Author Topic: How did you make the shift from earning to spending?  (Read 2844 times)

4tify

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How did you make the shift from earning to spending?
« on: April 25, 2021, 05:36:43 PM »
As I contemplate moving from earning to living off my investments Iím curious how those of you post FIRE have navigated this psychologically. 

I started earning paychecks at 12 years old and for the most part have always had income of some kind since then. As I get closer to FIRE Iím finding the idea of no longer earning a bit scary to be honest, and in some ways I worry I wonít find the courage to actually give up my job when the time comes.

Malcat

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Re: How did you make the shift from earning to spending?
« Reply #1 on: April 25, 2021, 05:40:44 PM »
Are you asking how people adjust or how they manage to make the decision in the first place??

In terms of making the decision, you just have to do it. Know that once you reach your goals, another year of earning is not going to make or break your future. Know your plan, and execute it.

Once you are retired, I wouldn't worry about it too much. People adapt to new realities pretty quickly. You will have other more important things to think about like "what the hell actually makes me happy" to worry about and keep you busy.

4tify

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Re: How did you make the shift from earning to spending?
« Reply #2 on: April 25, 2021, 05:50:34 PM »
Are you asking how people adjust or how they manage to make the decision in the first place??

In terms of making the decision, you just have to do it. Know that once you reach your goals, another year of earning is not going to make or break your future. Know your plan, and execute it.

Once you are retired, I wouldn't worry about it too much. People adapt to new realities pretty quickly. You will have other more important things to think about like "what the hell actually makes me happy" to worry about and keep you busy.

I think I understand broadly how people get to the decision to pull the plug once ready, but Iím curious if others have had any struggles making the shift mentally and what that process looked like for them.

You sound like an extremely confident person Malcat. I am more of a waffler maybe. But once I get through the consideration phase Iím usually good to go. But so far still mulling things over.

Still working on ďwhat the hell makes me happyĒ too! :)

Malcat

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Re: How did you make the shift from earning to spending?
« Reply #3 on: April 25, 2021, 06:07:45 PM »
Are you asking how people adjust or how they manage to make the decision in the first place??

In terms of making the decision, you just have to do it. Know that once you reach your goals, another year of earning is not going to make or break your future. Know your plan, and execute it.

Once you are retired, I wouldn't worry about it too much. People adapt to new realities pretty quickly. You will have other more important things to think about like "what the hell actually makes me happy" to worry about and keep you busy.

I think I understand broadly how people get to the decision to pull the plug once ready, but Iím curious if others have had any struggles making the shift mentally and what that process looked like for them.

You sound like an extremely confident person Malcat. I am more of a waffler maybe. But once I get through the consideration phase Iím usually good to go. But so far still mulling things over.

Still working on ďwhat the hell makes me happyĒ too! :)

My point was that you have no idea how you will feel once you retire. So as long as you can pull the trigger, I wouldn't worry about anything beyond that because it's impossible to predict in advance what you will and won't struggle with when your life changes dramatically.

The only thing I can guarantee for you is that how you feel about retirement and your finances will probably surprise you.

Moustachienne

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Re: How did you make the shift from earning to spending?
« Reply #4 on: April 25, 2021, 06:12:39 PM »
Great question!  And one we're still figuring out 4 years into retirement.  We found saving fairly easy and our default is still to save, even though we want to spend down the stache before we die! It has been surprisingly hard to go from a save to spend mentality. Since retiring we've had an unexpected inheritance and DH has been earning $$ at "hobby jobs".  Add in Covid restrictions and we haven't been spending at the levels we intended. Our intention is to pretty much spend down by age 95.

What has helped us is to have pretty specific spending plans, i.e. not lifestyle inflation in general.  So specific home improvements, charitable giving, family "fun", all within the envelope of what we know we can spend each year. 

Figuring out how to set up income flows without triggering unwanted taxes or clawbacks has been interesting and we struggle with how to tap lump sums rather than "save" from our income flows, our natural default.  Once funds are in terms or other investment accounts, we find it psychologically hard to tap those funds.  Lol - a nice problem to have but one that does bedevil us.

The struggle is real!

