The Boot: A Smart Solution To Spending More Money Guilt-Free

As a lifelong saver, it has been hard for me to spend more money and live it up. It didn't matter whether I got a raise or made a profitable investment, the extra money would almost always get reinvested. The Boot is a concept I came up with to help us spend money more freely.

The fear of being trapped in a job I disliked was far greater than the fear of missing out on nice things or experiences. Therefore, it was only rational for me to keep on saving and investing to one day be free. But I've discovered that even after extricating myself from Corporate America in 2012, it's still hard to ball out.

In some ways, the pressure to generate enough passive income is greater today because my wife and I are parents. Since we don't have day jobs, we don't receive any company-sponsored healthcare or retirement benefits either. When little ones are depending on you to survive, you can't lose too much focus.

But consumption smoothing is also important for a better life. There's no point making money if you're never going to spend it. If we end up dying with too much money, we will have ultimately wasted time and energy. Instead of grinding away for hours at work or on our business, we could have spent that time on something more enjoyable.

Example Of Using The Boot To Spend More Money

The Boot equals any investment return above its long-term historical average. The larger your Boot, the more you can spend money freely and kick butt.

For example, let's say your $1 million stock portfolio returned 18% one year. Given the long-term historical average in the S&P 500 is about 10%, your Boot is 8%, or $80,000. If you've been itching to spend more money, you now have the option to spend up to $80,000 before taxes on whatever your heart desires.

I struggled for two years to buy myself a new laptop. Even though I probably type more than 99% of people in the world due to Financial Samurai, I refused to replace my six-year-old laptop. Four keys were half broken and sticky, which meant I had to retype words over and over again. In addition, the battery no longer held its charge and the monitor would occasionally flicker out.

The Boot concept helped me realize I could spend $1,500 before tax on a new MacBook Pro 13″ due to my portfolio’s outperformance in 2020. But of course, I first researched how much it cost to change the battery ($250) and keyboard ($150) at my local repair shop. And of course, I waited for a sale before finally pulling the trigger. Hooray!

The Boot is also my capital source for revenge spending. After saving even more aggressively during the pandemic, I promised myself I would open up the wallet wider. However, I'm having a difficult time spending even 1/100th of my Boot. Let me explain.

The Problem With The Boot

Although my stock portfolio outperformed the S&P 500 in 2020 due to tech, my stock portfolio is severely lagging the S&P 500 in 2021 because big tech and growth stocks are sucking wind.

Hence, I have this worry that if I don't make changes to my portfolio, I will end up losing a lot of my Boot. And if I lose my Boot, then I will regret spending money that I never locked in. Therefore, I end up not spending or not spending nearly as much as possible.

This type of thinking is not uncommon for super-savers and investors. The “what if” mentality is always lingering. However, it is because of this paranoia that many of us have been able to build much greater wealth than the average person.

Therefore, if you are unable to fully embrace The Boot concept, let me share a modified version: The Boot Plus.

“The Boot Plus” For The Super Frugal

In 2020, the S&P 500 returned about 18% after dividends. Therefore, the 8% Boot above the historical average is nothing special in my example above. Everybody who only invested in the S&P 500 returned 18%. Further, people who use the S&P 500 as a net worth growth benchmark also likely grew their net worths by 18% or more. Therefore, let's calculate The Boot Plus.

The Boot Plus is equal to your portfolio's performance minus the S&P 500's performance if the S&P 500 outperforms the historical average. The point of the Boot Plus is to reward extra outperformance. If you're just outperforming like everybody else, you do not deserve a trophy! You must outperform the outperformer.

For example, if your $1 million portfolio returned 18% in 2020, your Boot Plus is $0 because 18% is what the S&P 500 returned. You don't have any extra money to spend beyond your normal spending habits.

However, if your portfolio returned 40% in 2020, your Boot Plus is equal to 40% – 18% (S&P 500 return) = 22%. You've made $220,000 more than what the median S&P 500 investor made, who already made $80,000 more than the historical average.

Even if your portfolio is sucking wind the next year, your 22% outperformance of the S&P 500 that year and 30% outperformance of the S&P 500's historical performance should be enough to let you spend more money than usual.

More Scenarios Of The Boot And The Boot Plus

For clarification, here are more scenarios using a $1 million investment portfolio and the S&P 500, which has historically returned 10%. If your Boot is $0, then your Boot Plus is also $0.

