I’ve been considering the topic of spending lately.
But not in the usual “you’re spending too much” line of thinking I’ve written about for so many years in posts like It’s the Spending, Stupid.
These days I’m actually pondering how I can spend MORE money. Yep, you read that correctly. I’m considering spending more, which falls within the spirit of my post titled If You’ve Won the Game, Stop Playing.
So let’s chat a bit about spending more and I can tell you what’s going on.
But first let’s begin with my spending background…
Always Buy for Value
I have never been a “buy the cheapest thing” sort of shopper (my wife is actually closer to this than I am). I have always tried to look for what I considered to be the best value.
That’s why I have purchased Toyotas/Hondas/Subarus — Not the cheapest but they run reliably forever making them great values IMO.
That’s why I buy Heinz ketchup and not the cheap Hunt’s/private label stuff — Not the cheapest but you can certainly tell the flavor difference (plus I used to market Heinz ketchup, so I’m loyal) 🙂
That’s why I shop at Costco — Not always the best price but consistently good prices, great return policy, and products are very good (especially the Kirkland brand.)
In other words, I look at the overall benefits of the item/store in comparison to the price to try and select the best overall value. The cheapest thing is rarely the best value IMO, unless it’s a commodity product or you’re fairly indifferent to quality among the options.
That said, there usually is a great quality product that’s near the lower end of pricing (not the lowest but below average for what it offers) that is generally what I consider to be the best value.
Using this method, we were able to save over 36% of our gross income while I was working (living on 17%) while compromising very little on our quality of life.
While this is how we handled most purchases, we did splurge now and then and go for something a bit more extravagant. Good examples of this are the three cruises we took when the kids were younger — two of which my parents went on with us (which we paid for).
All this was in line with what I call moderate and selective frugality — spending more on things you highly value and keeping all other purchases under control.
Blast from the Past
This has been my go-to policy for many years. In fact, in 2012 I posted on this article from the Bucks Blog that said there are times when we should actually spend MORE on an item than we need to to get a better value. Their thoughts:
It’s tempting to tell ourselves this little story about being frugal as we buy garbage from WalMart instead of the quality stuff that we want. Stuff that lasts. Stuff that we can own for a long time.
Here is the issue: when we settle for stuff that we don’t really want, and instead buy stuff that will be fine for a while, it often costs more in the long run.
How many shirts do you have in the closet that you never wear because you bought them on sale, despite feeling that they weren’t quite right? Those shirts you saved so much money on are now costing you in more ways than just money.
We have to deal with storing them. We have to deal with the uncomfortable feeling we get each time we see them, knowing that we shouldn’t have bought them in the first place. Then, we have to figure out how to get rid of them. Next thing you know, you’re trying to sell that shirt you bought on sale for $10 for only a quarter at a yard sale. Why not just wait and buy the $20 shirt you will actually wear and then keep it?
At that time, here were my thoughts on this subject:
- I’m sure I often seem like a get-a-low-price-no-matter-the-quality sort of guy, but I’m not. I buy more based on value — the relationship between price and quality. I’m willing to pay more for a higher quality item when I really think it has higher quality (not when a company simply wants me to think it has higher quality). Otherwise, assuming equal quality, then I buy on price.
- Quality is often subjective. To try and make it less subjective, we often use Consumer Reports to make buying decisions (as a way to measure the quality or lack of quality a particular item/brand may offer), especially when making a big purchase.
- One time quality is often the same is when comparing name brand items to store brand items. No, it’s not always the same. But in many cases store brand items are just as good as — if not BETTER than (yes, we’ve found items where we actually prefer the store brand) — the national brands. In this case it’s a no-brainer to buy the (usually) cheaper store brand. (I say usually because sometimes a national brand with a coupon is cheaper than a store brand without one.)
- Other times there is not a clear way to put a value on “quality.” For instance, compare a synthetic sports training shirt from Nike to one from Starter (Walmart’s brand.) Are they the same or not? Even if they are, is there some value in the Nike name? Of course we all need to make that decision for ourselves. Personally, I like the Nike name but I don’t like their prices. That’s why I buy their stuff at outlet malls. 🙂 [Update: And stacking discounts.]