I see that your question is more about the fear factor in living off investments rather than earned income.  That struggle is real too. :)  But once you have a good plan is place, taking into account your needs/wants/psychology, you'll be surprised at how secure you will feel.
« Last Edit: April 25, 2021, 06:14:45 PM by Moustachienne »

MoseyingAlong

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Re: How did you make the shift from earning to spending?
« Reply #5 on: April 25, 2021, 06:22:10 PM »
@4tify I've been struggling with this for a few months.
I "know" I have enough financially. I'm really looking forward to a break from work and the associated stress.
On the other hand, it has been amusing to watch the gyrations my mind goes thru about how to keep working.
...I could do this to keep it as a leave of absence instead of quitting;
   there sounds really interesting...I could take a travel assignment there;
   I've wanted to get back to that, this would be a good time;
   I've always wanted to try x,y,z, maybe this is the time.

Like you, I've been working or training for a specific job since I was young. And I'm uncomfortable with the change, even while looking forward to it.
Plus there are aspects of all my jobs that I've enjoyed and miss/will miss.

So my current plan is to call it a sabbatical. 6-12 months and see how I feel as the time goes by. Several friends are on standby to remind me if I start talking about work plans in the first 6 months. I have a rather long list of things I'm interested in doing so plan to jump into some of them while not setting any alarm clocks.

And I'm open to the option of returning to paid work of some kind in the future. But under my constraints. I've been setting my own, part time schedule for the last couple years and that is a marvelous situation. I will not return to full-time or someone else's schedule. Financially-paid-work may vie with other-compensation-work for my time. Because I do get other compensation from volunteer work be it knowledge, skills, good feelings, company of coworkers, feelings of usefulness, satisfaction of a job done, etc..

Those are my thoughts at the moment.

Greystache

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Re: How did you make the shift from earning to spending?
« Reply #6 on: April 25, 2021, 07:13:02 PM »
I put together a pretty detailed retirement budget and spending plan before I pulled the plug. My budget was based on actual spending in the years leading up to retirement. I actually pulled old bank statements and credit card statements to determine how much we really spent and what we spent it on. I then added an estimate for the things that would be different in retirement like more entertainment and travel. When I first retired, I tracked my spending in a spreadsheet every month to make sure I was on track. I did this for two years until I was convinced that my budget and spending were in sync.  Now I just track my spending at the end of each year see how I'm doing. So spending did not turn out to be that difficult.  I think the biggest change money-wise is my attitude towards investing. I find myself much more conservative and risk averse now that I don't have a steady income stream. I still haven't gotten over that yet.

secondcor521

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Re: How did you make the shift from earning to spending?
« Reply #7 on: April 25, 2021, 08:41:39 PM »
For me the process was something like:

1.  Decide I wanted to stop working.
2.  Figure out when I had "enough" money to do so.
3.  Decide that work was not fun anymore.
4.  Stop working and
    a.  Start worrying about if the math from step #2 actually will work.
    b.  Start worrying about market crashes, what if it's different this time, what if I did the math wrong, etc.
5.  Be nervous for about 3 years while
    a.  The worst doesn't actually happen.
    b.  Some unexpected good stuff happens.
    c.  The math actually appears to work, I didn't mess up the spreadsheet calculations, etc.
6.  Relax.
7.  Start worrying about what to do with all the extra money.

TLDR, you'll probably be nervous for a while and it probably will turn out better than you think.

deborah

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Re: How did you make the shift from earning to spending?
« Reply #8 on: April 25, 2021, 10:52:13 PM »
Yes, this is real. Even after youíve been retired for a while, and each year youíve ended up having more in your stash than you had a year ago.

Then comes the year you end up with less than you had the year before. You think about it for a while, and realise that you still have more than you had two years ago. So itís all still ok.

norajean

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Re: How did you make the shift from earning to spending?
« Reply #9 on: April 26, 2021, 06:18:36 AM »
There can be a transition from full income to full withdrawal. Despite retiring in Oct, we will have various sorts of income trickling in for a couple years and wonít make any withdrawals.

It is not uncommon to have a fear of reducing the portfolio. There are definitely people who work longer, tighten the screws on spending and live off SS in order to preserve their savings forever. It can be done.

My dad is 91 and has more income than he can spend just due to govt pension, military pension, SS and my momís pension PLUS he is frugal as heck. His 7 figure portfolio continues to grow. With a paid off house and vehicles and no kids there really isnít much you can spend on every month but food and utilities.

Malcat

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Re: How did you make the shift from earning to spending?
« Reply #10 on: April 26, 2021, 06:30:53 AM »
There can be a transition from full income to full withdrawal. Despite retiring in Oct, we will have various sorts of income trickling in for a couple years and wonít make any withdrawals.

It is not uncommon to have a fear of reducing the portfolio. There are definitely people who work longer, tighten the screws on spending and live off SS in order to preserve their savings forever. It can be done.

