try one you’ll be happy. Granted, I’m biased, as a software developer I like to have the latest given that I am on a computer for hours every day.

    My mom is a financial horder. She is constantly afraid that the next disaster is around the corner and will leave her broke. I try to convince her to enjoy herself but its no use.

      • MH says

        which Patek? Go for an ALS; they are all the rage in horological circles. When I get well into 7 figures cash I plan on going for a Patek or ALS.

        I think you should take the 13″ RMP for a spin. The screen is gorgeous. I think you can return for up to 14 days if you don’t like (you should confirm that). I don’t think you will return it. :)

  7. Phillip says

    On the subject of sunglasses, optometrist will tell you, wearing cheap sunglasses is far off worst for your eyes than not wearing any. The thinking behind it is, your eyes will blink more without glasses, stopping UV rays from entering. Cheap glasses fool your eyes into thinking its low light conditions yet the cheap glasses are letting in high doses of the UV rays. I’m not sure if I articulated that well, but I hope you get the idea. As a professional Tournament Bass Fisherman, I spend countless hours on the water and have a tendency to lose or destroy sunglasses on a regular basis. I can’t afford it, but I wouldn’t care if I had to spend $120 dollars a week on glasses, if it meant not getting cataracts or going blind. Enjoying retirement would defiantly not be near as enjoyable not being able to see the things I spend my life savings on and people I love.

    • Chris says

      Some people luck out with eyes, like in my case. I wear cheap sunglasses when I want to, but really don’t wear them much more than a couple hours a day. I still have yet to need glasses, and have been working in the computer industry for some 25 years now. Of course, I got into the habit a long time ago of fairly often turning to look at something that was farther away in the same area I was working in which evidently provided my eyes with the necessary rest and exercise at the same time.

      I’m seriously considering getting a pair of polarized, photochromic, eyeglasses using my HSA next year, but only if they don’t feel like they’re warping my skull like my wife’s do (and she has a relatively weak prescription).

  8. nbsdmp says

    I think this is a very important post Sam, admittedly at 36 I was not able to spend a little to enjoy, but in time I have been able to pry a couple of dollars out of the piggy bank. About 3 years ago I read an amazing article written by my neighbors wife (I didn’t even realize they were neighbors until much later). But it was about her husband who passed away at 44, it really hit home that life is short and you have to enjoy each and every moment. If you have worked hard freaking live a little! Everything in moderation of course, just because you can pay cash for an Aventador does not mean you should, get the 911 turbo or RRS…maybe a 3 year old one with a few miles, but then drive the wheels off of it! I told myself once I got to a certain # that I needed to open the purse strings. I save 100% of my passive income still, I budget my lifestyle to spend 100% of my modest but respectable income each year, but spend 1/3 of any bonus that is received. This year it will be an upgrade to the ridiculousness that is a boat…but it is what I love doing will use the hell out of it, and I will pay cash.

    The only thing I have not done a good job of this year is traveling abroad, I need to pick things up this upcoming year.

    O.k. I agree with MH above on the Panerai (although I admit there is a 111 in my drawer at home), but if you want a dive watch go with something with in-house movements like a nice JLC…ok I’m busting on you a bit but I actually love that exact same panny so I could understand if you pull the trigger, post a pic when you do!

    O

    • Financial Samurai says

      Spending 1/3rd of your bonus is a nice treat. I guess it depends on how big the bonus is too. I can’t pronounce JLC in full, so can’t buy one. The PAM 502 is in house movement. Which watch(s) are you sporting?

      I literally invested or saved 100% of every single bonus I had, which in retrospect was OK because there was nothing I wanted to buy except for a house in SF. After buying my house 9 years ago, I’m left just wondering about getting an updated car.

      • nbsdmp says

        Ahhh…the rabbit hole that is fine time pieces! I didn’t realize the 502 was in-house now…I debated on that one about 4 years ago but ended up just going with a JLC Master Compressor Chrono Dive watch…mostly because I already have the 111 and I was mesmerized by the blue sweeping dial when I tried in on during a business trip out to Palo Alto. (You guys out there are lucky cause you can actually walk into a store and touch and feel them instead of having to custom order blind since they rarely stock the unique pieces.) Anyway, I’ve got your various assortment of daily beaters from the Casio G’s to Suunto sport watches, at 36 was the first time I spoiled myself and bought a nicer watch…a Seamaster PO, love it to this day and actually gets the majority of wrist time for some reason. I’ve taken a hiatus from watches since I fell in love with the PP 5146 in black or the silliness that is platinum…ugh, I hate that I actually admire such craftsmanship & now I gave myself a goal to get to before buying something another watch especially one quite so specialized. (I had/have to visit 15 countries I’ve never been to before first…still 12 to go!)

