Switching from saving to spending mind set post -FIRE?

[Moustachienne]

Pre-FIRE we're so focussed on optimizing our saving that I worry that it will be difficult to switch to optimized spending mode post-FIRE.  Anyone have this problem post-FIRE?  And if so, how do you handle it?  Tracking?  General sense of spending level you enjoy and can sustain?

[Gone Fishing]

Not quite post-fire yet, but my plan is to simply focus on the monthly budget and do my best to ignore the rest.  Sure, selling instead of buying on a downswing will make me cringe a bit, but heck, I know it will happen from time to time, and just like my current contributions, the small monthly amount is only a drop in the bucket compared the total stache.  Might adapt a bit for a really big/prolonged downswing but for the most part, we plan to just truck along at 3-4%.

[Spork]

I am new to this, too... so still wrapping my head around draw down.  Between cash holdings and dividends, it will be a while before there will be actual draw down... but it just does have some odd feeling to it.  In know that's what it is there for... but there does seem to be a mind shift I haven't quite been able to make.

[DollarBill]

It is a strange feeling, especially if you were able to live comfortably from your investment savings then started receiving a pension or say social security. I'm sure most people won't have trouble finding a way to spend it but I wouldn't want it to change me or make others around me feel like I'm throwing it in their face. I'm sure a majority of us could buy a more fancy pants car but the one we have works fine. I sure most of us will continue to stick to our values.

It's a little more odd for me because I'm still single...I wouldn't want to meet someone that would just use me for money.   

[Exflyboy]

You have hit upon one of the psychological hurdles of being FIREd.

I talk about it quite a bit in my journal (link below).

But yes going from a net saver to a net spender has been very hard for me to do.

[DoubleDown]

Agreed, I found it to be a fairly profound shift. It's a triple shock, really: You lose your steady earned income PLUS you lose the steady addition to your savings PLUS you start drawing down. I knew it was coming, I was ready for it, but it was still difficult to make the shift after having a saving mindset for decades. I don't know the solution other than to be aware of it and remind yourself that it's okay once it occurs.

I was also fortunate that in my first year of FIRE, market returns did well so I ended up gaining as much in investment returns as I would have from working full time. That helped take the sting out since our net worth actually went up despite no longer earning.

[Moustachienne]

Very early in our marriage, long before MMM's blog, we realized that I was a saver and DH was a spender.  So we worked out a system which made sure that all expenses, including saving, were covered before spending could begin. So I could relax.  We then managed personal spending by establishing allowances, within which a person could spend without judgement.  So DH could enjoy spending and I could stay relaxed.  We also instituted a "top up" process whereby the "family" would be happy with a certain level of say, a sound system, and if DH wanted more bells and whistles, he would cover it out of his allowance.

Since we've had years now where income far exceeds expenses, and being busy at work reduces hobby time, we've not been as conscious about a saving/spending system. Post - FIRE, it might just be as simple as getting back to what worked for us years ago.  Determine income, cover required expenses, and allocate the fun funds.  Huh!

[Mr. Green]

Depending on how you approach your saving pre-FIRE, you may find yourself optimizing your spending to a certain degree already. I have always kept track of our finances looking forward, but never kept a historical record. This year is the first year that I've tracked every cent as it moves in and out of our accounts. This has helped me accomplish two things, the most important being proof that our spending actually is in line with what I believed it to be and how that will translate to a post-FIRE budget. The second was it allowed me to see what money was spent on things that will change. For instance, we spend a healthy amount on gas, car insurance, and maintenance now because we drive 125 miles combined to work each day. This vantage point also allowed us to cut spending in areas once we saw the cumulative effect over a year and decided that spending wasn't worth the cost. I'm sure there will be some additional tweaking that won't happen until FIRE but I feel pretty good about things because I know our spending has been optimized already.

[Retired To Win]

Pre-FIRE we're so focussed on optimizing our saving that I worry that it will be difficult to switch to optimized spending mode post-FIRE.  Anyone have this problem post-FIRE?  And if so, how do you handle it?  Tracking?  General sense of spending level you enjoy and can sustain?

The thing in my case is that my spending was already optimized, if you will, before I retired.  Having internalized frugality without sacrifice, I felt no urge to make any major changes in what I was spending on or the level of spending I was doing.  I'll admit to occasional discretionary expenditures but they really have not amounted to that much.  The result has been that, even after retirement,  I've ended up by default still saving every month because my passive income (dividends et al) exceeds my expenses and the surplus just accrues.