My dad is 91 and has more income than he can spend just due to govt pension, military pension, SS and my momís pension PLUS he is frugal as heck. His 7 figure portfolio continues to grow. With a paid off house and vehicles and no kids there really isnít much you can spend on every month but food and utilities.

Sure, but that only makes sense if the plan is to die rich.

If someone wants to actually follow the plan they set for themselves in retirement, they have to spend accordingly.

If someone wants to change their plan and grow their 'stache, then OMY would actually be the more efficient way to go.

If spending less in those first years as a SORR hedge is part of the plan, then that makes sense to me. But I don't understand making a plan and then suddenly turning around and not following it.

That's why I emphasized to OP to make a solid plan that they can be sure of and then don't second guess it.

If they know they're someone who isn't going to be comfortable spending their entire WR for the first few years, then plan for that. If they're someone who is going to want some income stream, then plan for that. If they're someone who is going to feel the need to adjust their WR according to dips in the market, then plan for it.

I'm not saying plans should be rigid and shouldn't change, of course they should. Just that it makes no sense to me to base retiring of off a plan that you have no intention of following.

NotJen

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Re: How did you make the shift from earning to spending?
« Reply #11 on: April 26, 2021, 07:37:32 AM »
I'm 1.4 years in.

Psychologically, it has been much easier than expected.  Not getting a paycheck turned out to be no big deal.  I had planned and prepared - the transition was anticipated and easy at that point.

I even rode out the "Covid Crash" 4 months after quitting.  It proved that I'm fine as long as I have at least a year's worth of cash on hand.  It's possible I'd be fine with even less, but that hasn't been tested yet.  And now my net worth is way higher than when I quit in spite of not making any contributions to my investments, so I'm feeling quite comfortable that everything is working as planned.  With my cash cushion and recent home sale proceeds, I won't have to sell any investments for a while.

What gave me the courage to quit was expecting to "eventually" get another job.  I was 100% certain that I would never want to go back to the specific job/career that I quit (that has not changed).  As time goes on, it looks like I might never *have* to get another job, but I will do paid work when I want to.

oneyear

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Re: How did you make the shift from earning to spending?
« Reply #12 on: April 26, 2021, 08:56:52 AM »
I get this. I'm in fake drawdown at the minute. Spending only what I earn in line with our post-fire drawdown amount. Its working fine

After all bills etc are taken care of, we pay ourselves a decent discretionary allowance. I do still find myself saving from this amount and building back up my own little individual pots outside of our overall savings/investments. I don't think I'll ever drain the account each month though.

Fishindude

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Re: How did you make the shift from earning to spending?
« Reply #13 on: April 26, 2021, 01:07:32 PM »
First you have to do some budgeting to determine what your post fire spending is going to look like.   Spend some time on this and try to include everything you can think of.
If you've got enough supplementary income and investment income to cover those expenses, plus a cushion, pull the trigger and quit.   

I kind of felt like I was leaving the workforce a bit earlier than I should have (57), but now 3.5 years later, I'm glad I did and probably could have pulled the plug a year or two sooner.

friedmmj

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Re: How did you make the shift from earning to spending?
« Reply #14 on: April 27, 2021, 08:22:22 AM »
First you have to do some budgeting to determine what your post fire spending is going to look like.   Spend some time on this and try to include everything you can think of.
If you've got enough supplementary income and investment income to cover those expenses, plus a cushion, pull the trigger and quit.   

I kind of felt like I was leaving the workforce a bit earlier than I should have (57), but now 3.5 years later, I'm glad I did and probably could have pulled the plug a year or two sooner.

I think you retired at a good age from an objective standpoint.  Health and energy are much higher for most people at 57 than 67.  I'm biased in that I am retiring next year at 55.  I think a lot of folks who retire at 60 or 65 could have easily retired at 55 or 57 and most of those people regret that decision and those lost "good years".

4tify

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Re: How did you make the shift from earning to spending?
« Reply #15 on: April 27, 2021, 03:34:44 PM »
Thanks to all for the input! Very helpful.

@MoseyingAlong I have also been thinking about taking a "sabbatical" and going from there. Would definitely give me a trial run making the shift. I think I sometimes have the RE thing as very black & white in my head, as if I'd never consider going back to work--which is always an option of some kind.

@norajean that's an amazing story about your dad. I definitely don't want to leave behind a ton of money (even though it's a bit hard nailing that part down).

