Author Topic: What do you do with the "extra"?  (Read 2866 times)

Moustachienne

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What do you do with the "extra"?
« on: May 06, 2018, 10:58:08 AM »
So here we are one year into FIR (at 60ish so not that Early) and it's pretty clear that we are going to have annual surplus income beyond what we need to live very nicely (paid off house in beautiful HCOL city, one "new to us" car, occasional meals in higher end restaurants, house cleaning service (!), travel every second year or so, very little clothes or other consumer spending, CDN healthcare, etc.) Because we're no longer saving we will have more $$ to actually spend than ever before.

We have some house renovation/refreshing I'd like to do and DH has a million hobbies (spending controlled through set budget) but even so, we are struggling to spend the entire income stream we set up.  Nice problem to have, I know.

But here's the thing, we don't want to inflate our lifestyle beyond our current approach (and you can see we're hardly suffering), e.g. we don't want to become constant travellers, and we don't want to leave a large estate (no kids).  Basically we don't want to just hoard the nest egg when it could be doing good in the world.  We're looking at $20-25K/yr surplus, not MMM $400K/yr scale but kind of the same problem. :)

We will be looking at setting up planned charitable contributions again (stopped after FIR till we got our bearings) and also trying to figure out how to help family.  That second one is very complicated, as many threads on this Forum have shown.

How have others handled surplus savings/income?  What does your "values" spending look like?


Livethedream

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Re: What do you do with the "extra"?
« Reply #1 on: May 06, 2018, 08:39:33 PM »
First, congrats, you made it! I still have a way to go but itís inspiring seeing people that are there.

My wife and I talk about this quite a bit. When we have extra money we want to donate after we tithe (part of our religious belief) we have a few things we like to do.

I will use a disclaimer and say, there are a few awesome sites that rank non-profits and will show you the% you give that actually gets used and not absorbed in overhead. We feel it is in our best interest to do some research when one company could be giving 20% more then another.

ďAdoptĒ a kid program like world vision, fun because you get a chance to correspond, see pictures, a more personal connection.

Clean water, wells, medicine for Third world countries.

We try to donate local as well, diapers is one my wife has enjoyed lately. We like to do an entire Christmas for an underprivileged family and will buy them clothes shoes toys etc, Christmas dinner, and have it given anonymously to the parents for them to give.

Sit down with your spouse and see what is on your hearts that you would like to do.

Maybe buying some financial books for a graduating high school class nearby?

Best of luck, find something that brings you joy when you give.


dude

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Re: What do you do with the "extra"?
« Reply #2 on: May 07, 2018, 08:49:16 AM »
$20k-$25k surplus each year?? Holy shit, that's a LOT of money!!

Do you have long-term care insurance?  If not, and you plan to self-insure, you may want to set a portion of that aside for LTC.

P.S. -- care to share what your annual expenses are?  Is it a multiple of your surplus amount, or do you just live a really frugal existence?

Eric

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Re: What do you do with the "extra"?
« Reply #3 on: May 07, 2018, 11:06:01 AM »
One year?  I wouldn't do anything yet.  At least wait until the next recession and see how you feel after that.

MonkeyJenga

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Re: What do you do with the "extra"?
« Reply #4 on: May 07, 2018, 01:29:22 PM »
My surplus money, which will be plenty when I de-FIRE to go back to work, will go toward charity and political causes. No kids, no plans for kids, and no family members in need of help. Honestly, barring disability, I would not leave much money to my hypothetical kids anyway. I have seen many examples of economic outpatient care, or an overabundance of privilege as children, skew people's lives.

sui generis

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Re: What do you do with the "extra"?
« Reply #5 on: May 07, 2018, 01:32:36 PM »
I second the donation suggestion.  From local to international, there are so many worthy charities that could speak to anyone's deepest wishes, I am confident that you could find something that resonates with you.  To get more bang for your buck, if you intend to donate that much, you can easily request to meet with someone that will show you the good they are doing, so you can feel the effect more concretely, rather than just have money disappear from your bank account one day.

My FIRE budget (to be implemented in 9+ months - I'm sadly still working), is just under 20% donations, so I'm basically doing it the other way round.  Rather than ending up with surplus, I'm committing to it in advance which is a big priority for my own FIRE journey, and if things start taking a turn for the worse, and 3.5% WR needs to be reduced, that's one place I can go if needed to preserve financial security.

Moustachienne

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Re: What do you do with the "extra"?
« Reply #6 on: May 07, 2018, 04:18:18 PM »

First, congrats, you made it! I still have a way to go but itís inspiring seeing people that are there.
[many good suggestions]
Best of luck, find something that brings you joy when you give.


