[How to determine budget for toys/luxuries?]

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EnjoyIt
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[How to determine budget for toys/luxuries?]

Post by EnjoyIt » Wed Jan 03, 2018 7:55 pm

It seems like every few weeks we get another post about "Can I afford X?"
X can be as simple as a $10k watch or as expensive as a $100k or more car.
Almost always the response by most readers is "No" irrespective of the person's financial situation.
I'm sure someone making $250k/yr can afford a nice $10k watch even if they have a net worth of $0
I'm also pretty sure someone who has a net worth of $2.5 million they can afford to part with 4% of it on a $100k car.
I purposefully used those numbers because they come out to 4% a number many believe is a reasonable guideline for retirement income.
BTW, this is not a thread on safe withdrawal rates so please keep those comments somewhere else unless they particularly pertain to expensive toy purchases.

With the above in mind:
1) What percent of one's income is it okay to spend on toys?
2) What percent of one's wealth is it okay to spend on toys?

[title edited by admin alex]

delamer
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Re: How much to spend on toys?

Post by delamer » Wed Jan 03, 2018 8:04 pm

Please define “toys.”

Sounds like you are looking for a number that does not take into account other expenses or age.

Do you really think a 60 year old who makes $250,000 a year but has a net worth of $0 can afford a $10,000 watch?

onourway
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Re: How much to spend on toys?

Post by onourway » Wed Jan 03, 2018 8:11 pm

I actually find that many times people here give the ok to toy or home purchases that are quite a stretch given the full financial picture.

One's income should not dictate how much they can afford to spend on a toy. It needs to come in context of the larger financial, life, and family picture.

Atgard
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Re: How much to spend on toys?

Post by Atgard » Wed Jan 03, 2018 8:15 pm

It would be very hard to give a simple exact answer beyond "whatever you want once your spending & retirement needs are met."

You can't base it solely on income, as I disagree that someone making $250K who has managed to save zero dollars can "afford" an expensive watch. They probably got to their situation by buying lots of expensive watches because they could "afford" it.

On the other hand, someone who makes $0, but has a big enough retirement portfolio to comfortably live on forever can buy whatever they please with the excess.

So it depends on not just income, but spending, age, health, family size, goals, net worth/retirement accounts, etc. For example, Person A may be able to "afford" the $10,000 watch and plans to work until he's 65, while Person B (for "Boglehead") says a $100 watch is fine for them and (along with other similar choices) aims to retire when he's 55. Not really a right or wrong answer so long as both are budgeting towards their goals.

bhsince87
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Re: How much to spend on toys?

Post by bhsince87 » Wed Jan 03, 2018 8:25 pm

That's in the same category as "How many angles can dance on the head of a pin?", "What is the sound of one hand clapping?" , and "Who put the bomp in the bop shebop shebop?"
Retirement: When you reach a point where you have enough. Or when you've had enough.

runner540
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Re: How much to spend on toys?

Post by runner540 » Wed Jan 03, 2018 8:52 pm

Here's a guideline that helps me: (assuming that all basic needs are met and savings goals are being aggressively funded) spend no more on luxuries/toys than I give to charity.

Bacchus01
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Re: How much to spend on toys?

Post by Bacchus01 » Wed Jan 03, 2018 9:13 pm

EnjoyIt wrote:
Wed Jan 03, 2018 7:55 pm
It seams like every few weeks we get another post about "Can I afford X?"
X can be as simple as a $10k watch or as expensive as a $100k or more car.
Almost always the response by most readers is "No" irrespective of the person's financial situation.
I'm sure someone making $250k/yr can afford a nice $10k watch even if they have a net worth of $0
I'm also pretty sure someone who has a net worth of $2.5 million they can afford to part with 4% of it on a $100k car.
I purposefully used those numbers because they come out to 4% a number many believe is a reasonable guideline for retirement income.
BTW, this is not a thread on safe withdrawal rates so please keep those comments somewhere else unless they particularly pertain to expensive toy purchases.