        If this helps with your car decision, I also invested 100% of every bonus (and 50% of my base salary…so damn near 85% of my overall income) as well right up until I was the ripe old age of 36. At which point I bought a 505 HP Corvette Z06. Writing that check I felt like an idiot at the time, but you know how there is buyers remorse…well I never once for a twinge of a millisecond had any! You talk about how you really enjoy cars…life is short, you are mega responsible dude, so just do it! I’m blessed though to still be working at something I enjoy doing and it affords me the ability to have some pretty cool toys sticking to my 30% rule. I would have a little harder time in your shoes, but I think you’ll regret not doing it.

  9. AverageJoe says

    I always found it sad when my retired clients wouldn’t spend money. You’re right: once you’ve become a saver you’re always second guessing that euphoria you get from spending money.

    One friend of mine found out he was going to die and his whole life changed. He went from being a huge saver to suddenly planning trips all over the world. Sadly, three months later, he found out that he’d been misdiagnosed. Instead of learning from his experience, we became a super-saver again.

  10. writing2reality says

    Ah yes, the saver’s paralysis. I think it is tremendously difficult to flip the switch on anything that has become ingrained in us as habits. Think about people who smoke, half of it is the nicotine, but the rest is actually the act of smoking. Or think about all the personal finance bloggers out there who are paying off debt. They are so focused on paying off debt that don’t think about what comes next. How many of them hit the point where it is time to start investing and end up not having any idea on how to move forward or are afraid of losing their every increasing nest egg?

    Habits can be tough to break, even positive ones. My suggestion to those who struggle, like yourself Sam, would be to focus on the things like experiences. You went on an incredible vacation earlier this year and are now very much on board with splurging on travel going forward as a result of that experience. Remind yourselves about the incredible memories you can create by going new places and seeing new things.

    As an aside, my future father-in-law is someone who is tremendously risk adverse and won’t travel, yet continues to sock away cash from his pension. He is exactly like your family member, even down to the early-bird special at the local diner. I know his frugality does affect his wife’s quality of life as she would enjoy traveling and doing more things. Habits die hard.

    • Financial Samurai says

      The habits are so difficult to break. I’ve only conducted these habits for 14 years. Can’t imagine breaking habits after 30+ years!! Guess it’s good for the heirs then to be frank.

      I’m fully on board with spending on experiences. There is no more hesitation on costs any more when I’m traveling.

  11. Chris says

    We’re well on the way to financial independence, at which point we’ll have to deal with this issue as well. It’s hard to imagine giving up a ~75+% savings rate. I think I get more enjoyment out of watching the assets grow than the thought of spending from them in the future. That makes no sense, really. “One more year syndrome” is going to be a tough one for me.

    My suggestion is be honest about what you’re buying with a $12,000 watch that “will last forever”. Sure, it’ll last a long time, but you’ll want to replace it before then… These are status symbols. I have no judgement there, it’s just the truth. We people like to justify these purchases with technical excellence (7,500′ water resistant!), but that’s what the marketing folks have taught us to do. A great book on the subject is called “Spent” and changed my view of items for life.

    To be clear, I think status symbols are fine if one is honest about them. However, my expectation is that most folks here are choosing or at least contemplating a different sort of life than regular dreams of quick lottery money. Why buy a watch regular rich jackasses buy to impress other jackasses. You just had several posts on “stealth wealth”! Do it differently I say. You mention a 911. Sure, awesome car. But, an Ariel Atom is technically awesomer. Build a Lotus 7 clone in the garage for 15-20k (pretty high end) and 1,000 hrs if you like cars. People won’t think “rich jerk”, just car guy with too much time. It’s stealth wealth when you say “it cost me less than a Versa” and is 5 lbs / hp. You can make it ~3 lbs / hp for another 10 grand and launch in 3rd gear. Spend your money on a off-grid Hawaii house with a killer media room if that’s your thing. Start an emu ranch or a non-profit of your choosing. Live a life that your time and money afford, not a life of buying silly status symbols. Cruises are a great example of how to spend tons of time and money without looking outside the middle-class world as almost everyone blows money on cruises.

    We’ve been conditioned to just buy things to express individuality in the USA. It’s pathetically our main source of freedom now for most folks. Travel and experiences are what make life great in my book. Time (freedom) spent with family is what I’m saving for. To each their own of course. I should hit my goals by 35 as well.

    Thanks,

    Chris

      • Chris says

        I tried not to sound judgmental, but it’s tough not to come across that way with a topic like this involving watches that cost more than a year of minimum wage income! I also realize this varies between people and over any person’s life. I used to think that spending more than $500 on a car was wasteful many years ago. Every year that number goes up (more than inflation) so that the last car was $3800 and I LOVE that car. Me from 10 years ago would think I’m wasteful now, but that guy didn’t understand money, investments, or how to put together a mean spreadsheet and financial plan. He also drove a car that would shut off in the rain. I can only imagine what money I’ll “waste” in 10 more years. Much of this probably comes from looking around at regular folk who might spend over a years’ worth of income on a car while drowning in debt. There aren’t a lot of people like me in my daily life by which to hold the comparison stick.