We are still pinching ourselves that this is all working out!  When we were working we donated to local and international organizations on an ongoing basis, as well as supporting random one off causes, e.g. sponsoring friends and relatives for charity walks.  We had a strategy and I think that's what we need to develop again.  I like the idea of donating at a foundational/infrastructure level through regular support that an organization can count on and also at a more personalized level, e.g. the idea of books for a specific classroom.  Sitting down with DH to come up with a plan will be the first step.

$20k-$25k surplus each year?? Holy shit, that's a LOT of money!!
Do you have long-term care insurance?  If not, and you plan to self-insure, you may want to set a portion of that aside for LTC.
P.S. -- care to share what your annual expenses are?  Is it a multiple of your surplus amount, or do you just live a really frugal existence?


It IS a lot of money!  Pretty clear that we oversaved and that's because we didn't really believe the Simple Math once we discovered MMM and we listened too much to the widespread naysaying that nobody can ever afford to retire or that you need to replace 100% of your salary, etc.  We don't have long term care insurance but have accounted for these costs in our savings/downsizing plans before the annual drawdown.

 Our "barebones" annual expenses are about $25K (with paid off house) and our "normal" middle class style expenses have been running at about $40K tops for many years.  Due to being (overly)conservative, we didn't retire until we had assets enough to generate $65/yr after tax with a 3.5% SWR.  EVEN THOUGH WE'VE NEVER SPENT THAT MUCH IN OUR LIVES.   Plus we're old at 60ish so CPP/OAS gov't pensions will soon kick in (included as part of the nest egg) and we're Canadian so catastrophic acute care health costs are not a worry.  Other health care costs are factored in (dental, prescription, long term care).  Yep, we could have retired sooner than we did.  Although many former colleagues still think we retired "young" and wonder how we did it.  SMH

Our target income level was pretty influenced by these articles on the 3 levels of CDN middle class income and the nest egg required for each - http://www.moneysense.ca/save/retirement/how-much-money-you-need-to-retire/ ; http://www.moneysense.ca/save/retirement/how-much-money-will-you-need-to-retire/ 

What we hadn't factored in was the effect of even non-badass levels of MMM style optimization on the $$ needed to live happily, as well as our commitment to not inflate our lifestyle when we paid off the house and our incomes rose over the past 10 or so years.  Especially no clown cars and no clown trips.  :) 

One year?  I wouldn't do anything yet.  At least wait until the next recession and see how you feel after that.

I'm not too concerned about a recession as we know we can easily trim expenses and as we've set the annual draw down on the "cash wedge" approach, that is, we have 3 rolling years of living expenses in term deposits/non-reg funds before we'd have to sell off any stock.  That should give things time to bounce back but you're right, there's still risk.  At only one year in, we'll take our time before setting up any major ongoing charitable commitments.

My surplus money, which will be plenty when I de-FIRE to go back to work, will go toward charity and political causes. No kids, no plans for kids, and no family members in need of help. Honestly, barring disability, I would not leave much money to my hypothetical kids anyway. I have seen many examples of economic outpatient care, or an overabundance of privilege as children, skew people's lives.

I have a couple of siblings that could use some help but this is due to some dodgy decisions on their part which they need to own.  Still trying to figure out if and how best to help them out.  Gifts not loans but even that could blow up on me.   This is a very tricky area and the "skewing" risk is real. 

My FIRE budget (to be implemented in 9+ months - I'm sadly still working), is just under 20% donations, so I'm basically doing it the other way round.  Rather than ending up with surplus, I'm committing to it in advance which is a big priority for my own FIRE journey, and if things start taking a turn for the worse, and 3.5% WR needs to be reduced, that's one place I can go if needed to preserve financial security.

Committing to the donation priority in advance is very badass!  I suspected we would be able to give bigger than we thought but was just too conservative/scaredypants to make that an upfront priority.  Very happy that we're getting to it now.

Bendigirl

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Re: What do you do with the "extra"?
« Reply #7 on: May 08, 2018, 05:47:26 PM »
Yipes...you are us!

Same age group, same country, one new truck, one new to us gas saver, house paid for, same expenditure range (we spend a bit more), and excess dollars...but Iím not sweating that!  We have one son and every intention of travelling until it is no longer possible...first class if we have the money.

We live offf pensions only, the nest egg awaits.  Pension amounts will only get larger at 65.  Right now life is very good with adventures planned for September and November.