With the above in mind:
1) What percent of one's income is it okay to spend on toys?
2) What percent of one's wealth is it okay to spend on toys?

You post a thread where the premise is that BH will say no to purchase that somehow you’ve said you’re sure someone can afford. And what new answer are you looking for?

daveydoo
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Re: How much to spend on toys?

Post by daveydoo » Wed Jan 03, 2018 9:22 pm

EnjoyIt wrote:
Wed Jan 03, 2018 7:55 pm
...as simple as a $10k watch...
The low end starts pretty high here!
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

randomguy
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Re: How much to spend on toys?

Post by randomguy » Wed Jan 03, 2018 10:03 pm

EnjoyIt wrote:
Wed Jan 03, 2018 7:55 pm
It seams like every few weeks we get another post about "Can I afford X?"
X can be as simple as a $10k watch or as expensive as a $100k or more car.
Almost always the response by most readers is "No" irrespective of the person's financial situation.
I'm sure someone making $250k/yr can afford a nice $10k watch even if they have a net worth of $0
I'm also pretty sure someone who has a net worth of $2.5 million they can afford to part with 4% of it on a $100k car.
I purposefully used those numbers because they come out to 4% a number many believe is a reasonable guideline for retirement income.
BTW, this is not a thread on safe withdrawal rates so please keep those comments somewhere else unless they particularly pertain to expensive toy purchases.

With the above in mind:
1) What percent of one's income is it okay to spend on toys?
2) What percent of one's wealth is it okay to spend on toys?
Wrong questions.:) The right answer is whatever is left after paying the bills and meeting your savings goals. Some people have goals (retire ASAP) that require them to save every possible penny. Others are more flexible (i.e. I want to retire at 55) that might only require saving 25%. Pay the bills. Plan for the future. Spend the rest.


The part that most people get hung up on is that they don't value the item the OP is purchasing so you get all sorts of value judgements. Now sometimes the OP might be wrong about how much they will enjoy said purchase (i.e. if you haven't bought something you later regret spending the money on, you haven't bought enough stuff:)) but that is hard for outsiders to say. And the things that bother you, might not bother me. I can't see spending thousands more for a seat on a plane for a couple of hours. I can see spending thousands more for a seat in a car that is more comfortable and has less NVH to assault me with every mile I drive give we are talking hundreds of hours/year not tens. Other people have the exact opposite feelings.

JuniorBH
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Re: How much to spend on toys?

Post by JuniorBH » Wed Jan 03, 2018 10:08 pm

Atgard wrote:
Wed Jan 03, 2018 8:15 pm

So it depends on not just income, but spending, age, health, family size, goals, net worth/retirement accounts, etc. For example, Person A may be able to "afford" the $10,000 watch and plans to work until he's 65, while Person B (for "Boglehead") says a $100 watch is fine for them and (along with other similar choices) aims to retire when he's 55. Not really a right or wrong answer so long as both are budgeting towards their goals.
Agree with this. If you're 35 with a goal to retire at 55 and are meeting the financial requirements of that goal, I see no reason not to splurge on toys, especially something like a watch or car which could be sold (albeit at a loss) if you suddenly needed the money.

Personally, net worth would be the benchmark I'd use to determine if I could afford a toy; buying a $100K car when you have a net worth of $2M is very different compared to when you have a net worth of $500K.

IMO
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Re: How much to spend on toys?

Post by IMO » Wed Jan 03, 2018 10:54 pm

randomguy wrote:
Wed Jan 03, 2018 10:03 pm

Wrong questions.:) The right answer is whatever is left after paying the bills and meeting your savings goals. Some people have goals (retire ASAP) that require them to save every possible penny. Others are more flexible (i.e. I want to retire at 55) that might only require saving 25%. Pay the bills. Plan for the future. Spend the rest.