        I think my point should have been that it takes a very healthy amount of savings to support the investment income to make semi-regular purchases like this. Nobody here is talking about the trade-off in life hours that it takes to earn those savings / investments. I think it’s implied, but should be flushed out perhaps. 12k / year could easily be 10 extra years of saving for most middle-class folks. that needs to be included in the optimization of total life happiness. I agree that creating a passive income of 100k / year and spending 20k and scrimping without enjoyable travel or whatever luxuries make one happiest is very sad.

        Someone else here also touched on the idea of maximizing return from luxury spending. If the interest is sustainable “green” home living, building that home gives the luxury effect with some amount of future savings. It’s an annuity in that sense, buying an electric bill for life with PV panels for example. An earthship, straw bale, or ICF passive house with only the need for a supplemental wood stove for heat is another way to go. Those are things I plan to do. It may not give a better return than other investments, but will make me happy.

        I’m a jeans and black t-shirt everyday kind of guy. From what I mentioned, I’d say my luxury spending would be middle-class style travel and a “Locost” 7. Throw a few non-status (non-public display) electronic gizmos in there too. The wife and I have our own discretionary accounts and while my wife enjoys going out to lunch, Mine is saved up to buy the first decent virtual reality setup and I’m not going cheap on that one. That’s a childhood dream right there. I expect I’ll spend far too much on that over my life.

  12. JayCeezy says

    “The only problem is that it’s about a pound too heavy and a little thicker than desired compared to the new laptops.” – this is only a problem if we are really talking about computers.

    Well. Watches, Luxury Cruising, Porsche 911s. The ‘Stealth Wealth’ phase didn’t last long.:-) Good to hear about the 30% parlay! Maybe you can take the gain (keeping the principal working for you), and explore some acquisitions/experiences that will bring enjoyment?

    As for your close relative, it is nice that you encouraged him to be sure to enjoy himself. I’m sure he appreciated it, and the reassurance that his kids are self-sufficient. Just a guess, but guys like him never stop worrying about others. I have a relative in what sounds like similar circumstances, and he is “living the dream” (probably the first time in my life I have used that phrase without irony.) Your relative has had a rewarding work life, full of international travel, he has successfully raised his children, wakes up every day in his free-and-clear home in Hawaii, has his money situation tight, and is without the responsibilities that everyone striving for FI/RE are attempting to address. Sounds like he has quite a bit to be proud of!

    • Financial Samurai says

      Indeed he does, but I still worry he’s not maximizing the money he spent decades earning and saving.

      It’s always fun to juxtapose topics on FS. But Financial Hoarding and Stealth Wealth is related! This post is here to kind of say,”Let’s also not go crazy with our Stealth Wealth mission boys and girls!”

  13. Done by Forty says

    I think the article will spur some good debate, but you can’t argue with the idea that money should be used for optimal happiness (or, I guess, social good). On that we can all agree. Saving money for the sake of saving money is for the birds.

      • Done by Forty says

        True, but that doesn’t necessarily mean that spending excess money is the next logical step after FIRE. That presumes each additional dollar of spending always increases happiness or improves your life in some way. It might not. You could see negative returns on spending after a certain point.

        My point was just that money ought to be used in an optimal way. That covers several strategies, including spending more.

  14. Untemplater says

    It would be nice if everyone retiring had a lot of money on their hands. Unfortunately both of my parents retired with a lot of debt. So that has had an influence on my money habits and I think I will always be conservative and tend under spend for fear of what happened to them. But it’s hard for me to know for sure because I haven’t retired yet. Tackling debt as early as possible makes life so much easier in the long run. I look forward to having more time to travel, go on local adventures, and spend more time with family. The earlier I retire the harder it will be for me to spend money for sure. I can’t imagine myself dying young so I will budget for a long life. We just never know but I sure hope I live past 60. Most of the women in my family lived into their 80s.

    • Financial Samurai says

      Our parents financial habits sure have a way of affecting our own financial habits. Maybe it’s always for the good?

      * If parents have poor habits, you want to make sure you have good habits so you don’t end up like them.
      * If parents have good habits, you want to emulate so you end up like them.

  15. John says

    I’d say accelerate your laptop upgrade; mostly because a laptop is something you use for a considerable amount of time every day. I refuse to scrimp on this type of item. I’d rather spend 30% more for what I really want than buy a cheaper windows machine.

    The new Haswell MacBooks are pretty incredible. Have you considered an air over a retina? I’m getting 15 hour battery life on the 13″ air with ‘normal’ usage!!

  16. Miss Growing Green says

    As a retiree, I do occasionally get the notion that I’m “saving too much” and not enjoying the moment enough. I ask myself things like “well, what would you do if you had extra money / put less towards savings? And the answer is usually ‘travel more’”. Other than that, I don’t think I would *want* to spend more money on other things.