- As items get pricier, I’m more willing to pay for quality. A great example of this is when I buy a car. My first step is to determine the sorts of vehicles I’m even willing to consider based on quality (AKA “reliability”) as well as preference. Then, once I’ve determined which cars I’m even willing to consider, I start the hunt based on price — trying to get the best deal possible on a vehicle I want.
So you can see this has been my process for some time. And it’s worked quite well — helping us balance both saving and still enjoying life.
A Dinner with Ramit Sethi
Just before that was posted, I attended the first FinCon (financial bloggers conference) in Chicago in 2011. It was the beginning of what has now become a very popular conference for money bloggers — and includes media, industry services, and many others as well.
Prior to that event I received an invitation from Ramit Sethi who ran the blog I Will Teach You to Be Rich and had a book out by the name of, what else, I Will Teach You To Be Rich
.
He asked if I wanted to have dinner with him at the event (his treat). I didn’t know him well but was happy to get to know him, so I accepted.
On one of the nights of the first FinCon several of us (including PT the founder of FinCon) went out to dinner and had a great time getting to know each other.
Ramit was such a gracious host. He was very kind to us all and I will never forget his generosity.
10X-ing Your Spending
Now, of course, he’s super popular and up there with the big-names of personal finance. But he’s one of the good guys, I know that for sure.
So when I Will Teach You to Be Rich, Second Edition: No Guilt. No Excuses. No BS. Just a 6-Week Program That Works
(the updated version of his book) came out, I was anxious to hear about it. I had read the original and didn’t think I needed the updated version, but I was excited to know what it was about.
It turns out this was pretty easy to do because Ramit appeared on about every podcast I listen to over a month’s time.
My favorite was this interview he did with Tim Ferriss. Here’s the video if you want to watch it all:
At about the 27-minute point they enter into a discussion about spending. This ultimately leads Ramit (at about the 30-minute point) to say:
I always like to spend extravagantly on the things I love but cut costs mercilessly on the things I don’t.
Sounds like moderate and selective frugality, right? 😉
But maybe his “moderate” is a bit less moderate than mine.
We find this out soon thereafter when he introduces the concept of a money dial and says to Tim (edited a bit by me for clarity):
Pick the area of your life that you truly love spending money on…what if you 10X-ed that? What would [that spending] look like for you?
They then go through imagining what 10X-ing travel (Tim’s area he likes to spend money) would look like if Tim spent 10 times more money in this area.
Ramit recommends this because he says people generally try to save a little bit here and a little bit there and just end up generally unhappy. That’s why he recommends spending a ton where it makes you happy and cutting everything else to the bone.
It was a fascinating discussion (and concept) and really got me to thinking.
My 10X
As I said in Top 10 Money Mistakes I Made on the Way to FIRE, I regret spending too little when our family was younger.
Now that I am retired and have more than enough (both income and assets), I can afford to loosen the spending reins a bit.
I got to thinking about If You’ve Won the Game, Stop Playing. Now that I’ve won the game, I should stop playing (saving) and consider other options (like spending more).
I’ve also considered the same question in my Retirement Interviews. I always ask:
Did you find it hard going from being a saver to a spender?
In many cases the interviewee is having to go from saving assets to spending those assets. I’m not even talking about that issue for me (at least not yet), but a much simpler version: spending more of the income I generate.
As I thought about the question for myself, I have found it hard in a way. Not that the transition has been rough or that I fret about finances, but I have more than enough, could afford to spend a LOT more, and yet I don’t.
How much more? With the sale of Rockstar Finance I’m now estimating my income this year to be roughly $110k. Expenses should be about $90k. So I could spend $20k more and not dip into assets.
If I wanted to begin taking out of assets at 3% (to be conservative), I could generate another $13k easily (still leaving many hard-to-withdraw assets untouched). Then when I turn 59.5 I could take out another $60k easily. And then ultimately I’ll have Social Security to add as well. So we’re ultimately talking about being able to double spending even with conservative estimates.
Ramit’s conversation with Tim got me to thinking — wondering where I could be 10X-ing my life. Or, at this point, even 2X-ing or 3X-ing would be a big jump.
FinCon 2019
At the same time all this was rolling around in my head I was booking my trip to the next FinCon. It’s in DC this year at the beginning of September (and Ramit will be speaking there!)
As I was booking my flight, I selected a United direct option. Not the cheapest but the best value as it was direct, at the right time, and flew into the DC airport I wanted to fly into. So I booked it.