The part that most people get hung up on is that they don't value the item the OP is purchasing so you get all sorts of value judgements. Now sometimes the OP might be wrong about how much they will enjoy said purchase (i.e. if you haven't bought something you later regret spending the money on, you haven't bought enough stuff:)) but that is hard for outsiders to say. And the things that bother you, might not bother me. I can't see spending thousands more for a seat on a plane for a couple of hours. I can see spending thousands more for a seat in a car that is more comfortable and has less NVH to assault me with every mile I drive give we are talking hundreds of hours/year not tens. Other people have the exact opposite feelings.
Agree with the above. It's more of a question of how much discretionary income do you have spend on yourself? It shouldn't matter if you want to spend money on snow globes, a boat, a car, vacations, or whatever. People on this site will make personal judgments on what's important to them, but that should have absolutely no influence on what you personally find of value in your life.

Like randomguy noted, pay the bills, plan for future, and spend the rest. Keep things in life in balance. SOOOOOOOO many personal factors come into play on even determining what's a reasonable amount for discretionary income from one person to the next.

WildBill
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Re: [How to determine budget for toys/luxuries?]

Post by WildBill » Wed Jan 03, 2018 11:25 pm

Howdy

You can buy any toy you want, but you gotta, repeat gotta, pay cash. No financing.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

spammagnet
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Re: How much to spend on toys?

Post by spammagnet » Wed Jan 03, 2018 11:32 pm

IMO wrote:
Wed Jan 03, 2018 10:54 pm
... SOOOOOOOO many personal factors come into play on even determining what's a reasonable amount for discretionary income from one person to the next. ...
It's not for this thread but I'd be interested to hear the range of opinions on that. As you suggest, they will vary widely. Some readers may draw on that information to establish a more concrete definition of what it is, to them. That would help with planning for the future.

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rosylenm
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Re: How much to spend on toys?

Post by rosylenm » Wed Jan 03, 2018 11:43 pm

daveydoo wrote:
Wed Jan 03, 2018 9:22 pm
EnjoyIt wrote:
Wed Jan 03, 2018 7:55 pm
...as simple as a $10k watch...
The low end starts pretty high here!
Indeed!

I did a lot of hand wringing when I spent $800 on three serigraphs.

runner3081
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Re: [How to determine budget for toys/luxuries?]

Post by runner3081 » Thu Jan 04, 2018 10:31 am

As others have said, it is all about your goals.

My wife and I have an aggressive retirement goal and do not spend any money on toys. We are also minimalists, so that removes the need to really buy toys. We are happy with what we have.

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jharkin
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Re: [How to determine budget for toys/luxuries?]

Post by jharkin » Thu Jan 04, 2018 10:48 am

This thread is not likely to say much that hasnt already been said. This board by nature has a lot of spending adverse folks (not spending is a big part of saving and accumulating wealth). And some on here are just frugal by nature and simply dont like spending money on themselves for anything - so you are never going to get a yes from that crowd no matter what you ask.

I have been known to splurge a bit on my hobbies by those standards but even I think that $10k on a watch at a 250k household income is stretching things. Its not the watch itself, its the fact that if you are buying Rolex's, it becomes a gateway drug to wearing designer suits, thousand dollar shoes, buying a 5 figure giant TV, driving an expensive luxury car, etc.... It all ads up and before you know it you are scraping by month to month on that 250k.

Its all about balance and only you can know what is right for you. I spent $3,000 on "toy" remote control helicopters of the last 5 years... twice :shock: . But I wear a $199 Seiko I got on sale, and can get away with going to work in blue jeans driving my Toyota. :beer

lazydavid
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Re: How much to spend on toys?