@oneyear I took advantage of last year to do a 'fake drawdown' as well. Was much easier to track unnecessary expenses while sitting at home. Food & booze budget definitely went up, balanced out by no gym dues. Can't say either was a good thing!

@Fishindude I appreciate the look back. I'm about to turn 54 and 55 has always been my line in the sand exactly because I've seen how the 60's start wearing on some people and I want to take full advantage of the well being I have left. I do think in my early years we'll be spending more on travel/hobbies, so that's of some concern. I've budgeted about $15k/yr for that above & beyond some every day extras. Curious what you've found you spend on fun/hobbies/travel. Assume there's some $ going into fishing hooks??


FLBiker

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Re: How did you make the shift from earning to spending?
« Reply #16 on: April 29, 2021, 07:51:01 AM »
Thanks for this thread!  This has been very helpful to read, and I especially found this "outline" to really resonate with me.

For me the process was something like:

1.  Decide I wanted to stop working.
2.  Figure out when I had "enough" money to do so.
3.  Decide that work was not fun anymore.
4.  Stop working and
    a.  Start worrying about if the math from step #2 actually will work.
    b.  Start worrying about market crashes, what if it's different this time, what if I did the math wrong, etc.
5.  Be nervous for about 3 years while
    a.  The worst doesn't actually happen.
    b.  Some unexpected good stuff happens.
    c.  The math actually appears to work, I didn't mess up the spreadsheet calculations, etc.
6.  Relax.
7.  Start worrying about what to do with all the extra money.

TLDR, you'll probably be nervous for a while and it probably will turn out better than you think.

We're tracking our budget strictly this year - in both prep for RE and because we just moved from Tampa to Nova Scotia and I want to make sure we're still in the same ballpark.  I think I'll be pretty confident after that about our "number", and we hit it a few months ago.  I'm thinking about starting by switching to part time, and I think that will be doable.  I want to do this partly because, like the OP, I'm anticipating a lot of mental resistance to switching from earning to spending, and partly because I know I do better with structure and accomplishment.  I know that's possible to get outside of paid work, but I think, as I establish that, having some paid work would be helpful.  I'm basing that on how poorly I've done (mood wise) with large swaths of unstructured free-time in the past.  In fairness, most of that was many years ago, and I have improved some habits since then (ie getting sober, meditation, exercise, etc.).  We shall see!

Fishindude

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Re: How did you make the shift from earning to spending?
« Reply #17 on: April 30, 2021, 07:42:07 AM »
@Fishindude I appreciate the look back. I'm about to turn 54 and 55 has always been my line in the sand exactly because I've seen how the 60's start wearing on some people and I want to take full advantage of the well being I have left. I do think in my early years we'll be spending more on travel/hobbies, so that's of some concern. I've budgeted about $15k/yr for that above & beyond some every day extras. Curious what you've found you spend on fun/hobbies/travel. Assume there's some $ going into fishing hooks??

I spend $20-30k annually on hunting and fishing and all of the related travel and spending associated with such.

Linea_Norway

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Re: How did you make the shift from earning to spending?
« Reply #18 on: May 02, 2021, 05:07:45 AM »
We also FIREd 1.4 year ago. We just continued spending as frugally as we used to. But we are a bit more aware of spending than earlier. We actively sell and buy stuff second hand. That feels good financislly and environmentally.
When I still worked, I track my expenses in detail and looked at DH bulk of expenses once a year. Now I don't feel like spending that much time on track half our expenses. So now we check once a year how much we own, earned and spent.
Last year, I had non-work income and still have some. DH had nothing in 2020. But he wasn't nervous about paying rent every month from his account. He did however work for 3 months this year, because he had only taken a year off in 2020.
It looks like we have enough compared with what we planned for. And it looks like DH will be receiving his inheritance after his mother very soon, which is an extra cushion. We have more of such cushions waiting for us in the future. So we are not quite worried financially.

Cannot Wait!

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Re: How did you make the shift from earning to spending?
« Reply #19 on: May 02, 2021, 10:01:33 AM »
The mindset change from saving to spending is weird. I find myself looking at something in a store thinking, 'I can do without that',  then I think, 'I'm rich, I can easily afford that'.  Then I think, 'but that's why I'm rich...'

Also, once you have the money plan in place, you can STOP thinking about money and focus on life.

Retired 5 years ago.  It doesn't get old.  ;)

spartana

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Re: How did you make the shift from earning to spending?
« Reply #20 on: May 02, 2021, 10:08:31 AM »
The mindset change from saving to spending is weird. I find myself looking at something in a store thinking, 'I can do without that',  then I think, 'I'm rich, I can easily afford that'.  Then I think, 'but that's why I'm rich...'