As United is great at doing, it offered me the chance to upgrade to first class for a few hundred dollars more.
My first thought was, “No, that’s not for me.”
My second thought was, “This is a 3.5 hour flight, boy would first class be great.”
My third though was, “This is an area where I could begin working on 10X-ing my life.”
My fourth thought was, “I can easily afford this, what’s the big deal?”
So I booked it — and was happy to do so.
I tweeted out to Ramit and we celebrated together…
But then I was left with the question…where else can I work on 10X-ing my spending?
My 10X List
So I decided to develop a list of possibilities. But along the way to creating it (which I’ll share in a minute), I realized I already had a few areas where I was opting to spend more than I had in the past. These include:
- Travel. After all, we’ve been to Grand Cayman twice in the past two years (see summary for 2018 and summary for 2019) and we didn’t actually go on a bare-bones budget. We’re also off to Florida in October and have a four-bedroom house on the beach. Nice. 😉
- Gym. I belong to Lifetime Fitness (take a couple minutes to look at those pictures — it’s very nice) and have for almost four years (we joined before my wife and daughter even moved here). It’s a premium gym with lots of amenities. Sure, I could belong to 24 Hour Fitness or some similar place, but I love the feel of Lifetime, it’s easily walkable from my house, and I can afford it. So why not?
- House. This is an area that was more than we needed when all four of us lived here. But now that it’s three of us (and one going out sometime in the near future), it’s over the top. But the location is PERFECT for us so we’ll likely keep it for some time.
While these areas had me already spending more than needed, I still wanted to think about what could I add. Some ideas:
- Travel. BY FAR the worst part of traveling is flying. It’s a nightmare these days. And it seems that all of our travels take us to the East Coast making the terrible process very looooooong. So I’ve decided to institute a new policy — if I take a flight more than three hours long, I’m going first class. I already have TSA Pre-check to make flying better and adding in first class takes out much of the remaining pain associated with flying.
- Clothing. I’ve said previously that I like 1) dressing casually and 2) wearing Nike clothing. So I’ll begin to loosen up on buying more of it. I’ve already started adding needed shirts to my wardrobe for when I play pickleball. I dislike wearing sunscreen, but need to on any exposed areas given my skin cancer history. So I have started to eliminate the amount of exposed areas by buying (and playing in) long-sleeved Nike shirts.
- Hobbies. I don’t see myself starting any really expensive hobbies like collecting cars, but the few that I add, I’m going to be a bit looser with the cash. I did upgrade my pickleball paddle and got some better balls (there are pickleball ball snobs) and may even do a bit of traveling for tournaments. And if I ever do take up sailing, that’s one hobby where 10X might not be enough! LOL!
- House Upgrades. Since we’re keeping the house we’re considering a host of inside and outside upgrades including new decorations, flooring, and landscaping. This could easily be a 10X category.
- Entertainment. Only a couple small upgrades here but it’s a start. First, when we go to the movies we usually go on bargain Tuesday, but have been supplementing the trip with a Starbucks stop at the theater’s new cafe. And we have even (gasp!) seen a couple shows on non-Tuesdays, paying full price because a different day is more convenient. My wife still frets at this lack of fiscal responsibility! LOL! And I’ve started to BUY books again. If I think I will really like it, I actually order the book from Amazon and have it sent to me. I know, I’m living on the edge! 😉
- Giving. I don’t want to just be spending, spending, spending on myself. I also want to do more to help others. To this end, I’ve got something brewing I think you’ll all love. Stay tuned as I’ll roll it out near the beginning of November.
Of course the above is not always 10X-ing (probably not even 2X-ing in some cases) nor is it just in one category, but the principle is the same — spend more if you can afford it in areas that make you happy.
Anyway, that’s my plan so far. How about you? How do you balance price and quality?
Are you willing to pay more for something you like better/will last longer?
And finally, what would you like to 10X?
I love this post. We have been loosening the purse strings as well. We now go out to lunch every Saturday, inviting our adult child and their fiance to join us if they wish. We usually dine at a local restaurant, trying to help the community.
We started having lawn service three years ago. When our first guy was unable to continue to do the job my husband wanted me to find a replacement.
In the spring I started getting a monthly massage. It’s a win-win as it is someone I know that has her own business.