Congrats

TheWifeHalf

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Re: What do you do with the "extra"?
« Reply #8 on: May 08, 2018, 06:13:52 PM »
TheHusbandHalf will retire in January, and we will have 'extra.'
Our plan, at least in the beginning is to just add to the stache.  I have DNA that make us want to figure I''ll be around for another 35 years, and when thinking about how it used to be 35 years ago, and the changes that have happened, we better be prepared.

I hear every few weeks about another pension in serious trouble, and I just know the government's going to figure out a way to get part of all the Roths.
So, we're just going to invest it. If there's a lot left when we die, our will will specify how it's to be divided. If there's not so much, those people can blame the government for taking it.

DreamFIRE

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Re: What do you do with the "extra"?
« Reply #9 on: May 08, 2018, 07:23:22 PM »
I hear every few weeks about another pension in serious trouble, and I just know the government's going to figure out a way to get part of all the Roths.

Time to plug this thread:

https://forum.mrmoneymustache.com/welcome-to-the-forum/how-pissed-would-you-be-if-roths-got-taxed/

Gone Fishing

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Re: What do you do with the "extra"?
« Reply #10 on: May 08, 2018, 07:51:03 PM »
If all goes to plan, we should have a huge surplus.  I've been thinking of endowing a small nature museum for our town.

Step37

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Re: What do you do with the "extra"?
« Reply #11 on: May 08, 2018, 11:09:07 PM »
Sounds like one of the best kinds of problems to have. I am sure there are many worthy causes that would be grateful to receive your help. Iím impressed that you are unwilling to simply inflate your lifestyle to match the surplus.

Reading stories like this makes me believe in the plan for my husband to retire this year (at 48) while my income (more than) supports our expenses while the stash grows for a few more years. I am part owner of a small business, so walking away is not an option yet (currently on four days per week and aiming to get to just three! I thought I was there, but itís too busy. Another ďgoodĒ problem.). Hopefully it will be within a few years. Iíd love for my husband to be free of the constraints of his work demands (even though he has decent flexibility), maybe do some p/t casual work for a friendís company, do house/yard projects and just enjoy life a bit. And of course have supper ready on my work days;)

MonkeyJenga

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Re: What do you do with the "extra"?
« Reply #12 on: May 09, 2018, 12:31:14 AM »
My surplus money, which will be plenty when I de-FIRE to go back to work, will go toward charity and political causes. No kids, no plans for kids, and no family members in need of help. Honestly, barring disability, I would not leave much money to my hypothetical kids anyway. I have seen many examples of economic outpatient care, or an overabundance of privilege as children, skew people's lives.

I have a couple of siblings that could use some help but this is due to some dodgy decisions on their part which they need to own.  Still trying to figure out if and how best to help them out.  Gifts not loans but even that could blow up on me.   This is a very tricky area and the "skewing" risk is real. 

I recommend trying to help them with your time and knowledge before giving them money. Judge whether they are invested and can use the money responsibly. And if you do decide on monetary gifts, prepare yourself to see it wasted and have them come back to you asking for more money. Not a guarantee, but seems probable based on other people's stories of trying to help people who haven't managed their own money well and haven't changed their approach.

sokoloff

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Re: What do you do with the "extra"?
« Reply #13 on: May 09, 2018, 02:06:50 AM »
Thereís a long way between constantly traveling and a trip every couple of years. While youíre still young(-ish) and mobile, Iíd consider traveling twice a year and using those 3 ďextraĒ trips every 2 years to learn about the world. Part for enjoyment and intellectual curiosity, but part to inform how youíd like to devote your resources of money and/or time.

Iíd also loosen up the purse strings a bit. If DH has a millions hobbies and you know plainly have enough money and he enough time, thereís less reason than before to keep a tight leash on hobby spending. Assuming the hobby isnít raising hogs in the suburbs, whatís the harm? I see a lot of older friends go downhill fast mentally and physically when they stop working and that alllows them to stop moving and thinking everyday. Hire out more tasks that you donít like. Maybe in addition to having cleaners, maybe your days of raking fall leaves are over, maybe the local independent mechanic now does your oil changes instead of DIY, etc.

By all means allocate money to help others, but youíve earned the right to increase your own enjoyment of your healthy, active, golden years as well. Iíd at least partially seize that gift youíve given yourselves.

Hirondelle

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Re: What do you do with the "extra"?
« Reply #14 on: May 09, 2018, 03:52:51 AM »
Thereís a long way between constantly traveling and a trip every couple of years. While youíre still young(-ish) and mobile, Iíd consider traveling twice a year and using those 3 ďextraĒ trips every 2 years to learn about the world. Part for enjoyment and intellectual curiosity, but part to inform how youíd like to devote your resources of money and/or time.