    When I have the feeling that I’m not splurging on myself enough, I usually ask myself what I want, then compare that to alternatives. The alternatives are usually a) save this money for my future family or b) donate this money to a good cause. When you look out how many people out there are living with less, the idea of buying $300 sunglasses seems a little silly.

    then again, perspective is everything. If I were a multi-millionaire, I might not think $300 sunglasses were too big a deal. I’m simply a financially independent person, living well below my means and trying to lead a modest lifestyle. Splurging for me is going out to eat ;)

    • Financial Samurai says

      Everybody is different right? Is not everything other than bread, water, and a roof “silly” unnecessaries in a world full of suffering?

      I think there’s a self correcting mechanism in all of us.

  17. Ace says

    Sam,

    I actually enjoy most of your posts (maybe too much! LOL!).

    Get the $1300 computer. You’re in the blogging business; it’s tax deductible and a no brainer!

    The $75,000 automobile. That requires more introspection. You will likely need one good vehicle (but there may be other alternatives in San Francisco?). I guess it depends on how badly you want this specific automobile.

    But, you do seem to keep your cars for a very long time. So buying new, and keeping it for 10 to 15 years seems fiscally reasonable to me.

    The $12000 diving watch is a bit of a pragmatic stretch (but then, I wear a $35 watch, so whom am I to say anything about high quality watches). I’d say that this requires considerable introspection. It’s not like you are going to starve if you buy it. And it will last your life time.

    Again, if the watch is so important to you, why not? Buy yourself a Christmas present. You only live once!

    • Ace says

      A $12,000 watch?

      I’m rethinking this. Why would anyone want a $12,000.00 watch?

      Why not something cooler and more meaningful? You will gain more pleasure from experiences over stuff!

      When you are on your deathbed, would you really care about a watch?

        • Ace says

          How about this: If you have $12,000 to blow, why not get a pilot’s license?

          You’ll learn a new skill. You’ll have a unique experience. And you will have a wonderful new view of the world.

          BTW: The aerial views of Northern California (and Hawaii actually) are spectacular!

        • Ace says

          Well….. There really isn’t anything I wish to buy. I have two houses, a car, a bicycle, and my biggest luxury: part ownership of an airplane.

          I have no interest in adding ownership of anymore things! :). Things require maintenance and upkeep. I prefer the freedom of owning basically nothing!

        • Ace says

          I don’t want two houses. I got stuck with two houses.

          And I’m planning to sell the airplane as the market starts to recover.

          I don’t mind walking.

          Look….. It’s a free country. If you want to purchase a $12,000 watch….. You can.
          Whatever makes you happy!

          You put in the blog for opinion…. and I’m giving you my opinion!

  18. Color Me Frugal says

    Great post! I totally hear you on the what-if-you-die-at-36 (or insert whatever relatively young age) sentiment. My own father passed at age 48 and I often think about that. It’s a good reminder to live in the present. However, I still struggle to balance that thought with my saver’s mentality at times.

  19. Fabio Povoa says

    Hi Sam,
    Your post hit an open nerve.

    I am definitely a Financial Hoarder, alwayis in saving mode for a better future. Rather suddenly, after selling my minority shares on my tech company, I just found myself with financial freedom, without having really “prepared” for it.

    I am having a hard time getting out of the saver-mode, and really figuring out next moves, and feel rather guilty at the thought of just retiring, not to mention spending (and, alas where on what to spend). I do agree on investing on experiences and memories – travels, skills, etc – rather on just plain luxury stuff.

    I´d like to share what I decided to spend my money / time after having rethought my priorities:

    - Sports: I started taking tennis lessons, finished a scuba diving class and will start learnig paragliding. I have also bid for World cup tickets in Brazil coming June.
    - Education: my wife and I started 2 NGOs focused on education for impoverished kids on Brazil. SorriaCriança (SmileKid!) offers free oral education and prevention to public nursery schools, and MeusTostoes (MyBucks) teaches personal finance to teenagers in public schools.
    - Travel: I have already planned trips to Orlando (with my daughter and wife), Barcelona (to see Barça x Madrid match with my father) and will visit Southeast Asia with my wife in August.
    - Car: I took the plunge and bought a Volvo SUV, which I use to drive my daughter to school on a daily basis. It is comfortable, really safe and the first SUV I have had. During my 2 year MBA at Berkeley, I did not even had a car (just Zipcar).
    - Gadgets: I am an Apple geek who loves technology, so I had already purchased an iPhone 5S, an iPad mini and a MacAir, all of which are put to heavy use and make my working life so much better.
    - Food + maid: in Brazil, a maid cost so much less ($ 500 per month, for 8 hrs per day, 5 days a week), so this was by far the best investment I made. She handles all groceries shopping (saving me a ton of time), handpicks the best fruits, prepares awesome healthy meals and thoroughly cleans the house, does the dishes, and picks after my baby´s toys.