Post by lazydavid » Thu Jan 04, 2018 11:53 am

IMO wrote:
Wed Jan 03, 2018 10:54 pm
Agree with the above. It's more of a question of how much discretionary income do you have spend on yourself? It shouldn't matter if you want to spend money on snow globes, a boat, a car, vacations, or whatever. People on this site will make personal judgments on what's important to them, but that should have absolutely no influence on what you personally find of value in your life.
Exactly. Decide what level of discretionary income will meet your savings goals, and then do whatever you want with that amount. After our taxes, benefits, and 401k withholdings, we decide on a set dollar value that we want to effectively be our "take-home pay" to live on from each pay period. It's been static for the past 5 years, but we're upping it by about 12% this year because things have started to get tight. The remainder gets automatically whisked into our taxable account, so we're left with only the amount we planned for.

Out of that amount, we pay our normal bills, save up for large expenses like vacations and home improvements, and generally live our lives. Every purchase decision we make falls into the universe of the money we have available from that bucket, as if the rest of our income never existed. If we want something, have enough in checking to pay for it without impacting our other bills, and think it's the best use of those funds, we buy it. If not, we either don't buy it at all, or postpone until we do have the funds.

When we get our raises in the fall, we just back them out by increasing the amount going to taxable. We get to our goals faster because we effectively live on a fixed income, albeit ratcheted up occasionally like this year.

EnjoyIt
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Re: [How to determine budget for toys/luxuries?]

Post by EnjoyIt » Thu Jan 04, 2018 1:09 pm

It looks like the correct answer isn't really a yes or a no but the correct answer is asking more questions. I think the three big ones are:

1) What are your financial goals?
2) What is your path to achieving those goals?
3) How stable is your income?

Once the above 3 are answered a reasonable math problem now exists that can decide if a person can afford some discretionary spending. It shouldn't matter if it is a car, a boat, a watch, or fake vomit to throw around the subway station.

SeaToTheBay
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Re: [How to determine budget for toys/luxuries?]

Post by SeaToTheBay » Thu Jan 04, 2018 1:34 pm

I am a huge car nut, and my wife recently proposed starting a "fun car fund." We are doing great on saving and are now accumulating cash, so she thought why not start an allocation that I could spend on something I am passionate about?

The way I decided to fund this budget is as a percentage of my annual bonus and raise. That way I'm incentivized to work hard, and the fun stuff only comes out of the "extra" income I earn - not out of my base salary that is used for expenses and savings.

One thing I'd like to add is I feel the budget should be adjusted depending on the true long term cost of whatever toy or luxury this is. A 1st class ticket's value is gone the moment you step off that plane, whereas an expensive watch you can probably resell for roughly what you paid. Similarly, if you spend $100k on a 2010 Porsche 911 GT3, which hasn't really depreciated in the past 5 years, that is a better use of money than spending $100k on a new Mercedes that will depreciate to $30k in 5 years, despite spending the same amount upfront.
WildBill wrote:
Wed Jan 03, 2018 11:25 pm
Howdy

You can buy any toy you want, but you gotta, repeat gotta, pay cash. No financing.

W B
I get the philosophy behind this, but my opinion is it depends. If you get an excellent rate, can afford/save the cash price, and the "toy" will still be worth close to what you paid when you're done with it, financing is not out of the question IMO. A personal example is when I bought a 2002 Honda S2000 convertible in 2013 for $13k. I could have paid cash, but instead got a 1.74%(!) 5-year loan and invested the rest. By the time I sold the car 3.5 years later for $13,900 (that's right - more than I paid), the S&P had risen 65% in the time I was financing the car. In that case, I made out great by financing a non-depreciating asset at a below-expected-market-return rate. Sure, it could go the other way, but given this was not a huge amount of money, it was a reasonable risk that paid off well.

jlcnuke
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Re: [How to determine budget for toys/luxuries?]

Post by jlcnuke » Thu Jan 04, 2018 2:39 pm

I take my income, deduct my mandatory and desired bills - the be responsible spending stuff (mortgage, phone, internet, insurances, utilities, food, etc etc). From the remainder, I deduct my planned savings/investments (which I've previously determined based on my desired retirement timeline and spending projections) - the be even more responsible spending stuff. The rest of the money is for me to spend on anything I want...

quantAndHold
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Re: How much to spend on toys?

