Mindset Change from Killing-Debt to Protecting-Assets!

[heybro]

Hey!

In the very near future, I will have zero debt.  Up until now, I've been in the mindset of 'Killing the Dragon of Debt.'
Overnight, I'll instantly switch to 'Protect My Nest Eggs!'

I'm posting this to ask what kind of strategies, rules of thumb, or just general ways of thinking one should approach things.

I remember in the past I had asked a question about 'minimizing taxes' and I got a response saying that one shouldn't worry about taxes as much as they should worry about rate-of-return.  (A higher rate of return may be beneficial even if higher taxes).

When I was eliminating debt, the whole strategy was to kill the dragon.  This new freedom will be very ODD and I'm not asking about nuts and bolts so much as I'm asking about the new mindset.  I know you need to avoid luxury creep!

Thanks in advance!

[verfrugal]

Just like you automated paying off the debt, do the same thing with savings.  The more money that piles up in a place you can see it and easily access it, the easier it is to start giving yourself little treats and begin the process of hedonic adaptation.

That said, I do think a small, one time, treat for yourself to celebrate is worth it.  Like updating your 401k contributions, or opening a IRA, or a new Vanguard account -- and drinking an adult beverage.

[Financial.Velociraptor]

My experience was it starts out "easy".  From year 1 to year 2 your stash doubles.  Over the next year it goes up half again as much.  Year 9 to year 10 or some such, it gets harder to move the needle with frugality.  That's where it got harder to maintain discipline. 

[SansSkill]

I would start writing of belongings and furniture.
Basically estimate how many months something will last, than divide the cost of buying a new one right now by that. Round that up and put it away every month.

This way you don't need to take on new debt / postpone purchases in the future, it's saved me a couple of times when some electronics broke down and I could just walk into the shop and walk out with a replacement. Did it for my bed as well when I saw it wouldnt last more than a year or two still, about half that time later I saw a great deal I could pay cash, would have missed that opportunity and pay full price had I needed a new bed ASAP.

[heybro]

My experience was it starts out "easy".  From year 1 to year 2 your stash doubles.  Over the next year it goes up half again as much.  Year 9 to year 10 or some such, it gets harder to move the needle with frugality.  That's where it got harder to maintain discipline.

So true!  Not eating out in your 20s is a whole lot more meaningful than skipping a luxury in your 80s. 

This is really apparent with compound interest calculators.  Contributing so much per month when you are 50 ends in almost nothing additional for your retirement.  But even contributing half as much in your 20s makes a huge difference.

[ChpBstrd]

If you mean protecting your stash from yourself, IRAs are ideal for that. Just crank up your 401k deduction percentage until money stops piling up in your checking account. At that point, you have put a ceiling on your own spending that can only go up if you get a raise or pay the penalties for an early withdraw, and - most importantly - go through the steps of a brokerage withdraw and wait a few days for the transfer to hit your checking account. By then, you might have rethought the brand new Chevy Tahoe that the salesman made you a "great deal" on. ;)

Note that the 3rd point applies to any brokerage account. To make a withdraw, you must make a concious decision to destroy some of your future prosperity for the sake of current consumption. It's a very different mentality than credit cards encourage.

[MustacheAndaHalf]

OP mentioned "protecting" assets in both the title and first post.  Protecting generally refers to reducing risk when nearing retirement, typically by allocating more bonds.  You don't want that kind of protection when you're making your first contributions.

I like pointing to Vanguard and Fidelity target date funds, both of which allocate 90% stocks and 10% bonds for retirements decades from now.  Their expertise is more valuable than any reasoning or data I could provide, so I'd recommend following their approach.