Simple rule to not become a miser?

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ThankYouJack
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Simple rule to not become a miser?

Post by ThankYouJack »

As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good balance for me between being an extreme saver to spending more freely.

Thoughts?
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Re: Simple rule to not become a miser?

Post by jebmke »

Without getting into specifics, what I try to look at (loosely) is the percent of my spending that is done on behalf of others. That would include charity, gifts, picking up a restaurant tab .....

I don't track every little detail but I have enough sense of the smaller items to provide a little windage to the numbers I know.
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rich126
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Re: Simple rule to not become a miser?

Post by rich126 »

Some people are spenders, some are savers and some are in between. This idea of rules to change behaviors don't work IMO. It is like the poster who wanted to prevent themselves from streaming videos while they are supposed to be working. Unless someone else is enforcing the behavior it doesn't work.
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KlingKlang
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Re: Simple rule to not become a miser?

Post by KlingKlang »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.
If this floats your boat, great. In my experience unplanned expenses - house repairs, car repairs, medical bills, relatives' needs, etc. are more than likely to consume any budget "surplus".
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Re: Simple rule to not become a miser?

Post by RadAudit »

Not to worry. If you live long enough, at least spend your RMD.
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Re: Simple rule to not become a miser?

Post by stan1 »

It's entirely up to you. But I agree there's not much point in dying with multiple millions if your family or others around you could use financial help or if there are things you'd like to experience with your family (or on your own such as travel).
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SmileyFace
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Re: Simple rule to not become a miser?

Post by SmileyFace »

We do an assessment every December seeing how much we spent and saved for the year - bottom line question is really simple - how-bloated has my emergency fund bank account has become. The amount of excess funds drives how much we donate to charities (I do all donations as bulk-single-time payments in December working through our charity list - some exceptions are fund-raisers that come up throughout the year from some friends/relatives).
I am in a different boat than many here in that my goal in life is not to FIRE. I like the FI piece but I believe in living and giving throughout my lifetime versus getting to a point where I can stop working. So our simple rule is - did we hit our investment/savings goals for the year and still have extra money? If the answer is "Yes" then we give the excess away.
Last edited by SmileyFace on Wed Nov 23, 2022 11:00 am, edited 1 time in total.
homebuyer6426
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Re: Simple rule to not become a miser?

Post by homebuyer6426 »

It's much harder to be a miser today than it was in the past when people had less.

As a single guy I lived very comfortably on $25K and didn't feel I lacked anything. Food, transportation, entertainment, shelter was all there.

In the old days when ideas like the miser came about, it was much more expensive to satisfy the basic needs. A much higher percentage of people were living in poverty.

If you're not living on cereal and keeping your house at 50 degrees in the winter while sitting on millions, I wouldn't worry too much about it.
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TheTimeLord
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Re: Simple rule to not become a miser?

Post by TheTimeLord »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good balance for me between being an extreme saver to spending more freely.

Thoughts?
I think what I and a lot of people miss about most people in the situation of feeling they spending too little is 2 things. First, they were likely pretty financially responsible and disciplined teaching themselves to save and no longer having debt. So they got in the habit of saving but because they have paid off their debt monthly expenses have moved lower. Second, even though they were responsible with their spending they are older and probably have bought pretty much all the clothes, cars, TVs and a house they really want and now are just replacing stuff that wears out. Which means most of their spurge spending will likely be travel, remodels and gifts for family. Those are my thoughts.
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LittleMaggieMae
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Re: Simple rule to not become a miser?

Post by LittleMaggieMae »

I think having some "rules" or some guidelines for how to handle spending money is a good thing. (it's that budget/spending plan thing)

Thinking about where and how you will be more generous to others in everyday is also a good thing.