We’re paying more for a wedding than I’d at first thought was prudent because a lot of family will travel from out of state to attend.
We continue to donate at least 10% but I have been feeling the urge to make more of it local going forward.
We too are trying to spend more, without going crazy.
Love the writing!
Can’t say we’re very differnet from you: similar spending habits and ‘frugality’
We sometimes like to think we make ‘butter from water’ 🙂
Where we are right now, the scope to 10X doesn’t exist: but I fully agree that’s something we should do when we can afford it. But not too late either, at a time when we can enjoy it without burning a hole in the pocket.
Cheers, keep writing!
We have been spending like this for many years – and never really thought about couching it in the way you have written about. We have a good income ( my husband is in a higher paid medical specialty) . We live below our means in many many areas of our life but have spent most where it matters to us… on our children’s education. That encompasses 8 years of private schooling during middle and high school for 1 child, private colleges for 3, and now medical school for 1. About 1 million dollars all in. But we don’t travel much ( we are homebodies) and have lived in the same house over 30 years. Our kids have done extremely well and have no debt . That is how we have chosen to spend “more”.
Loosening up the pursestrings is actually a lot more challenging than people think, especially for the FIRE mindset.
Years of being frugal to be able to FIRE has a side effect of having a lasting impression on your psyche. Even after you have made it, it seems that part of you still dominates your thoughts.
I have never traveled first class until recently, it was my flight back home from Bermuda and one of the legs sent me an email that I could upgrade to first class if I wanted to. I thought why not and I was glad I did.
I like the concept of 10x in areas you like, but I would probably go 3-5x because of my nature (and plus I think my baseline in spending on those areas is already kinda high since I like to go to the best restaurants when traveling and really go overboard with accommodations if I can).
It’s funny after 2+ years of retirement, we’ve arrived at the same conclusion. While we don’t have nearly the assets or potential spending range that you do, we’re not hurting for money either.
As we look at our long range financial plans, we also anticipate SS being additive to an already workable budget. We will loosen the purse strings a bit when that happens but really want to spend that money now. So we’re strategically adding spending here and there and gradually getting used to spending our hard earned retirement stash (without going crazy on it).
My vice is cars… and unfortunately that’s an expensive “hobby”. I have not yet scratched that itch but inching towards it! We’re also planning to increase our travel budget.
I use my incremental cost justification in places where I’m looking to spend on quality. For instance, if you’re buying a t-shirt, you know you’re going to be in for at least $15… so what’s an extra $5-$10 to get a much better fitting, longer wearing shirt? I have also recently realized how we both used to look at prices on a menu and fret over the difference of a couple dollars for a meal… maybe that’s how we became FI and retired early, but we don’t do that any more. We order what we really want when we dine out and focus a LOT less on the prices.
Hopefully your post also shows folks in their accumulation years how being selectively frugal early can pay off later.
I can relate to this blog. I recently started thinking along the same lines. I’ve always been so frugal that I’d buy the cheapest model that could get the job done. So when I was shopping for a new blender, I was tempted to just get the economy model, for about $30 or $40, as I’d done all my life. But I started wondering, what would be the difference if I went for a model that went for about $100? After reading reviews, I selected one, and the difference was worth it. With the cheap model, the first thing that hits you is the loud sound, deafening. The flimsy lid that barely fits and once even collapsed and got eaten up in the blender is another annoyance. You have to disassemble it to clean it. And the bottom part starts leaking eventually. The thing would chop the veggies, but what a hassle. The new model is a dream. It’s much quieter. It has a lid that fits securely, an integrated design that doesn’t require disassembly to clean, in fact it has a cool self-cleaning cycle. The whole thing just oozes quality. Spent more to get the same job done, but well worth it!
Great post! I love the 10X concept, and you’re causing my brain to start cranking. We applied this (without realizing it) when we bought a NEW F250 and 35′ 5th wheel RV for retirement, and haven’t regretted either for a minute. You’re on to something, for those who have won the game. Off to listen to the Tim Ferris podcast….
This really hits the spot. We have many friends recently retired or retiring soon that are having trouble going from saving to spending the spoils of their hard labor. We are so similar in many of our retirement activities. I love Columbia brand clothing for sun protection and outdoor activities. So much so I bought $10,000 of Columbia stock which has happily more than paid for all the clothes we have purchased with the appreciation of the stock. A happy bonus to buying what you use and like, including stock investments. Wish I’d bought more Costco. Maybe I will Monday; I need to cover my spending there as well🤑.