    The interesting thing is that by putting money to use, I could free myself form just over-acumulating and start appreciating how saving can translate into fond memories, closer connection to my family, giving back to society through NGOs we founded and manage, and though more productivity (as with the maid).

    Love your blog. Keep up the good work.

    Best,
    Fabio

    • Financial Samurai says

      This is a fantastic list Fabio! And Go Bears! What year were you?

      By listing things out, I think we get better satisfaction from money spent because we know exactly where the money spent. Hence the reason why budgeting is so important.

      How’d you find my site anyhoo? Not sure if I’ve ever seen you comment before. Thanks

      • Fabio Povoa says

        Hi Sam,
        I was a 2012 FTMBA.

        I am a quiet reader, which is why you haven´t hear from me before. I can´t recall where I had found your blog at first, but I do know everyone interested in personal finance would find it somehow (either through Google or linked throughout the web).

        By the way, I will be in SFO until Saturday. Let me know if you´d be up for a beer.

        Fábio Póvoa
        fabio_povoa@mba.berkeley.edu

  20. Kristy says

    We go back and forth at our house about whether we are saving too much for retirement and not spending enough NOW. So, we decided to spend more on vacations with the kids. They are now both old enough where it is enjoyable to travel with them and have them try new things. We took them skiing last winter and my oldest one (she’s 7) loved it! Next year is Disney for all of us. I have to say that while I really enjoy the excitement Disney brings, it is pretty expensive for all of us to go. It may be the last one for a few years. We have done all of this and not had to compromise saving though…I guess since we are now only paying for daycare for one kid, it was easier to spend more.

  21. Jason says

    From the perspective of someone that is pursuing financial independence, suppressing wants is the name of the game. But, after years (sometimes decades) of self-conditioning, of course there’s going to be resistance to changing ingrained behavior even when it’s not necessary anymore.

    Additionally, if you ignore the little luxuries for such a long time, you get out-of-touch with what’s out there (the latest model cars or electronic gizmos) so they fall off your radar and you don’t even think about or want them anymore.

    If I get to FIRE, I can see this as a struggle for me too. My car is nearly 30 years old, my computer is over 10, and I have no plans to change either unless they die on me. But, the yin to my yang is my wife, who encourages me (and sometimes drags me, kicking and screaming) to enjoy today as much as our plans for the future. Without her, I can see myself going right down the rabbit hole of frugality, becoming the crazy old eccentric with no fixed address but that has a hundred rental properties.

    Truth be told, a part of me really wants to become that guy. It would *really* speed up my progress! LOL

  22. Nick says

    “The reality is I’m projecting what I want for myself onto my relative. If being frugal makes him happy, then I’m happy for him to continue saving so much. What I’m actually not happy about is feeling like I’m not optimizing my money on living life to the fullest. I’ve spoken to many of you super savers who feel the same way.”

    Bingo! If the end goal is being happy, your relative will have to do what he sees as right for him, and you’ll have to do what you see as right for you. Being frugal can be a lifestyle that brings pleasure for various reasons. But it’d be hard not to splurge once you have all that dough! I’ve always wondered what I’d do if I were crazy rich (think Warren Buffet rich). He doesn’t splurge on more toys or a bigger house as much as he could (I ride past his normal looking, non gated community house everyday on my way to work). I’d be tempted to buy some toys! But he has said that he knows those things wouldn’t make him happier.

    • Financial Samurai says

      It’s fun to fantasize about being crazy rich yeah? That’s cool you ride by Warren’s house. Take a picture and email me one day would ya?

      I think is honestly buy my own private Airbus mega bird and fly around the world with friends and family.

      • Nick says

        …Sure thing on the photo!

        Even though he doesn’t splurge on some things, he did buy NetJets in the ’90s (private jet company) and flies around in private plane when he wants. I suppose that luxury would be nice for all of us!

  23. MH says

    @Chris

    Noone notices watches. Someone could be wearing $100k Patek and i bet less than 1 in a thousand would even notice.

    Compared to $100k S Class, which everyone knows is an expensive car.

    • Financial Samurai says

      I think perhaps only watch guys recognize and appreciate other nice watches. So for folks who aren’t into watches and can’t fathom a $12,000 watch, I understand that it’s hard for you to understand. And $12,000 is on the lower end of fine watches too.

  24. Justin @ RootofGood says

    That’s why we feel ok eating into our principle right now at age 33 instead of just living off dividends/interest. We can only spend it while we are alive. But we are spending only 3% of our portfolio, so over time I expect the real value to increase slowly. Eventually we’ll be able to up the spending without unduly risking our long term retirement plans.

    I value more free time over more money, so I quit working when I had “enough”.

