Author Topic: Investment fluctuations and my daily spending habits  (Read 1715 times)

Daisyedwards800

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Investment fluctuations and my daily spending habits
« on: December 19, 2019, 12:04:24 PM »
I make $134,000 a year plus a $6,500 401k employer contribution (starting this year now that I qualify). 

Because I started saving early when I made less, and because of the recent stock market performance, my net worth increased $95,000 in 2018 and increased $70,000 this year.  This is more than half my salary. 

It is warping my idea of what things cost and how much I have to spend on things. I really need to get a handle on my budget, because when your net worth goes up (or down) so much in a week or a month, it seems like $15 here and there isn't a big deal.  I know this is my mind sort of playing psychological tricks on me, and thinking I am richer than I am and that small amounts don't matter, but  it will affect my future savings if I do not get more strict with myself.

frugaliknowit

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Re: Investment fluctuations and my daily spending habits
« Reply #1 on: December 19, 2019, 12:17:22 PM »
Yes, you need to get your arms around a budget so that you don't end up raiding your 401K to pay for unexpected emergencies, true.

pk_aeryn

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Re: Investment fluctuations and my daily spending habits
« Reply #2 on: December 19, 2019, 12:18:53 PM »
I would suggest setting up your direct deposit so that all of your money (other than what you need for necessities and whatever amount you deem to budget for fun money) to be directly deposited into brokerage account and automatically invested into an index fund. This is assuming you are already making the max contributions to the 401k, IRA, HSA.  If you donít have those things, get them (maybe not HSA depending on healthcare plans available to you and your individual needs.

Then donít ever look at those accounts, as little as possible. Pretend as best you can that you have no idea that money exists and even if you want it, youíre going to have to pay taxes on gains to withdraw it, which could be a good disincentive.

For example, Iím maxing out all retirement accounts available, and then putting $400 per paycheck automatically to vanguard. So my paycheck shows $900 biweekly going into my checking account for rent and bills, which makes me feel poor enough that I remain budget conscious.

honeybbq

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Re: Investment fluctuations and my daily spending habits
« Reply #3 on: December 19, 2019, 12:51:13 PM »
I don't spend mindlessly and am inherently thrifty (drink free coffee at work, etc).
That said, if I want something that's less than $100 I don't worry about it.
When you make or lose 50k in a day because of the stock market, these small fluctuations are irrelevant as long as they don't add up over time to be large.
In my mind it's called being on "cruise control" because you don't really look at the speed any more but you know you're getting there.

ontheway2

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Re: Investment fluctuations and my daily spending habits
« Reply #4 on: December 19, 2019, 12:53:11 PM »
Unless I am retired and living off my savings, my NW is irrelevant when deciding if I can/should buy something unless that something is freedom

Steeze

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Re: Investment fluctuations and my daily spending habits
« Reply #5 on: December 19, 2019, 05:29:18 PM »
All of my money is automatically transferred / invested/ etc. and I am left with only a small amount each month to spend. My spending money is a scarce resource, even on days my net worth increases 5 figures.

Laura33

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Re: Investment fluctuations and my daily spending habits
« Reply #6 on: December 20, 2019, 07:48:13 AM »
Why are you looking at your NW or investment account gains?  Seriously?  There's absolutely no reason to do that except for taxes, rebalancing/annual planning, and last couple of years pre-FIRE.

I tend to impose artificial poverty on myself:  I have everything taken out of my paycheck or bank account automatically.  When I get a raise, I increase the monthly withdrawals; when I get a bonus, it is pre-allocated to different things and also exits the account.  As a result, my checking account stays the same, or even drops over the course of the year (a big chunk of my pay is end-of-year), so I never feel flush (except for 12/31 when the end-of-year pay hits -- so I enjoy that for a week-ish and then return to normal life).   

FWIW, this is particularly useful if you trend spendy.  My DD has always been a spendthrift -- her bank account usually hit about $2.98 the last week before she got paid/got allowance, and she spent the entirety of her teenage years trying to persuade me to give her still more money on stuff that she was responsible for.  But we have also required that she put part of every dollar in savings, including allowance, birthday/bat mitzvah money, etc.  She's now back from college for the holiday, and I heard her talking with a friend about where they were going to go out for a group dinner and vetoing place after place as too expensive because she's broke.  So I pulled up her bank account:  sure enough, she's got $30 in her checking.  But she has almost $6K in savings!  I stuck the phone with the dollar amount right in her face -- and she covered her face like it was Medusa or something and said "don't show me, don't show me!  I don't want to know it's there!"  I said, honey, you're in school -- this is what you saved it for.  And she said "but it's SAVINGS.  Its for SAVING, not SPENDING!" 

Probably proudest parenting moment ever, btw.  ;-) 

Look:  no one is perfect.  Expecting yourself to always be rational and all your decisions to be unemotional/influenced only by your long-term plan is a losing game.  The way to succeed in the real world is to recognize your own weaknesses and design a system that works around them.