Post by quantAndHold » Thu Jan 04, 2018 2:52 pm

rosylenm wrote:
Wed Jan 03, 2018 11:43 pm
daveydoo wrote:
Wed Jan 03, 2018 9:22 pm
EnjoyIt wrote:
Wed Jan 03, 2018 7:55 pm
...as simple as a $10k watch...
The low end starts pretty high here!
Indeed!

I did a lot of hand wringing when I spent $800 on three serigraphs.
As someone who spends much of my early retirement time and money doing printmaking, I approve of this purchase.

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DaftInvestor
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Re: [How to determine budget for toys/luxuries?]

Post by DaftInvestor » Thu Jan 04, 2018 3:07 pm

WildBill wrote:
Wed Jan 03, 2018 11:25 pm
Howdy

You can buy any toy you want, but you gotta, repeat gotta, pay cash. No financing.

W B
So 100% of income or 100% of invested assets? :happy

Personally - I look at discretionary spending as a category that includes toys and leisure activities - if I spend more on vacations one year I will spend less on toys and vice-versa. I recently read that the average family spends 3% yearly on vacation travel. Perhaps Toys+Vacations should be somewhere in the 5 - 10% range of salary (provided you are otherwise living below your means).
Regarding NetWorth - I believe you could develop a pre-retirement formula based upon age (should be spending less as a precentage of networth on toys as your networth grows and you approach retirment) and a post-retirement formula based upon age (should be spending more as a percentage of networth as you age and draw-down your assets). Not sure if networth makes sense - a lot of folks start life with negative networth and need some pleasures in life so not sure how this would be accounted for.

KlangFool
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Re: [How to determine budget for toys/luxuries?]

Post by KlangFool » Thu Jan 04, 2018 3:16 pm

OP,

1) If your net worth is 50 or more times your current annual expense, you can spend any amount in excess of that for any toys.

2) The answer cannot be based on income since the income could disappear at any time.

3) The answer cannot be based on net worth only because it is meaningless unless it is a ratio based on annual expense. A person may have 1 million. But, if the annual expense is 2 million, the person is living on the edge.

KlangFool

mak1277
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Re: [How to determine budget for toys/luxuries?]

Post by mak1277 » Thu Jan 04, 2018 3:23 pm

KlangFool wrote:
Thu Jan 04, 2018 3:16 pm
OP,

1) If your net worth is 50 or more times your current annual expense, you can spend any amount in excess of that for any toys.
So you are advocating zero discretionary/fun spending unless you have a double-funded retirement? That seems....unnecessarily conservative.

KlangFool
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Re: [How to determine budget for toys/luxuries?]

Post by KlangFool » Thu Jan 04, 2018 3:31 pm

mak1277 wrote:
Thu Jan 04, 2018 3:23 pm
KlangFool wrote:
Thu Jan 04, 2018 3:16 pm
OP,

1) If your net worth is 50 or more times your current annual expense, you can spend any amount in excess of that for any toys.
So you are advocating zero discretionary/fun spending unless you have a double-funded retirement? That seems....unnecessarily conservative.
mak1277,

1) It is obvious that OP wants to spend a lot of money on some toys/luxuries that require budgeting.

2) Do you need to budget for a small amount of discretionary/fun spending? I don't. I save 30+% of my gross income and I spend the rest of my income. I do not budget for any of my spending. That includes discretionary/fun spending.

KlangFool

wrongfunds
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Re: [How to determine budget for toys/luxuries?]

Post by wrongfunds » Thu Jan 04, 2018 9:34 pm

fake vomit to throw around the subway station.
I think this will get you one way ticket to Guantanamo Bay

smitcat
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Re: [How to determine budget for toys/luxuries?]