[Cassie]

We are in our 3rd year of semi-retirement & have ramped up our spending to do more traveling while we can.  Also we are going out more to do fun activities. WE are not gong crazy but want to have fun in our 60's because you just never know:)) 

[Cassie]

If we had retired young then things would be different. Although, we still need to spend within reason. I read a lot of studies that said by the time people are in their 70's their desire to travel wanes and they don't go as much.  Of course some can't go because they are too sick.  We are hoping not to be in that category of course:))

[Ozstache]

I too struggle with this and am currently spending about half I what I really could in ER. I have tried but have been unable to simply increase my spending when I already consider what I spend to be more than enough to live comfortably and happily.

My solution has been to significantly reduce my exposure to shares in my AA, which costs me in unneeded investment performance but gives me stash stability and hence ER longevity security instead.

[Mr. Green]

There was no shift for me as I spend the same post FIRE as I did pre-FIRE. I had a set amount of $$s put in checking account for living expenses when working and the rest was direct deposited to investment accounts so I never "saw" it as part of my potential spending money. Same happens now that I'm FIRE'd - set amount of $$s each month goes into checking and I live on that. I don't track or budget in FIRE just spend within my allotted amount - about half of which goes to pay for basic expenses and anything over that amount goes into a money market savings to be used for "fun" stuff like travel or for emergencies if needed or invested if not used. I just live with in that pre-determined amount and so never worry about overspending.

I really like this idea. When we FIRE I'm sure I'll still have the mindset of spend as little as possible as a precaution since we're young. Having an slotted amount sounds like a great way to remove the stress of always wanting to spend the least while being able to clearly see what might be extra for vacations or whatever.

[steveo]

I too struggle with this and am currently spending about half I what I really could in ER. I have tried but have been unable to simply increase my spending when I already consider what I spend to be more than enough to live comfortably and happily.

My solution has been to significantly reduce my exposure to shares in my AA, which costs me in unneeded investment performance but gives me stash stability and hence ER longevity security instead.

This sounds perfect to me. There is no need to spend extra money plus the change in AA makes your retirement safer.

[Jon_Snow]

I am going to approach this thread from a bit of a different perspective. I'm starting to realize that any "draw down" might be a problem for us. Actually, "problem" is probably not the correct term. But it may be our reality.

In my "Quest for FIRE" I chose early on to pursue a course of creating a passive income stream, using the dividends from stocks/ETF's, distributions from REIT's, etc...I view this monthly/quarterly payout as my post-FIRE salary. Now, this amount is already comfortably above our monthly "happy place" spending. With my wife STILL WORKING for the foreseeable future, this income stream is going to grow significantly. By the time she joins me in retirement, not only are we going to hard pressed to spend our dividend income, there will still be the matter of _._M of investments sitting in our accounts.

Quite literally, we are a couple of inherently frugal people faced with the prospect that we are probably unable to utilize the little financial empire we have created. This thread has actually caused me to look at our current and future scenario a bit closer. Do we need to develop some expensive habits/hobbies?

Our inability to spend on ourselves would probably be great news to our heirs, if we had any. ;)

[zephyr911]

Pre-FIRE we're so focussed on optimizing our saving that I worry that it will be difficult to switch to optimized spending mode post-FIRE.  Anyone have this problem post-FIRE?  And if so, how do you handle it?  Tracking?  General sense of spending level you enjoy and can sustain?

I don't think it's as dramatic a difference as the wording might suggest. Even pre-FIRE, your savings rate is primarily driven by spending decisions.

If you're worried about shifting gears when the time comes, you may be over-focused on the savings aspect, forgetting that it's just the other side of the coin. FWIW, I'm working toward saving 75%, but that's actually just a byproduct of my goal of living on less than $2K/mo.

[Exflyboy]

I am going to approach this thread from a bit of a different perspective. I'm starting to realize that any "draw down" might be a problem for us. Actually, "problem" is probably not the correct term. But it may be our reality.

In my "Quest for FIRE" I chose early on to pursue a course of creating a passive income stream, using the dividends from stocks/ETF's, distributions from REIT's, etc...I view this monthly/quarterly payout as my post-FIRE salary. Now, this amount is already comfortably above our monthly "happy place" spending. With my wife STILL WORKING for the foreseeable future, this income stream is going to grow significantly. By the time she joins me in retirement, not only are we going to hard pressed to spend our dividend income, there will still be the matter of _._M of investments sitting in our accounts.