    • Financial Samurai says

      Sounds good. I’m curious to know in one year after you’ve drawn down a full 3% whether you will still feel OK drawing down principal. It pained me so much to think about drawing down principal that I decided to work on active income instead after retirement.

      • Justin @ RootofGood says

        In reality, our dividends across the whole portfolio (mostly in IRAs or 401ks) are almost enough for our annual spending. So I’ll be depleting principle in taxable accounts while adding to principle (through dividend reinvestment) in tax deferred accounts.

        I know where you are coming from – I felt a twinge of pain when I cancelled the auto-reinvest orders for dividends in my taxable investment accounts. Now I am spending those dividends. It made retirement “real”. Of course it sucks that my taxable portfolio won’t grow through dividend reinvestment. But I asked myself “why did I save all this money?”. The answer is “to retire early”. So I’m okay spending my taxable investments, even dipping into principle (when the time comes).

        I’m sure I’ll discuss what I’m thinking and feeling in my monthly updates when I start cutting into principle. It will be particularly hard if the market takes a dive between now and then. For now I’m living off my final vacation payouts and smallish unemployment (no fat severance package for me! :( )

        • Financial Samurai says

          Gotcha. It will be a good read on taking down principal or spending dividends or both. The psychology behind the finance is what’s most interesting. Will things feel OK that you are no longer building the nut as your peers catch up etc.

          Markets seem so frothy now, I’m defensive.

      • Joe says

        I’d also rather work part time than draw down the principal. It’s too painful. Saving and living frugally is a hard habit to break.

  25. Micro says

    That is one reason why I don’t mind the occaisional treat for myself every now and again. The other thing I like to remind myself is that I am saving and investing to buy myself more time when I am older. When I can retire, I won’t have to sacrifice 40 hours every week sitting in an office. This should also help break a bit of the frugal chains that stick with people after they retire. I won’t be able to buy any more time for future me. All that will be left to do is generate memories. If I can remember that, I think I should be okay.

    • Financial Samurai says

      Yeah, definitely good to treat yourself DURING the journey. It’s really the journey that’s most rewarding. Getting to FI is like opening up your Christmas presents as a kid. You’re happy for a week or a day, and then you move on.

  26. krantcents says

    I admit it that I am a lifelong saver and probably will in retirement, but not cheap! My wife and I have taken 5-6 cruises and everyone was a veranda cabin. In fact one was on the concierge level. We always fly business or first class (using miles). My computer is only 3 years old, but it replaced a 10 year old one. I like nice things and I am willing to buy them, but I hate paying retail. Part of my personality is getting a “deal”. I plan on enjoying retirement, but I will still save.

  27. Ricky says

    Oh come on, go ahead and get the MBP you want and don’t even bother returning those glasses. Trust me, if its something you really and truly want you will keep it anyway and the cost is secondary. I have had a 15″ Retina MBP since last year, and I still wouldn’t have any other computer. The best part? I see myself using this computer for another 3-5 years. The display can’t be matched. Reading text is infinitely better. I have an iPad too but I still do a lot of reading on here since the text is so crisp. As for sunglasses, come on, that is such trivial thing! I bought some as well over the summer but I wear them consistently and since I care about style and what I wear, they are worth every penny.

    I think what you fear is the “snowball” effect of buying one nice thing only for it to lead to another nice thing and that you will never stop wanting nice things. In that case, I’ll agree because I am the same exact way and I also believe “saving mode” and “spending mode” require two completely different mindsets and you lose sight of the former while engaged in the latter, and vice-versa.

    You and I think a lot alike in that we would do everything possible to invest and not touch principal. I 100% agree. The security that living off of interest purely is unmatched. I don’t think there is any question as to why you have so much in 3-5% yielding CDs: its probably the best place you could be right now. You’re drawing an ample amount of money for living and then some.

    You’re also right that its hard to determine how much we can spend and how much we can save since we know that saving more will always give the better result for the future. I think in truth we are too stubborn to stop and say “I’ve worked as much as I can or feel like and now it’s time to live”. I feel like someone like you is continuously striving to do “better” in life despite having achieved so much success already. It’s a mind thing for sure! I highly believe in still not touching principal though, whether it is for one’s beneficiaries, or just the simple fact that it supplies so much more security.

    Sorry for the long comment but this is an interesting topic, one that I think about frequently.

    • Financial Samurai says

      I definitely will not be touching principal from my financial nut. It feels like I’m stabbing myself if I did such a thing!

      I actually don’t feel the snowball effect of wanting an endless amount of nice things. I just feel a little off balance saving so much and not spending within a more balanced ZONE of what I could afford. Part of this is my upbringing, another part is an early retirement which means a much longer life to support without work. And another part is the FS community who seem to lean very frugal.