Post by smitcat » Fri Jan 05, 2018 7:19 am

EnjoyIt wrote:
Wed Jan 03, 2018 7:55 pm
It seems like every few weeks we get another post about "Can I afford X?"
X can be as simple as a $10k watch or as expensive as a $100k or more car.
Almost always the response by most readers is "No" irrespective of the person's financial situation.
I'm sure someone making $250k/yr can afford a nice $10k watch even if they have a net worth of $0
I'm also pretty sure someone who has a net worth of $2.5 million they can afford to part with 4% of it on a $100k car.
I purposefully used those numbers because they come out to 4% a number many believe is a reasonable guideline for retirement income.
BTW, this is not a thread on safe withdrawal rates so please keep those comments somewhere else unless they particularly pertain to expensive toy purchases.

With the above in mind:
1) What percent of one's income is it okay to spend on toys?
2) What percent of one's wealth is it okay to spend on toys?

[title edited by admin alex]
We have always made sure that our savings goals are met, then the balance is fair game for any other application.
The savings goals were sufficient to match our retirement needs as we are nearly there now.

TwstdSista
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Re: [How to determine budget for toys/luxuries?]

Post by TwstdSista » Fri Jan 05, 2018 7:36 am

I think it's a fairly personal decision. When times were tighter, the husband and I each had $25/month to blow on whatever we wanted. Eventually we upped that to $50/month and now it is up to $100/month.

I spend mine at coffee shops and he spend his on his hobby. Works for us, and we're both happy! (I'm usually under budget and often give him my leftovers -- makes me the best. wife. ever!)

msk
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Re: [How to determine budget for toys/luxuries?]

Post by msk » Fri Jan 05, 2018 8:39 am

Way back when we were both around age 30, me and my buddy decided that we were too stingy and saving too much (30++% of meagre incomes) and not spending enough on toys. So we resolved to save no more than a third of net income and even bought our top-of-the range Mercedes S Coupes together, but different colors :D 40+ years later we have spent a lot on toys, and are both worth 8 figures. Actually by saving and investing 30% of income starting in your youth, you quickly build up investment income as well. So I'd say, just make sure you are always saving and investing at least 30% of net income and you can happily use any fraction of the rest on toys. YOLO. No need to be excessively cautious. The world may collapse tomorrow into Armageddon, but a greater probability is that you get a health crisis and your life ends quite suddenly. A dear neurologist friend spent her entire life saving like crazy, retired wealthy at 65. And died of colon cancer within two years. We all know of such sad cases. YOLO.

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jharkin
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Re: [How to determine budget for toys/luxuries?]

Post by jharkin » Fri Jan 05, 2018 10:07 am

msk wrote:
Fri Jan 05, 2018 8:39 am
Way back when we were both around age 30, me and my buddy decided that we were too stingy and saving too much (30++% of meagre incomes) and not spending enough on toys. So we resolved to save no more than a third of net income and even bought our top-of-the range Mercedes S Coupes together, but different colors
'30% of meagre income'

'top of the line Mercedes.'


I think you have a very different definition of "meagre" than 99% of the population does... ;)

wrongfunds
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Re: [How to determine budget for toys/luxuries?]

Post by wrongfunds » Fri Jan 05, 2018 10:30 am

Unless you are making 7 figure income, your income is meager by BH definition. I think you have been here long enough to understand that. I suspect msk was barely making half mill per year at that time which is indeed nothing to brag about.

JGoneRiding
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Re: [How to determine budget for toys/luxuries?]

Post by JGoneRiding » Fri Jan 05, 2018 10:37 am

Since you seem to want a simple rule I will give you one.
After saving 20% for edit and paying taxes and paying 25% for home you can probably spend 1 to 4% of remaining income each year on "toys" feel free to save it up for expensive toys.

There nice and clean not subject to age. You need to be doing 1 and calculating for taxes (step 2) before paying 3 and then finally you get to 4 and can spend on toys!

nick evets
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Re: [How to determine budget for toys/luxuries?]