Quite literally, we are a couple of inherently frugal people faced with the prospect that we are probably unable to utilize the little financial empire we have created. This thread has actually caused me to look at our current and future scenario a bit closer. Do we need to develop some expensive habits/hobbies?

Our inability to spend on ourselves would probably be great news to our heirs, if we had any. ;)

That is an interesting perspective Jon and one I find my self almost following.

Before the pullback I believe the S&P500 ETF's were making about 2% in dividends. It turns out that 2% is slightly above what we spent last year (but that does not account for funding HC through Obamacare).

Having said that we make about half our last year's spending in rent in addition to the dividends.

If I take my UK pension next year.. that's another half

So we are already at 2 times last years spending, with no drawdown (in theory).

In 7.5 years, my Wife gets her pension (another half), She is still working (that's 1 times).

Oh and I am doing this hobby job thing for time being... that was 4 times last year.. Maybe 3 this year.

My problem is I tend to focus on the size of my stash and wonder if I have enough money and should I cut back on spending now the market is dropping.. Well clearly that's ridiculous because the market could go to zero and stop paying ANY dividends and we would still be OK.

On the face of it, we too should develop expensive hobbies, but that is just foreign to my naturally frugal nature..:)

[Jon_Snow]

Exflyboy, your post made me realize that I didn't even mention that I'll be able to draw upon a union pension plan when I hit 55. More money I won't be able to spend in all likelihood. I don't think this thread was created with guys like us in mind XFB...

[Exflyboy]

Agreed Jon,.. but.

You and I are probably at the extreme end of a spectrum.. I,e even though we have "over saved" and "over provided", we don't have a path forward to get to say a 4% spend of our portfolios.. to do would require a level of spending that we both know would not make us any happier then we are right now.

If anything that level of spending would most likely make me nauseous.

[BBub]

You guys feel free to send some of that money down south if it keeps burning a hole in your pocket!  JK. 

I hope to be in your position one day.  It's all about redundancy. I picture a rental portfolio that pumps out income suitable to meet our annual spending, but that income instead flows into a stock portfolio with 1X+ dividend income, and that dividend income flows into a laddered muni portfolio, the income of which funds a shorter term CD ladder, which matures on an annual basis into the checking account for us to freely spend the following year.  Pretty ridiculous, perhaps.  But I enjoy the wealth building process nearly as much as the end result - most days, anyway.  I certainly intend to FIRE, but it's not the be-all end-all for me.  I'm 30... I could conceivably jump at 34 or 35.  But if I have to take it a little slower to build the ultimate redundant system which provides a happy, comfortable, secure & confident retirement by 40, or 38, or 42 - then I'll enjoy the process.

[JN2]

In contrast to J_S &  Exflyboy, I'm drawing down every month until age 66. To zero. At which point I'll have 2 UK work pensions, 1 UK state pension, 1 US state pension and 1 US work pension (I worked in California for 10 years). These 5 pensions add up to approx $3000 per month. For ever. I'm set.

[Exflyboy]

In contrast to J_S &  Exflyboy, I'm drawing down every month until age 66. To zero. At which point I'll have 2 UK work pensions, 1 UK state pension, 1 US state pension and 1 US work pension (I worked in California for 10 years). These 5 pensions add up to approx $3000 per month. For ever. I'm set.

Nice.. Did you go back to Wales or are you still over here in the US?

I emigrated from the UK in 97, I thought about going back but its got very expensive back home.

[JN2]

Nice.. Did you go back to Wales or are you still over here in the US?

I emigrated from the UK in 97, I thought about going back but its got very expensive back home.

I went back to Wales. A small mid-Wales seaside town. Slow pace; high quality of life. Property is expensive though! And also wine :)

[DollarBill]

I'm still having a hard time wrapping my head around post-fire spending mind set. Take today for instance; I just got back from a 3 week trip to see my Family and had to restock my fridge. For the last 3 years I've been on a $320 a month food budget and buy meats that are on sale and off brand items (Not many because I eat most fresh veggies). So while I'm shopping I see tomatoes for $2.99 a lb, my brain says that's kind of high but since I haven't bought any for a long time I decided to grab a few. Then I see some fancy fruit and I start thinking well I can afford it but decide to pass and just got apples instead. Then I saw Jumbo shrimp on sale for $5.99 a lb...I can afford it even if it's $10 a lb but haven't bought any for a long while. So I ended up buying 6 lbs just because it was on sale. Then I wanted a jar of pickles and started to buy the off brand for $1.50 but then there's a shinny jar for Vlasic pickles for $3.50...my brain locked up because I have too many choices so I just walked away and didn't buy any. I liked it better when I was working toward  saving money and now I just feel like I'm wasting it.