      As for Apple, I do admit I will buy the iPhone 6 within two months of release if it comes out in the Fall of 2014. I love my phone much more than I love my laptop. My laptop is just a tool

  28. dan23 says

    Interesting post. I’ve thought of what I would spend money on if I wasn’t saving for retirement and had significant excess money. Don’t know what it says about me but most of the things I came up with are paying for services. Paying significantly extra for balcony on cruise doesn’t resonate – same logic as your relative – I am not spending time in my room. Also, very little interest on spending on objects. I don’t so much feel guilty about spending money on things like watches, cars, etc. – I just derive little value\enjoyment, even psychological from them. I actually am pretty willing to spend a large amount of money on an object if I derive significant value/ enjoyment from them (if my eInk reader broke and the only replacements cost $500, while tablets which are an alternative were $200 (an alternative) I would spend $500 on a reader without hesitation, as this is something I derive daily enjoyment from. There are almost no objects that meet that test. Comfortable bed and shoes are another two – I believe Bruce Sterling may have made this point in a state of the world a while back. What I would spend on in retirement with excess money that I don’t spend on now:
    - all laundry done by someone else (I actually often spend on this now)
    - eat out/order food way more – actually, always
    - upgrade to doorman building.
    -with significant excess retirement income – flying first/business class internationally (I know I could do it at least occasionally with points, but in retirement I don’t want to spend time playing the points game.
    -very significant excess – building with full amenities.

    • Financial Samurai says

      Nice list! Interesting to note on a building with full amenities. I concur. Are you living in Manhattan? I love having a doorman receive those FedEx/UPS packages that never come when you are home!

      I’d fly business more too if I could get over financial hoarding. I have no time for the rewards points game either.

  29. Joe says

    Sam, you really put yourself out there in this post. Thank you for sharing. Spend less time worrying about money and try to enjoy your life. I hope you fine your way (or at least a girlfriend). I will link to this post the next time I hear someone suggest early retirement…seems like a sad existence. Keep on smiling bud, and next time you’re in New York, drinks on me, sounds like you need one.

    • Financial Samurai says

      Sounds good. I’ll take you up on the drink next time. Yeah, early retirement is kinda sad sometimes. Too much freedom and time to pontificate. I sometimes long for the pressures and stress of work!

      What site are you running that would link this post? I’ll come check it out.

  30. Bryce @ Save and Conquer says

    My mom is 86, a multimillionaire, with annual income over $100k through Social Security and a pension. Her expenses are probably around $24k/year. Her biggest kick is taking her little dog for walks around the duck pond in the trailer park she lives in. She was raised through the Great Depression and is extremely frugal. She has no desire to spend money on herself. Much of her furniture is older than I am (57). One of my brothers replaced her old CRT television with a flat screen earlier this year. She was thankful, but doesn’t watch it. Her second biggest kick is to give large amounts of money to charities she supports, like scholarships at UC Berkeley (her alma mater), as well as supporting my older brother’s kids through college (she stopped supporting the one who dropped out). We don’t try to tell her how to spend her money. She is happy doing what she is doing. Who are we to tell her otherwise?

    • Financial Samurai says

      I’m impressed she is a multi-millionaire and lives in a trailer park!

      Can I play devil’s advocate for a second? Would you tell her what to do with her money otherwise if she was spending huge amounts of money on herself and others who were not family? Would you be OK if she donated all her money to UC Berkeley?

  31. M says

    Great post and too true. Just like the Millionaire Next Door book, since it polled all the millionaires that came for the free food, that’s how it concluded they were all savers. That’s how they got there.

    My thoughts:
    Car – no (depreciating)
    Laptop – yes (depreciating but used daily)
    Sunglasses – yes
    Watch-yes (collectible)
    Vacation – yes, if you will enjoy it.

    Big ticket depreciating items need to be really thought over well for value/use. Small ticket, eh, go ahead. If you’re saving 50%+ of income, enjoy it on the small things.

    Now if you really want to cure your saving habit, go buy a boat!

  32. JW says

    The decision to withdraw from your principal needs to weigh the importance what will be purchased with that money (i.e., fancy indulgence, experience, every day expenses, etc) vs. what interest could be gained off that withdrawal. Further, this needs to be considered within the context of one’s personal situation (i.e., age, life expectancy, size of the proverbial “nut”).

    Taking a withdrawal from principal immediately reduces income generating potential…which is the thing that enables someone to retire early and maintain the lifestyle they’ve decided to life.

    Good luck to all with this endeavor.

  33. moshennik says

    I think treating yourself is very important.
    Saving for the sake of saving makes no sense to me. I have no issues spending money on extravagant things once my “target” savings are achieved.
    I do have a Rolex watch that I paid $8600 for. I believe right now I could ebay it for $10-11k.
    Right watches (Patek, Rolex) don’t depreciate, they appreciate if anything.

    I am actually in exactly the same boat with MBP.. mine is from 2006 or 2007, and it still works great (although a bit slower then what I would hope). I keep hoping that it will break and it will give me an excuse to buy the one with retina display.