This really hits the spot. We have many friends recently retired or retiring soon that are having trouble going from saving to spending the spoils of their hard labor. We are so similar in many of our retirement activities. I love Columbia brand clothing for sun protection and outdoor activities. So much so I bought $10,000 of Columbia stock which has happily more than paid for all the clothes we have purchased with the appreciation of the stock. A happy bonus to buying what you use and like, including stock investments. Wish I’d bought more Costco. Maybe I will Monday; I need to cover my spending there as well🤑.
First Class flying… how sweet it is. Started doing that about 3 years ago. Never going back to coach.
Our next big spending choice is a private golf/country club membership. We’ve lived on the 15th hole of one of the courses for the last 6 years. The house is paid for, and we work from home. Other than about 25K down, it’s $500/month for three 18-hole courses. Even though we’re still saving 30-50 times that amount on a monthly basis, it’s still oddly hard to want to spend that money on such fluff.
(M149)
Love this post and blog in general. I am, and will always be, a value guy. Have strayed from time to time (German automobiles, bought used, don’t always turn out to be “great buys”). My guiltless splurge has been on great golf courses – and even here, I’ve still found myself being more selective at times than need be.
Building wealth is a game a lot of us play and I do think it’s hard to change your spending mentality all of a sudden. Ramit’s concept is right on in my book, to whatever degree you’re comfortable.
I heard the podcast and had a lot of the same thoughts. I love your thought process around travel – and particularly flying. Couldn’t agree more that it’s the worst part. I’ve always said you couldn’t design a worse experience if you tried, and it’s at the beginning AND end of every trip. I can’t quite pull the trigger on first class yet – we’re still recovering from our overall lifestyle inflation. But, I’m confident that is the area we’ll inflate our spending once we feel like we’ve won the game and can stop playing. Both longer trips (to spread the cost of the flight over a greater period of time) and better flight iterneraries and first class.
I just came up against this when we were on vacation in Seattle. Our hotel had valet parking for $45.00 a night or we could do self parking for $32.00. I argued back and forth with myself and then realized we can afford valet parking and it’s ok to pay for convenience! So valet we did. I have also decided the convenience of being TSA pre-approved is worth the $100 it will cost to zip through security so we’re going to be applying for that. We’re traveling more so why should we wait in those long lines. Now when I’m questioning if I should spend the money, I include the convenience factor and it’s making life a lot nicer!!!
When I read your comment and mentioned to my husband that we should finally get TSA pre-approval he told me that he had recently signed up for CLEAR (after getting offered a discounted signup while standing in a long line at LAX). It’s a biometric system that he’s used several times already and says it works like a charm (although they don’t offer it at one of our local airports).
I’m going to add myself to his CLEAR account as “family” for only $50. I missed a flight this year while stuck in a horrendous security line )-: so that fee is well worth it to me.
Thanks for mentioning CLEAR. I had never heard of it. I looked into it and it’s $179.00/year but you can find some discounts as you mention. It also says “you are not receiving any expedited or reduced screening”, but also says “it’s a great way to speed to front of any long security queues”. Unfortunately, It’s in a limited number of airports and not in San Diego where I am. Global Entry is $100 for five years. And my husband will have to have a separate application and fee. The application process is a little tedious and once my application is approved I will have to go in for an interview. I like that we can use it for when we fly internationally and flying from San Diego. It’s nice that there are some options to skip those long lines!
Great post, as usual. I envy you, all of you, who have achieved financial independence at your age and can afford to spend even more now on the things you love than you did when you were working for money. You are all very inspiring and I hope to be able to live like that too some day.
QUESTION: If you are able to spend/splurge more now than you did before achieving financial independence, would you say that you willingly “over saved”, or postponed retirement when you could have retired earlier? Does this mean that you could have retired years before, and lived just as frugally for the rest of your life as you did before won the game?
In other words, are there two options to “retire”? 1. Figure out how much you’ll need in retirement living frugally the rest of your life and quit working for money and accumulating as soon as you get there? 2. Continue working and accumulating a bit longer so that you can do 10X-ing on the things you love after your “retire”?
Thank you!