I'm even thinking about upgrading my vehicle because a couple of my Family members think I'm cheap. 

[Exflyboy]

Hey realax, this is normal.. The car I drive now cost me $350 and I have 75X current expenses saved in liquid assets.. i.e not including the paid off house!

[DollarBill]

Hey realax, this is normal.. The car I drive now cost me $350 and I have 75X current expenses saved in liquid assets.. i.e not including the paid off house!

I'm trying...I'm wired a little high strung lol. This has been a very sudden change for me because it was unexpected. It kind of feels hedonistic and it makes me feel uneasy. If you can afford a more expensive life style then why would someone not choose it? I think it is different for people who need to take out a loan to live up to a certain standard. What is it in our DNA that holds us back?

In my head money can be like a drug and it scares me to test my limits. I have an amazing self control but there are things out there that will test my will. This all could be because I retired at an immature age of 39...I'm sure if I retired later I might have a more secure thoughts. I'm not down grading anyone I just feel if maybe I had more experience at this then it would be more natural...it's a learning curve.

[smiller257]

It probably depends on how naturally frugal you are. I've been FIRE for over 3 years now and I approach it as if it is now my job to enjoy life to the fullest and spending my hard earned money is part of that. I am not naturally frugal yet I'm also not an overspender (I just live within my means). It is fun now to spend money on travels and a few toys but still live within my means.

Good luck!

[Financial.Velociraptor]

Hey realax, this is normal.. The car I drive now cost me $350 and I have 75X current expenses saved in liquid assets.. i.e not including the paid off house!

I'm trying...I'm wired a little high strung lol. This has been a very sudden change for me because it was unexpected. It kind of feels hedonistic and it makes me feel uneasy. If you can afford a more expensive life style then why would someone not choose it? I think it is different for people who need to take out a loan to live up to a certain standard. What is it in our DNA that holds us back?

 

I think the key question (bolded above) is will having a more expensive lifestyle make you happier? And why?  I could choose a more expensive lifestyle (I have the financial means) but it wouldn't bring me greater happiness or fulfillment than my current lifestyle or spending level. So spending just for the sake of spending because you have it isn't going to increase your joy necessarily.

I've got to +1 this. 

In my early career, each promotion and raise and increase in spending made me happier.  Until about 55k/yr.  That was an epiphany.  I had a long bit of soul searching and discovered I was probably about equally happy to my time in Grad School on 6k/yr.  I explored my core values and discovered the true genius of the Mustachian Way: materialism is not true happiness.  I cut back spending a lot and became much happier because I was focused on the things that mattered to me (which I never actually knew what they were before!) 

So DollarBill...what are your personal core values?  Can you even list them?  I promise going through the exercise will be worthwhile!

[soccerluvof4]

I am concerned about it and even had a thread about some questions myself. For me though i was able to quickly work through the draw down but it was more about having the right number saved and expenses right. If you have that and truly understand the dynamics of that the drawn-down mentality will be easier to absorb.

[Tyler]

If I were to track my FIRE focus over time, it probably looks a little like this:

• I need to reduce spending.
• How to optimize savings and investments. 
• Check investments multiple times a day.  Progress feels so slow!
• Motivation to stay the course and keep working towards goal.
• Identity crisis nearing financial goal.
• Am I sure about this?
• FIREd!  Not working is awesome!
• I need to watch my spending, as having no income feels very strange.
• Oh yeah, I haven't checked finances in a while.  Yep -- still fine.
• There's no need to watch my spending anymore, as my money habits are all healthy and sustainable.
• FIRE is about much more than saving OR spending.  Its a lifestyle, not a withdrawal rate.

[Frugal-Investor]

Pre-FIRE, I didn't see this one coming. Now in FIRE status, there are moments it has felt like an odd reversal to drawdown from savings, even though that was the plan all along.