Also, once you have the money plan in place, you can STOP thinking about money and focus on life.

Retired 5 years ago.  It doesn't get old.  ;)
This has been my experience also. I also feel like I still earn since money magically shows up in my checking account each month from various sources - and I didn't do one damn thing but play all day! I still get a little thrill each times that happens. Never got the same feeling when I was working and my payday arrived. I toiled for that money. Now I just go to the beach and play volleyball all day  ;-). Magical I tell you! I am still frugal because that's my nature as well as Im a minimalist environmental wacko so not much Im interested in buying but free time.

4tify

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Re: How did you make the shift from earning to spending?
« Reply #21 on: May 02, 2021, 10:38:24 AM »
The mindset change from saving to spending is weird. I find myself looking at something in a store thinking, 'I can do without that',  then I think, 'I'm rich, I can easily afford that'.  Then I think, 'but that's why I'm rich...'

Also, once you have the money plan in place, you can STOP thinking about money and focus on life.

Retired 5 years ago.  It doesn't get old.  ;)
This has been my experience also. I also feel like I still earn since money magically shows up in my checking account each month from various sources - and I didn't do one damn thing but play all day! I still get a little thrill each times that happens. Never got the same feeling when I was working and my payday arrived. I toiled for that money. Now I just go to the beach and play volleyball all day  ;-). Magical I tell you! I am still frugal because that's my nature as well as Im a minimalist environmental wacko so not much Im interested in buying but free time.

I never really thought about the pleasure in seeing that pseudo paycheck hit the bank. Guess you canít know until you try!


epritch7

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Re: How did you make the shift from earning to spending?
« Reply #22 on: June 14, 2021, 07:57:08 AM »
The mindset change from saving to spending is weird. I find myself looking at something in a store thinking, 'I can do without that',  then I think, 'I'm rich, I can easily afford that'.  Then I think, 'but that's why I'm rich...'

Also, once you have the money plan in place, you can STOP thinking about money and focus on life.

Retired 5 years ago.  It doesn't get old.  ;)

This is me as well, and I'm still earning (reached FI last fall).  The balance is hard to find as I also ask "am I being a true to my goal of living a life sans money or am I just hoarding it".  I definitely struggle with feeling a bit like a hypocrite.  I've made a goal to spend these last few months while I still have employment income being "ridiculous" with my spending, thus far it has made no noticeable difference to my budget nor has it improved my happiness either.  FI just feels pretty boring, I'm looking forward to some more radical changes once I RE.

asauer

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Re: How did you make the shift from earning to spending?
« Reply #23 on: June 16, 2021, 07:34:12 AM »
@4tify I've been struggling with this for a few months..

So my current plan is to call it a sabbatical. 6-12 months and see how I feel as the time goes by. Several friends are on standby to remind me if I start talking about work plans in the first 6 months. I have a rather long list of things I'm interested in doing so plan to jump into some of them while not setting any alarm clocks.

Those are my thoughts at the moment.

I'm so glad you posted this!  This is exactly what I am doing to get myself over the 'quitting' hump coming up in July.  I don't know if I could make myself leave if I told myself it would be for years and years.  But a year sabbatical feels easier to tell myself.

xbdb

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Re: How did you make the shift from earning to spending?
« Reply #24 on: June 16, 2021, 01:15:00 PM »
The shift from earning to spending can be scary because you worry that you're going to run out of money at some point. For me, an eye opening experience was to run some of the retirement calculators only to discover that I was more likely to run out of LIFE than money. Really, this struggle is all about accepting one's mortality. When you buy (pun intended) into the FIRE philosophy you have to acknowledge that and recognized that time is really the only currency we have.

I love this video from the South Park guys, which gets the point across: https://www.youtube.com/watch?v=ERbvKrH-GC4

And this poem:

“Death is always on the way, but the fact that you don't know when it will arrive seems to take away from the finiteness of life. It's that terrible precision that we hate so much. But because we don't know, we get to think of life as an inexhaustible well. Yet everything happens a certain number of times, and a very small number, really. How many more times will you remember a certain afternoon of your childhood, some afternoon that's so deeply a part of your being that you can't even conceive of your life without it? Perhaps four or five times more. Perhaps not even. How many more times will you watch the full moon rise? Perhaps twenty. And yet it all seems limitless.”
― Paul Bowles, The Sheltering Sky

« Last Edit: June 16, 2021, 01:16:57 PM by xbdb »