It helps when you have to make a decision about being generous in everyday life - tips or splitting a check or just making an effort to stop saying out loud "oh, this costs so much - I remember when it was 25 cents!" in that voice that implies it's PAINFUL to have to pay for it now. Or something else about how maybe spending money on a thing is somehow a "hardship" for you when it's really not. Really, listen to how people talk (or don't talk) about the money they spend (or give). Listen to how you talk about spending money to other people. Maybe it's time to just tip generously (unless you really do get terrible service - it's good to decide what's terrible service so you don't just "rationalize" why every time you eat out or have something delivered it's "terrible service")

Having some guidelines for how much you will spend on your hobbies or entertainment or something else you value - can also help you to spend money. Sure maybe you could get away with a used GeeGaw (a hobby thing) but wouldn't it be nice to have a "new" one? If you have already allocated money to your hobby - maybe you can easily buy the "new" one. Same thing with entertainment expenses - do you need to sit in the cheapest seats or can you upgrade to a more expensive set at a live performance? Without "breaking the bank"? If you have money pre-allocated - you will know if you can. You know the total amount you can spend without it effecting something else.

Same thing goes with gift giving to family/friends/whatever.

The way to get past being "cheap" or a "miser" is KNOW how much you can spend/give. And then make the effort to spend/give it in ways that are "valuable" to you. You aren't wasting this money... if you "spend" it on something you value (a gift to a relative/friend/charity, something for your hobby, tipping someone without any inner anxiety about figuring out how little you should tip. )

It's all about having choices.
Last edited by LittleMaggieMae on Wed Nov 23, 2022 11:22 am, edited 2 times in total.
secondopinion
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Re: Simple rule to not become a miser?

Post by secondopinion »

If the dollar spent actually will make you really happy, then go ahead. Otherwise, it is just spending to spend. I pay for premium dark chocolate (yet buy it on sale, in bulk, and with coupons on top of that); I do not pay for amusement parks, concerts, movies, and other crowded and noisy things.

Smart spending is just fine; if you have surplus, just wait until there is actually something good to spend it on.
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VanGar+Goyle
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Re: Simple rule to not become a miser?

Post by VanGar+Goyle »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.
At some point, you may realize that you are middle aged, and may only live for another 50 years or so.
Then you may start to think who gets your money when you die at age 120, or if you should spend it, or give it away before then.
If you are still working, then 5% may be too much, but you should spend at least 10% of your combined income and portfolio a year :)
Marseille07
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Re: Simple rule to not become a miser?

Post by Marseille07 »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good balance for me between being an extreme saver to spending more freely.

Thoughts?
I don't think forcing spending makes sense. If you are comfortable drawing 5% FWR and you think you have a surplus, why not retire earlier so that you don't have as much surplus?

I also don't agree with the notion that spending 3~4% is being a miser. Our portfolio is a money machine made out of money. I don't see anything wrong withdrawing just you need, even if it is lower than your WR%.
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FLC41
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Re: Simple rule to not become a miser?

Post by FLC41 »

In my experience, the least miserly (and most personally rewarding) action you could take would be to give to a charity meaningful to you up to your 5% threshold. A great many people are in constant need and your philanthropy could be a real difference-maker for someone less fortunate.
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Re: Simple rule to not become a miser?

Post by miamivice »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good balance for me between being an extreme saver to spending more freely.

Thoughts?
I don't havre any suggestions, but let me tell you, I really despise wealthy misers. My in-laws are like that. They own three houses worth nearly $2-$3 million plus an unknown amount in their IRA accounts and also some inherited stock. My MIL says she is broke because all of her money is locked up in investments, and they sit around and complain about how they don't have enough money. Sometimes we went went out to restaurants they refused to pay their share of the bill because they're broke...meanwhile they have millions in a variety of assets. Just sad.
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Re: Simple rule to not become a miser?

Post by Mike Scott »

Being a "miser" is more a frame of mind than it is anything directly monetary or budget related. It's probably easier to see it in others than it is to see it in yourself. I would not force a spending rule for stuff I don't want or need but you could increase gifts and charitable donations if that's what you want. Use the money for something you value.
Marseille07
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Re: Simple rule to not become a miser?