Post by nick evets » Fri Jan 05, 2018 11:09 am

WildBill wrote:
Wed Jan 03, 2018 11:25 pm
Howdy

You can buy any toy you want, but you gotta, repeat gotta, pay cash. No financing.

W B
I really like that. So simple, and so true.

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midareff
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Re: [How to determine budget for toys/luxuries?]

Post by midareff » Fri Jan 05, 2018 11:15 am

The way I handled it when I was still in the accumulation stage was..... I had a savings and investment goal for each and every year that led to retirement.. which started more than 15 years in advance of my actual retirement. When I had achieved my goals for the year I was free to spend excess $$ on toys, travels and luxuries. Now retired 6 years it is similar.. cash flow over and above our monthly essential needs can be accumulated for spending on toys, travels and luxuries. In case of disaster tuck away a couple of $25K CD's, which we used to call an emergency fund when working.

DrGoogle2017
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Re: [How to determine budget for toys/luxuries?]

Post by DrGoogle2017 » Fri Jan 05, 2018 11:20 am

I never go online asking people how much and what I can spend. However, I have no problem offering my opinion if someone asks me online. I’m in the spending phase, aka blow more dough.

EnjoyIt
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Re: [How to determine budget for toys/luxuries?]

Post by EnjoyIt » Fri Jan 05, 2018 12:26 pm

KlangFool wrote:
Thu Jan 04, 2018 3:31 pm
mak1277 wrote:
Thu Jan 04, 2018 3:23 pm
KlangFool wrote:
Thu Jan 04, 2018 3:16 pm
OP,

1) If your net worth is 50 or more times your current annual expense, you can spend any amount in excess of that for any toys.
So you are advocating zero discretionary/fun spending unless you have a double-funded retirement? That seems....unnecessarily conservative.
mak1277,

1) It is obvious that OP wants to spend a lot of money on some toys/luxuries that require budgeting.

2) Do you need to budget for a small amount of discretionary/fun spending? I don't. I save 30+% of my gross income and I spend the rest of my income. I do not budget for any of my spending. That includes discretionary/fun spending.

KlangFool
No, OP has no problems saving 50% of after tax income every year and looking for early retirement. This is to look for a reasonable consensus on answering the question "Can I afford X?" if we come up with something solid then maybe we can get it turned into a wiki page.

msk
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Re: [How to determine budget for toys/luxuries?]

Post by msk » Sat Jan 06, 2018 3:37 am

jharkin wrote:
Fri Jan 05, 2018 10:07 am
msk wrote:
Fri Jan 05, 2018 8:39 am
Way back when we were both around age 30, me and my buddy decided that we were too stingy and saving too much (30++% of meagre incomes) and not spending enough on toys. So we resolved to save no more than a third of net income and even bought our top-of-the range Mercedes S Coupes together, but different colors
'30% of meagre income'

'top of the line Mercedes.'

I think you have a very different definition of "meagre" than 99% of the population does... ;)
We had the conversation about saving and splurging on toys at around age 30, but, as everyone here knows, investing a constant stream of savings (IMHO not in bonds when you are still young enough to recover from possible losses) can build up your NW very rapidly. Both of us happened to be living in a hot RE market, and certainly by age 40 both of us could pay for brand new top of the line Mercedes cash, and still staying within my own other rule-of-thumb, "Never pay more than 6 months' income for cars". But different folk love different toys. Frankly my strong advice to youngsters is to SAVE AND INVEST 30% of net income from today, regardless of how young you are or how meagre your income looks. Ten years hence your perspective as to your NW, job income, etc. will change dramatically. In ten years, with luck, your investment income may well eclipse your job income. With a bit of luck. Parking your savings in a 1% account will not do the job but you can easily check out a Monte Carlo simulation for 100% stocks or a spread sheet, or whatever.

Thesaints
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Re: How much to spend on toys?