Yes, there are many varieties of FIRE from LeanFIRE ($30k per year spending or less) to FatFIRE ($100k+ spending per year).
Personally for us, I wish 1) we had spent more/saved less on our journey and 2) retired much earlier (when we hit FI). We had enough to do both.
Got it. Thank you very much, ESI, for answering my question!
Spending more on your journey, yet retiring sooner seems counter intuitive. I suppose high earnings is what would allow someone to do both of what you wish you had done. Or is there more to it than that?
I do understand why you wish you had done that.
Well, I actually hit FI at 42. Details here:
https://esimoney.com/my-financial-independence-numbers/
So I could have spent more along the way and retired at say…46 (I actually retired at 52).
Great! Thank you, and thanks for the link too!
Diogenes, for me personally, I had my head down working towards building revenue in my small software company, and before I knew it, the revenue grew to a bit more than I ever expected. Also, I wasn’t sure how long the market would last for my company (because Windows was headed a different direction with Windows 8), but now that Windows has stabilized at version 10 (and it’s not going the direction of 8), my market outlook changed from 5 – 10 years to 20 years plus (and revenue has stayed up).
So if I had known I’d be where I am now, I would have started spending a bit more 4-5 years ago. But for more standard savings plans, I would say you’re better shooting for #2 in your question. You can always spend a bit more on what you love later if you saved “too much”. Plus I’m trying to change my family’s money legacy and that takes having quite a sizable amount of left over at death… not just hoping a 4% withdrawal rate leaves a bit left over at the end.
Thanks very much, Mr. Hobo Millionaire! That makes sense. Congratulations on growing your wealth quicker and to a greater deal than you expected.
May also want to keep in mind that while FIRE includes “retire early”, many who do continue to make money at other things they enjoy so the “extra” for spending can come from that. Others may reach FI and enjoy their jobs enough to keep at it for some years before things change enough for them to call it quits. Finally, others like myself look at their current situation and expenses, and while they could “technically” retire today, feel better if they get a few more years of income in.
Ahh, It’s golf, travel and wine for me but definitely not 10X more like 3X. I need to think on this a little.
One trick I use to spend a little more, and this is more appropriate for early retirees with 10-15 years to SS like me, is to make my future SS payments an asset of value now and then use it in my 3% withdrawal rule. Certainly, this is a less conservative approach but it helps with justifying spending more now on your 10X things while you have more energy and good health.
I play golf with my father and his friends weekly. They are in the upper 70’s and 80’s. They all tell me to spend it now as their desire to travel, eat out, have fancy “whatever’s” has waned.
So, I will try to give a very simplified example. Lets say you and your wife age 53 are expecting a $50K payout at age 67 in 14 years. To convert those future cash flows to an asset, let’s use a 5% withdrawal rate to back calculate an equivalent of $1M asset at that time. If you use a 5% rate of return for 14 years that would roughly equate to having a $500K asset today. Or, in other words, this $500K asset will grow to $1M by the time you hit 67 at which time you begin withdrawals of 5% ($50K) follow? You can now say that I am going to use this 500K virtual asset with a 3% withdrawal rate to generate $15K more a year in income to spend now. This, of course, is a long winded mental gymnastic way of saying you will take a higher withdrawal rate now knowing you will will take less once SS hits, but it helps me quantify and make sense of it.
Yes, this is not a conservative approach, but the intent is to avoid running up on 67 and having a big spike in income only to realize that you wish you had spent more on your 10X fun stuff when you were younger.
It works for me.
I love this technique… well played!
I kind of alluded to it in my post above but haven’t calculated it out as you have. For us the courage to spend is our biggest obstacle (or maybe appropriate methodology… haha).
In any case, there’s no way we’re going back to work…ever… so we need to be at least a little prudent, but this method of “spending” our eventual SS is appealing.
Obviously, the risk is the dreaded sequence of returns and how your nest egg could be damaged from that increased withdrawal rate in a market downturn.
I need to go do some math now! Please do not disturb 😉
It makes sense to pay more for some things. Two years ago I joined brand new Lifetime Fitness in Charlotte. It costs me $260/month for a family of four but it’s worth every penny! I exercise more, have more energy and sleep better.