  • The S&P 500 returns 12%, your portfolio returns 15%. Your Boot = $50,000 (15% – 10%). Your Boot Plus = $30,000 (15% – 12%). These are good times, therefore, you should spend more freely.
  • The S&P 500 returns 8%, your portfolio returns 9%. Your Boot = $0 because the S&P 500 and your portfolio underperformed the historical average return of the S&P 500. Although times are still good, rewarding underperformance is not the way of the Financial Samurai.
  • The S&P 500 returns 4%, your portfolio returns 20%. Your Boot = $0 because the S&P 500 underperformed its historical average. There is a growing uncertainty in the economy. Your Boot Plus = $0 even though you crushed it because you're preparing for future opportunities. Although, with such outperformance, you should feel free to spend at least 10% of your portfolio's return over the historical average (20% – 10% = 10% or $100,000/10).
  • The S&P 500 returns -15%, your portfolio returns 6%. Your Boot = $0 even though you significantly outperformed. During corrections or bear markets, it's best not to spend more than your usual if the economy is fraught with uncertainty. In general, you should rather take advantage of downturns and invest more money.

Finally, I do think it’s generally best to spend more money with your cash flow than selling your investments to spend money. The larger you can grow your investment pie, the better.

You'll Likely Never Spend Your Entire Boot

The Boot isn't an all-or-nothing concept. The goal is to spend more money during good times and when you outperform. After all, you can't get rich if you don't outperform the average. You certainly don't have to spend your entire Boot. If you have a sizable portfolio, it may be impossible to spend that much more money.

For example, let's say you had a $5 million portfolio that went up 40%. Using the same percentages for 2020, your Boot Plus is a significant $1.1 million ($2 million – $900K). If you're used to spending only $300,000 a year for a family of four, suddenly spending almost 4X your budget will be extremely difficult.

However, at the very least, your investment gains should enable you to freely buy almost anything you want. And if what you what is relatively inexpensive compared to your Boot, then consider yourself lucky!

Personally, I always like starting small and working my way up towards more spending. For example, I like taking my Boot Plus and dividing it by 100. I look around and see what I can buy with 1% of my Boot Plus. Then, I take my Boot Plus and divide it by 10 to see what I can buy. I continue on until my desires are satiated.

More times than not, you may receive another Boot Plus before you spend your previous Boot Plus. As a result, you will end up building even more wealth while you enjoy your life further.

If you always tether spending to investment performance, you will forever be a disciplined spender. As a result, you will also likely never get into financial trouble either. Here's to spending our fortune responsibly!

Related posts on spending:

How Much Savings You Should Accumulate By Age

The 10X Investment Consumption Rule To Fix Bad Spending

Readers, what do you think of The Boot and The Boot Plus method for spending money more freely? Do you have any smart spending rules that tie into investment or wealth gains? How do you overcome the guilt of spending more money?

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25 thoughts on “The Boot: A Smart Solution To Spending More Money Guilt-Free”

  1. Over the years I’m accumulated what would probably be considered a “boot surplus”. When the market did very well, I set aside some “excess profits” so I can freely spend it when I want without guilt or derailing long term plans (retirement, kids college tuition, etc). I use this “play money” to invest in indiviual stocks, more risky index funds, etc. So when I profit off these trades, I am guilt free in spending this surplus on anything stupid as it’s “profit off of already spendable assets”. And if I lose money on these investments, I call it the cost of entertainment just like if I went to Vegas. It’s a psych trick to make me feel better about stupid/luxury spending and bucketizes “allowed stupid spending that I still invest” as distinct from my long-term investments.

      1. Nothing big. New $1200 pair of speakers. New iPhone for the wife. Allowed our kid to play in a higher soccer league whereas club fees, travel, etc will probably come in $3000 higher for the next year vs last year’s league. Booked a better room for our trip to Yellowstone this summer (around $400/nt vs our typical $250/nt room). The bigger purchase will be a new car (we like new and can afford it). So an Audi or Benz vs an Acura is in the cards now. Our current SUV, which we bought new, is 16 years old now.

  2. Canadian Reader

    I’m going to spend my boot on a having a third baby ASAP. It’s a big boot, and I can’t think of anything that would make us happier. I can’t control it precisely, but I can try.
    In the meantime, I’m going to waste a little cash on botox and some new clothes. I’m also going to pay a personal trainer. I don’t really need the help, but I’m lonely in my new city, so I’m ok with paying for a friend to work out with. For Father’s Day I’m going to get my husband a few developed palm trees.
    On a more serious note, I will be reinvesting some in the form of a private placement on a mining stock, and on warrants from a previous private placement.

  3. I have a different method. Its called the turning 50 and what the hell happened to the time method. So far I’ve taken 2 very nice trips, bought a new truck, bought a condo and even cut back on some of my weekly S@P contributions. The thing is my net worth is still growing.

    I guess the best part of saving for 30 years is that at a certain point its time to spend.