Post by Thesaints » Sat Jan 06, 2018 3:43 am

JuniorBH wrote:
Wed Jan 03, 2018 10:08 pm
Personally, net worth would be the benchmark I'd use to determine if I could afford a toy; buying a $100K car when you have a net worth of $2M is very different compared to when you have a net worth of $500K.
Agree! My personal theory is that expenditures around 0.01% of one's TNW are irrelevant. Therefore, if by "toy" the OP means a worthless trinket, that's the max price level I'd consider. Of course, if one derives extraordinary pleasure from such a thing, that limit might be reconsidered, although the fact itself could be a little concerning.

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jharkin
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Location: Boston suburbs

Re: [How to determine budget for toys/luxuries?]

Post by jharkin » Sat Jan 06, 2018 8:34 am

wrongfunds wrote:
Fri Jan 05, 2018 10:30 am
Unless you are making 7 figure income, your income is meager by BH definition. I think you have been here long enough to understand that. I suspect msk was barely making half mill per year at that time which is indeed nothing to brag about.
By BH definition yes.... But my quip was to point out that definition is relative - BH represent a very small slice of the population and whats normal for us in not anywhere remotely close to normal for the vast majority of people in the general population.

I'm trying to decide if your 'nothing to brag' comment is straight, or deadpan.... hard to tell ;)

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jharkin
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Re: [How to determine budget for toys/luxuries?]

Post by jharkin » Sat Jan 06, 2018 8:41 am

msk wrote:
Sat Jan 06, 2018 3:37 am
jharkin wrote:
Fri Jan 05, 2018 10:07 am
msk wrote:
Fri Jan 05, 2018 8:39 am
Way back when we were both around age 30, me and my buddy decided that we were too stingy and saving too much (30++% of meagre incomes) and not spending enough on toys. So we resolved to save no more than a third of net income and even bought our top-of-the range Mercedes S Coupes together, but different colors
'30% of meagre income'

'top of the line Mercedes.'

I think you have a very different definition of "meagre" than 99% of the population does... ;)
We had the conversation about saving and splurging on toys at around age 30, but, as everyone here knows, investing a constant stream of savings (IMHO not in bonds when you are still young enough to recover from possible losses) can build up your NW very rapidly. Both of us happened to be living in a hot RE market, and certainly by age 40 both of us could pay for brand new top of the line Mercedes cash, and still staying within my own other rule-of-thumb, "Never pay more than 6 months' income for cars". But different folk love different toys. Frankly my strong advice to youngsters is to SAVE AND INVEST 30% of net income from today, regardless of how young you are or how meagre your income looks. Ten years hence your perspective as to your NW, job income, etc. will change dramatically. In ten years, with luck, your investment income may well eclipse your job income. With a bit of luck. Parking your savings in a 1% account will not do the job but you can easily check out a Monte Carlo simulation for 100% stocks or a spread sheet, or whatever.
You completely missed the point of my comment. I was just pointing out that an income that can afford a Mercedes S coupe is not meager by any normal definition of the term. An S coupe costs something like 60% of what the average American families home is worth.

I know all the rest. My portfolio returned about 60% of my base salary last year, thanks to BH principles. However I'm still nowhere near being able to afford an S coupe, simply because my chosen career doesn't pay on a scale that puts me in that demographic. And even my (apparently lowly by BH standards) career pays probably in the top 5-10% income statistically.

It was just a young in cheek comment (reason I added the smiley ;) ) meant to point out that none of us here are average.

wrongfunds
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Re: [How to determine budget for toys/luxuries?]

Post by wrongfunds » Sat Jan 06, 2018 9:22 am

I'm trying to decide if your 'nothing to brag' comment is straight, or deadpan.... hard to tell ;)
Knowing all my prior comments, I don't think you can guess wrong :-)

student
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Re: [How to determine budget for toys/luxuries?]

Post by student » Sat Jan 06, 2018 9:31 am

I allow myself to by small luxuries (under $100), it is in the budget. For something more expensive like a car, I cannot afford a luxury version.

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