    Sunglasses are such a tiny expense.. I would not think twice about spending $200-400 on them. They will last several years. Btw, a lot of vision insurance will cover portion of the costs.

    Vacation is not even a question here.. if we can’t drop decent $ on vacation, why are we saving???

    Car is the only thing i keep going back and force with it. Right now we have one car, we got it new 1.5 years ago. 1.9% loan from penfed.. you can’t really beat it. Typically i buy them 1-2 years old from an auction, but in your case, as you like to keep them for 10+ years. Treat yourself!

  34. JimL says

    I’ve be able to increase my savings rate to 50% and am well on track to meet/exceed my goals.

    My dream would to buy a classic porsche and have it restored. I could buy one and not make much of a dent in my net worth, but I just can’t get myself to write that check. Reading this thread has caused me to reconsider.

  35. Pauline @RFIndependence says

    I have decided that any online income was to be spent on the short term for as long as it lasted. So far I make about 3 times what I need for normal living so it leaves quite some breathing room for luxuries. Just got a new laptop and spent 10 weeks in Europe :). But old habits do die hard.

  36. Squirrelers says

    Interesting post, and good questions. Well, I’m not retired and it isn’t imminent for me, so my perspective is one of a person working toward retirement.

    With that, I’d say that it’s probably those good overall habits that get a person to the success of retirement or early retirement – and it’s a great thing that good habits are apparently hard to break! The retiree you mentioned is a good example of that. Of course, since we live once, it’s of course important to fully enjoy every day – even if that means spending a little bit.

    Projecting myself to that situation, I would think about any guilt I could have thinking about how others in different places would be thankful for even the basics. If I didn’t have much guilt, then I’d spend. For example, if my car was super old and I bought a newer yet practical car to replace it, could I feel guilty? No, Probably not. If I replaced it with an upscale newer car, yes I would feel a bit guilty.

  37. Mark Ferguson says

    To be financially healthy I think you can’t be afraid to spend money. I’m a big loa guy and if you are afraid to spend money it usually means you are scared you can’t make it back or will run out if retired. Both of those ideas are bad news in my opinion.

  38. Andrew@LivingRichCheaply says

    I guess I can see how someone who has lived frugally most of their life continue to do the same in retirement. But if the retiree is truly satisfied with their life, it’s all good. If the retiree has enough money and is worried to spend it, then it might be a problem. I think with a good size pension, your friend really should relax the purse strings. Although, even if I had the money, I wouldn’t necessarily splurge on fancy restaurants, watches and stuff like that as it is just not my thing. But yeah I’d like to enjoy life…why not? That’s what you saved for right?

  39. Jen @ The Happy Homeowner says

    Brilliant post! I adhere to the mindset that life should be enjoyed now as long as you’re not causing serious damage to your finances or well-being. Within reason, I make today my ‘someday.’ I still save plenty, I have a good cushion in reserves and retirement, and I am constantly seeking passive income opportunities. But, I also travel as much as possible, indulge in my passion for nice cars, and put experiences over any other material object. It’s all about balance!

  40. Evan says

    I think there is a difference if there are children or grandchildren involved. Anything not spent gets sent down to help out generations to come.

  41. rob says

    Enjoyed this post. Fortuately (and unfortunatley), if I made a list of things I want it would consist of 1 thing: cars. For the past year, I’ve wanted 2: the new Porsche 911, and the Tesla Model S. Have made the mistake of driving each of them and want them even more. Unfortunately, either one would set me back atleast 90k. While I could “afford” it, I don’t consider myself financially independent yet so spending that much seems extremely foolish. But the amount of time I spend rationalizing and doing various calculations is crazy. Short of boats, high-end cars are a spectacular way to burn cash. I’ve tried to set my sites on more attainable versions of each: maybe a Scien FRS and Volt. Nope- no interest. Can only wish I wanted a 12k watch or 4k cruise instead!

    • Financial Samurai says

      Scion FRS is such good value at only $24,000! But yeah, definitely not the same as a new 911.

      If I had a two card side by side garage, I’d be in TROUBLE. Alas, I only have a two car tandem, so one car is all for me.

      • Rob says

        Ha- I only have room for 1 car now was well. Which helps me stay away from 911s (and also the FRS) cause I need it to be more practical. For the past few years I’ve settled on leasing a BMW since it speaks to my inner car enthusiast while not being ridiculously irrational. Buying ricewise, it doesn’t adhere to your 1/10th of income rule but the lease amount is only about 3% of my monthly gross income. I like the predictability of knowing exactly how much it is each month (inclding maintenance) and that I can just give it back to them after 3 years regardless. Doesn’t seem that bad in the scheme of things. In fact, if I were looking for things to be more frugal on, I’d gladly cut a bunch of other stuff before the car. Weird but true.

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