I absolutely love this, talking more about spending according to your values instead of cutting spending and frugality is just what is needed (in my opinion). We also splurge on travel-definitely 10X-and never regret it. In Asia, we are able to get private drivers and tour guides and while it definitely increases the cost of vacations, it makes it possible for us to travel with our 3 kids AND still enjoy it. We also like good quality food (whether traveling or not), so that’s another thing we spend a lot (and maybe too much!) on.
Changing spending habits is hard, especially if you’ve demonstrated success with your current practice. I’m struggling to let myself buy new bookshelf speakers for $900 (there are a number of speakers in the $450 – $600 range that seem good enough and a better match for the quality of the other components … I’m not an audio buff). Meanwhile, my retirement portfolio oscillates up and down by 5 figures daily and I’m still working a good paying W-2 job. Go figure.
I was curious and wanted to private message ESI on what he thinks of Ramit. I took one of his courses once. And now, it’s good to hear that you will be meeting him soon.
BTW, is this article applicable only for FIREs? I’m 37, not FIRE, no kids or family, earn 120k. But I gave away 100k in last 2 years to sibling and parents. I’m left with 200k in 401k, 50k in HSA and about 60k in savings.
Did I already have 10-x moment? Or was I stupid to give money like that? I may or may not get it back.
Sounds to me like your doing fine. If you gave money for a valid reason, don’t sweat it and don’t expect it back. With 120k no kids or family you could be a FIRE in no time.
Thanks. That’s good to know. A friend of mine told me that if I can set aside 2k every month in savings I can get close to FIRE soon. However, we didn’t discuss 10x spending at that point. I still spend 30 mins deciding to go for a $5 average hair cut vs $18 professional hair cut. I am working towards getting away from that thinking. Otherwise I can never do 10x…..
Sam, I believe 10X spending is only for those who have already won the game (Financially Independent, “Retired”) AND with enough money to receive a high income from their assets for the rest of their lives.
For those of us who are still playing the game, we must be frugal, do what we can to increase our Earnings, Save as much as we can, and Invest as much of those savings as we can, and as early and as frequently as possible.
As for giving your family money, my 2 cents is to keep your finances a secret(Stealth Wealth). Only your spouse should know how much you make and how much you have saved and invested. Otherwise, family and friends will never stop coming out of the woodwork to as for a loan(gift).
If your family is truly in need, have an emergency, help them by all means. But don’t let them think of you as their Emergency Fund. As someone once told me, don’t lend your family money, or you’ll end up without the money and without the family.
Your high salary, combined with the fact that you are reading ESI tells me you are on the right track. Congratulations, and good luck to you!
Many thanks for that! I agree with everything you said. It took a while to keep boundaries with family but I am at a point where I feel I did my bit as best as I can.
Will continue to grow career with ESI principles. Overall, this is a good perspective from ESI and Ramit. For some reason, I like this combination 🙂
I have to second what Diogenes is saying.
Unfortunately, the gulf between my (and wife’s) wealth vs just about everyone else in our extended families is very wide. Most of our relatives, even the ones leading middle-class lives, exist on a hand-to-mouth basis, and there are a handful of elders that would be living in outright poverty, but for relying on the generosity of others, namely their adult children.
My in-laws (may they rest in peace) were the exception to the rule – they were the original millionaires next door – modest folks from modest means who were professionally successful, saved and shaved pennies, lived below their means, and ended up being worth north of $1mm on top of retiring to generous pensions, so the assets were not even touched until the very end (we made FI well before inheritance, but yes, that was a nice icing on the cake so to speak).
From them, I learned thru observation to downplay what you have in the bank cause someone in the family is always going to be sniffing around for a “loan” (i.e. handout). Sometimes they took their fiscal conservatism to extremes, but I kinda get it now in a way I did not before.
I’ve been fortunate (and worked very hard) to be able to generate a significantly above-average income much of my career, but for a long time we were able to hide the economic divide – for example we always drove crappy old beaters paid for in cash when everyone else was driving shiny new (leased) cars. I am sure many family members thought “gee I thought he was so successful and all but looks like can’t even afford a decent car…”
Fast forward 25 years and while much of our lifestyle is not in plain sight, we can’t exactly hide our million dollar homes, or the luxury cars (though still bought used and paid for in cash). They know the divide is huge because as they have aged, they have struggled and life doesn’t seem so easy any more. They don’t quite know why they are struggling – they blame the politicians or the rigged system or bad luck, or whatever, anybody but themselves. Therefore, if we are doing better, we either simply won the lucky lottery or we’re on the receiving end of the rigged system.