Here's one way that I've been thinking about easing my mind about drawdown pain. I am highly confident in our pre-FIRE planning, budget, and investment decisions. Logically, today, I acknowledge that our planned drawdowns are reasonable and completely sustainable (in low 3% ballpark). Perhaps the same accountability for the future with its accompanying minor angst that made it possible to have a great savings rate is behind the emotionally-based pain I feel while I pull money from investments intended for that purpose. Happily, acknowledging that drawdown pain is not fully logical helps with it. And, since part of the issue is about my perception, I can tackle it with the same auto-pilot of financial moves that made saving easy.

[DollarBill]

If I were to track my FIRE focus over time, it probably looks a little like this:

• I need to reduce spending.
• How to optimize savings and investments. 
• Check investments multiple times a day.  Progress feels so slow!
• Motivation to stay the course and keep working towards goal.
• Identity crisis nearing financial goal.
• Am I sure about this?
• FIREd!  Not working is awesome!
• I need to watch my spending, as having no income feels very strange.
• Oh yeah, I haven't checked finances in a while.  Yep -- still fine.
• There's no need to watch my spending anymore, as my money habits are all healthy and sustainable.
• FIRE is about much more than saving OR spending.  Its a lifestyle, not a withdrawal rate.

I've been having a little bit of "Identity crisis" going on. Trying to really dig into my own head. When you don't have titles and capes then who are you?

[Ozstache]

When you don't have titles and capes then who are you?

The real you?

[Bertram]

Pre-FIRE we're so focussed on optimizing our saving that I worry that it will be difficult to switch to optimized spending mode post-FIRE. 

THat's not the mindset I ever got from MMM/FIRE. To me it was always (!) about finding the right amount to spend to be happy, same in the PRE- and Post-FIRE periods. What do I need for happiness? What is essential what is not? Trimming expenses that add little value, and focusing time and money on things that do. The different between Pre- and Post-Fire is the time and effort spent on the earnings-side.

To me it's always about finding the balance. After you find that balance it's a bit of math how many years to work to generate the necessary earnings, and when to switch from having to earn, to spending that time on finding meaningful projects that I enjoy. That's the important part, that's what I sometimes worry about.

Money in and out is just plumbing, sure it needs to work right, but nobody would spend the majority of time for the up keeping of their home and worry about the plumbing and optimizing the perfect throughput.

[Exflyboy]

Pre-FIRE we're so focussed on optimizing our saving that I worry that it will be difficult to switch to optimized spending mode post-FIRE. 

THat's not the mindset I ever got from MMM/FIRE. To me it was always (!) about finding the right amount to spend to be happy, same in the PRE- and Post-FIRE periods. What do I need for happiness? What is essential what is not? Trimming expenses that add little value, and focusing time and money on things that do. The different between Pre- and Post-Fire is the time and effort spent on the earnings-side.

To me it's always about finding the balance. After you find that balance it's a bit of math how many years to work to generate the necessary earnings, and when to switch from having to earn, to spending that time on finding meaningful projects that I enjoy. That's the important part, that's what I sometimes worry about.

Money in and out is just plumbing, sure it needs to work right, but nobody would spend the majority of time for the up keeping of their home and worry about the plumbing and optimizing the perfect throughput.

Money is just plumbing.. I like that thought..:)

[Moustachienne]

Since posting my original question, we've been tracking our current expenses more closely and setting up a retirement budget.  As non-early retiring Canadian DINKS with a paid off house and fairly thrifty life (58 yrs old; old/used cars; packed lunches; transit user -me; bike commuter -DH) it turns out we already live very comfortably on less than we will be able to draw on in retirement at 60 (savings plus CPP, plus OAS and small OMERS pension at 65).

So like Mr. MMM and others commenting here, we will be able to spend what feels right to us for the life we want without too much fussing after all.  We aren't big trackers now and we don't need to be in the future.  I *may* set up a separate account for big ticket items like travel or home renovations so we can see where that $$ would be coming from and consciously decide whether to spend on it.  Daily life?  That will just tick along nicely at the right level, neither stingy nor spendy...
 

[Landslave]

DollarBill:

   Finding a mate on MMM forum might be an answer!  If I were single I would worry about the same thing.

   Jeff

[DollarBill]

DollarBill:

   Finding a mate on MMM forum might be an answer!  If I were single I would worry about the same thing.

   Jeff

lol...I'm open to that idea!