    Thanks, Bill

  4. I always try to use my “boot” money on something that might end up being an asset in the long term. Such as a car I want that might end up becoming a classic and therefore more valuable in the future such as a Porsche. Or even things like collectible coins, jewelry, art, decor, and the like.

  5. After aggressively saving for years I’ve spent part of my boot on Super Bowl tickets this year and I couldn’t be happier :)

  6. I think the Boot Plus is a perfect example of giving yourself permission to live a little during good times in a nice, controlled way. After all, what’s the point of saving and investing and growing all that money if you can’t use it from time to time? If we all wait until we’re retired or at the end of life to enjoy our money, then was it really worth it?

  7. I try to live my spending life splurging on assets- things that put money in my pocket as opposed to taking money out of my pocket. Or, Atleast an asset that has the potential to reasonably appreciate overtime. Rental homes, my classic car, etc.
    Although rather useless today given the fact that I carry my phone with me during all waking hours, I’ve recently begun to lust over a Rolex. More specifically, the black dial Milgauss. I’m hoping this will be my next splurge and I plan to attain it as soon as my passive income improves by the purchase amount of the time piece.

      1. I may have odd taste, but I prefer the black dial without the green glass. I also wonder if perhaps fewer opvrijde were made?
        I also really like the blue dial green glass model too. Decisions, decisions…

  8. I like the alternative thinking. HOWEVER, we have a few holes in this.

    1.) Fails to account where you are on the financial journey. If you are at less than 1/2 your financial end goal, you likely should reinvest most of your boot.

    2.) You ruin the historical average. So if the SP on average returns 10% and you peel off all the earning above the average return and still stomach the below average years….then over the long haul YOUR historical average will be well under the 10% SP 500 historical average.

    This is well understood from savvy people like yourself…..but for newer people or less mathematically inclined….the boot is a dangerous concept.

    3.) I believe in balance….IF you live it up in an up year….you should pay the price in a down year. So if you reward yourself when the SP is on fire …. OR your investments are on fire….. it does make some sense to enjoy your fruits then because the more investment prices rise, the less likely they are to continue to rise. So profit take and enjoy.

    BUT you should have a system to invest more in down years to counter balance and buy more when investment prices are cheap and you get more bang for your buck.

    1. “the boot is a dangerous concept.”

      I like to live dangerously. But hopefully people have the ability to self-regulate.

      Good points. There’s an easy solution to your points. Your Boot spending comes from cash flow, which should be possible for the vast majority of people out there who work.

      Instead of taking profits in your investments when you outperform, just allocate more new cash flow to spending money if you wish.

      And hopefully, at some point, people will make much more from the investment portfolio than from their day job.

  9. I really like this concept of boot and boot plus. I am pretty far away from these levels so I don’t bother checking whether I beat S&P at all.

    Do you sell and lock in the boot or boot plus to avoid the “what if” regret?

      1. Same – I spend from cash flow instead of based on how my investments are doing. Since I have a W2 job, I just max out 401k and two 529 accounts via automatic paycheck contributions and spend the rest on living expenses, but for the last two years and going forward, I put my end of year bonus into a savings account and spend it on fun or big purchases throughout the next year. I also have real estate investments that I keep separate and reinvest 100% of the cash flow, so there’s really no need to invest my work bonus any more at this point. Having a year end bonus that I know is all mine to enjoy is highly motivating.

  10. Really fun and helpful advice! I like your thought on applying fractional boot plus spending calculations. I’m more in that camp.

    My idea of splurging would be something like $75 on a vintage swatch watch, $100 on vintage 80s toys, or $50 in retro or collectible stickers.

    Silly things that I totally don’t need and in the grand scheme of things don’t cost that much. But to me are fun ways to splurge. Yet I can’t help but feel guilty spending money on stuff like that because those things aren’t useful. They’re just collectibles for fun. So using a fractional boot plus calc could help me get over the guilt I suppose.

    It’s interesting how we all have such different ways to splurge!

    1. Nostalgia buying is the best! So fun to buy toys we had growing up or the things we wanted but could afford growing up!

      Now, I think it’s fun to splurge on our kids. But we must do so judiciously of course.


  12. I have been struggling to spend 3k for a mountain bike for 6 months despite increasing my networth over 1 million since this time last year. It all feels like funny money and is related to huge increases in real estate which does not feel sustainable. I am afraid of spending and can completely relate to this article. I wish I could live it up a little.

    1. How long have you owned your current mountain bike? How often do you go mountain biking? If you’ve owned your current mountain bike for a long, long, LONG time AND you go mountain biking multiple times per month, you should allow yourself a new bike. When it goes on sale of course!

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