Either way, these are folks who feel they are owed something because of all of the above. Which makes us targets. In any case, the mentality is that were the roles reversed, of course they would be oh so generous. Maybe they would be. I don’t really care. I don’t want to be the family bank.
Over the years, wife and I have developed a system of dealing with family requests: (1) Hesitate. Don’t jump in to solve the problem too quickly, let the dust settle, give people time to solve their own problems. They are more resourceful than you and they think they are. You are just the easy answer. (2) Make yourself the hard answer, not the easy answer. Ask probing and uncomfortable questions. Make sure you understand what happened, how they got there, and how they will make a longterm fix. Don’t let anyone squirm out of providing real answers. Folks hate answering those kinds of questions. (3) If you are inclined to proceed, make it very clear what you can offer is a LOAN, with very specific repayment terms. (4) Make it very clear they only get ONE money ask – period. Forever. That will at least make them think twice. (5) Do not provide the entire amount required to solve the problem – if practical force them to seek other resources too.
Make no mistake, this approach has caused some broken relationships. But, I have to ask myself, were those real relationships if our value is only in being the bank. There are people, even family, that you simply do not need in your life if they are too toxic and self-destructive. There have been truly dire situations that we have helped people out of, and we plan to help some of the younger generation with student loans, and we feel good about all that. You just have to be very selective and careful not to create dependency.
I’m with you on 10x-ing in the area of giving, because it’s so fulfilling to do so, but if I had to travel, and if I had the money, I would book a first class train ticket just to enjoy the experience. I think luxury trains would be awesome to try, at least once, and when time is on your side. Good luck with the remaining 10x efforts.
Our pastor says there are 3 phases in retirement: The “Go-Go” Years, the “Slow-Go” Years, and the “No Go” Years. Both sets of our parents lost some mobility sooner than anticipated. So, we translate this approach as: “Experience and travel as much as you can when you can.” After reading this post, we may have to see what 10X-ing that looks like.
I’ve been thinking about this a lot over the last year after reaching what I initially set as a FI target ($2.2MM net worth). I don’t have any plans to RE though and am still saving about 40% of gross income, so I’ve really allowed and then even embraced some lifestyle inflation.
I too booked my first business class flight this year! I was going all the way to Bali for a yoga retreat so it was about $5000 – nearly 10x the cheapest coach ticket I could have gotten – but SOOO worth it. I was giddy during the entire 25 hour journey each way. I’ve also started buying more designer clothing to spruce up my image.
The reason I wanted to comment was to say that one great exercise is to do a values exercise and identify what your values truly are (everyone wants to say security but your values might include things like status or sex appeal, which is fine). Then see how you can allocate more of your budget to your values. Education? Take a course at your local university. Health? Spring for more organic food or those expensive yoga classes. Then when you make those spending decisions you can actually enjoy them knowing you’re consciously getting closer to your goals – aligning your time and money with what you truly value. The key of course is to also cut out stuff that doesn’t get you closer to those values, even if it means less of things you enjoy on some level – food delivery and alcohol, for example.
I recently got 2 new upf long sleeve shirts. I have kept up with walking in the park after work and it is much more convenient to toss on a shirt and avoid excess sunscreen. The annoyance of putting on sunscreen for a short amount of time was often a con to going for the walk, and I’ve removed that barrier. 🙂
This year I’ve also gotten a hotel room twice when in the past I might have pushed to drive home. Totally worth it!
Thank you for the article. I will be sharing with my husband. After being savers for so long, it is difficult for both of us to spend. We have plenty for our retirement and I keep reminding him that I don’t want to be cheap just so our relatives (no kids) inherit money. We did travel to Europe one way with business class and had so much fun doing that but coming back was economy, so sad. I like your idea of flights over 3 hours and using business class. I will start to review that option now too. We travel a lot and why not treat ourselves when the journey starts, just changing mindset.
We do have 10X on cars and drive them for a long time. I now have a dilemma and fun challenge to find a replacement for my 2007 Lexus sedan. Planning 2019 trips and splurging 10X will be a goal of mine. I noticed Costco had a trip to the islands of Tahiti and maybe I can convince myself to treat ourselves.
Thank you to many of the commenters too, additional helpful information was shared.