Iíd also loosen up the purse strings a bit. If DH has a millions hobbies and you know plainly have enough money and he enough time, thereís less reason than before to keep a tight leash on hobby spending. Assuming the hobby isnít raising hogs in the suburbs, whatís the harm? I see a lot of older friends go downhill fast mentally and physically when they stop working and that alllows them to stop moving and thinking everyday. Hire out more tasks that you donít like. Maybe in addition to having cleaners, maybe your days of raking fall leaves are over, maybe the local independent mechanic now does your oil changes instead of DIY, etc.

By all means allocate money to help others, but youíve earned the right to increase your own enjoyment of your healthy, active, golden years as well. Iíd at least partially seize that gift youíve given yourselves.

OP emphasizes they aren't interested in inflating lifestyle, still you suggest inflating lifestyle because they've "earned the right"? OP sounds like they already greatly enjoy their golden years. I do agree that DHs hobby spending doesn't need tight control in this situation, but suggesting 3 extra international trips every two years (who says they enjoy that much travel or there's that many places they want to visit?) and hiring out more tasks sounds downright odd to me on a frugality forum.


To OP:
That's indeed a wonderful problem to have and I love the idea to donate your extra money. I'd probably not donate the full yearly amount to keep a little as an extra safety net or maybe some (unexpected) increased spending as you've only been 1 year into FIRE. But that'll still leave a good amount for donations. Where you want to allocate your money will greatly depend on your own values and you should align it with that. I'm very interested in "effective altruism" mostly, so some of my favorites are:
- Anti malaria foundation
- Cool earth (most cost effective for climate change)
- Give directly

I also like to donate to charities supporting research towards rare (genetic) diseases and alternatives for animal experiments, but that's some very personal values as this is a field I work in. Oh, and just anything that reduces environmental damage like plastic waste cleanup, rainforest protection. And sometimes just local causes like local homeless people or the foodbank. Regarding the local ones you could also consider giving your time by volunteering now you've retired.

sokoloff

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Re: What do you do with the "extra"?
« Reply #15 on: May 09, 2018, 04:27:19 AM »
I submitted some thoughts for the OP to consider (and even used that specific cue word).

Sounds like you agree with some of those thoughts that were contrary to OPís original post and contrary to extreme frugality and you disagree with others. Thatís fine, and I assume the OP can take all the input, consider it, and make life choices.

Hirondelle

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Re: What do you do with the "extra"?
« Reply #16 on: May 09, 2018, 06:49:00 AM »
Oh yes I didn't think your suggestions were bad at all (I love travel), but I was mostly surprised at how your explicitly suggested increasing spending in 3 areas. Sorry in case I came off as a bit snarky there :)

Moustachienne

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Re: What do you do with the "extra"?
« Reply #17 on: May 09, 2018, 12:12:40 PM »
Thanks for the thoughts/ideas!   "Golden years"?  lol - 60 isn't THAT old.  But it depends on what age you're typing from.  Not to mention that worrying about surplus money is pretty golden at any age.

Re the travelling question.  I know this has been debated on many other threads and it really is a "to each his own" question but for us, travelling too much more than we do wouldn't feel in line with our values.  We like to enjoy our house and city and be involved in the community through volunteering.  That means we want to be here and not somewhere else, at least not for long stretches of time.  And honestly, it feels weird when I meet up with other retirees and the only topic of conversation is where people have travelled or are planning to travel next.  "Where/when's your next trip?" is the default topic, even ahead of talking about the weather!  It can come across as endless surface consumption.  Not to say that we haven't travelled a fair bit and plan to do more!  Including some beach time that will be hardly world-changing.

Re DH's hobby allowance.  We can increase the ceiling on that but a budget is a very useful behaviour nudge to make sure that the hobbies aren't all about buying equipment and also include actually doing the things.  The doing is often cheaper than the equipment accumulation. :)

It's really interesting to see the different things people are supporting and/or plan to support once finances allow.  My takeaway is that the satisfaction is in the conscious decision-making about where to direct the funds.  A museum!  Now that's a cool idea.

The very real difficulty in using surplus funds for family makes me sad.  Charity begins at home and all that but good money after bad isn't true charity.  Neither of my siblings are in danger of being on the street, their decisions haven't been that bad, but sharing our surplus with them in any big way would be very tricky.  I'll probably just go in the direction of "treats", e,g, a nice dinner out or a weekend away together.