Post by Marseille07 »

miamivice wrote: Wed Nov 23, 2022 1:29 pm I don't havre any suggestions, but let me tell you, I really despise wealthy misers. My in-laws are like that. They own three houses worth nearly $2-$3 million plus an unknown amount in their IRA accounts and also some inherited stock. My MIL says she is broke because all of her money is locked up in investments, and they sit around and complain about how they don't have enough money. Sometimes we went went out to restaurants they refused to pay their share of the bill because they're broke...meanwhile they have millions in a variety of assets. Just sad.
Your in-laws may be extreme but it's actually possible to find ourselves lacking liquidity when we're drawing 4%/year. Someone having 1.25M might only have 50K/year to work with, even though they technically have over a million.
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Patzer
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Re: Simple rule to not become a miser?

Post by Patzer »

FLC41 wrote: Wed Nov 23, 2022 1:27 pm In my experience, the least miserly (and most personally rewarding) action you could take would be to give to a charity meaningful to you up to your 5% threshold. A great many people are in constant need and your philanthropy could be a real difference-maker for someone less fortunate.
In my experience, giving money alone hasn't felt rewarding. It's actually felt painful. (I know that's not universal, but might be true for others that have trouble spending.)

What I have found really rewarding is to volunteer a little bit with a charity (even just 1 day), see the impact they are having, and then give them money to help achieve their objectives. That helped me feel good about giving the money, instead of feeling like I was spending it on something.
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Re: Simple rule to not become a miser?

Post by afan »

miamivice wrote: Wed Nov 23, 2022 1:29 pm

I don't havre any suggestions, but let me tell you, I really despise wealthy misers. My in-laws are like that. They own three houses worth nearly $2-$3 million plus an unknown amount in their IRA accounts and also some inherited stock.
A new concept. Misers with three houses. I would have cut off my definition of miser at any figure greater than 1.
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Re: Simple rule to not become a miser?

Post by White Coat Investor »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good balance for me between being an extreme saver to spending more freely.

Thoughts?
Giving money away helps with this.

But if you really want to force yourself to spend, make a rule that whatever you don't spend of your designated spending amount for that year has to be given to a PAC for your least favorite political party.
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Re: Simple rule to not become a miser?

Post by afan »

Spending 5% of assets after retirement would have a significant risk of going broke, unless Social Security or pensions covered part of that spending.

While working, I suppose one could do it, provided they also save from their earned income.
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retire2022
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Re: Simple rule to not become a miser?

Post by retire2022 »

Op

One cannot take assets with you, loosen up the purse strings, be magnanimous and generous with yourself occasionally.

Treat yourself I watched my parents saved all their lives working, father separated from my mom, he died broke.

Mother was frugal also to the end, what is the point of saving if you can’t spend some of it.

Use some discretionary income to enjoy yourself with family and friends.

Write a bucket list things to do.

I retired since last August 2021 and wondering the same.

Good luck
Last edited by retire2022 on Wed Nov 23, 2022 3:01 pm, edited 1 time in total.
Topic Author
ThankYouJack
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Re: Simple rule to not become a miser?

Post by ThankYouJack »

Thanks for all the replies.
Marseille07 wrote: Wed Nov 23, 2022 1:09 pm I don't think forcing spending makes sense. If you are comfortable drawing 5% FWR and you think you have a surplus, why not retire earlier so that you don't have as much surplus?
I feel fortunate that for most part I enjoy my line of work so plan to work for a while longer (at least part-time). Also I wouldn't feel comfortable completely retiring at this point, seems like I'd be cutting it too close, would really have to watch spending and I don't want to run out of money. Continuing to work will allow me to inflate my lifestyle will probably increase happiness a little, and more money should allow me to help those close to me who may need help down the road.
Marseille07 wrote: Wed Nov 23, 2022 1:09 pm I also don't agree with the notion that spending 3~4% is being a miser. Our portfolio is a money machine made out of money. I don't see anything wrong withdrawing just you need, even if it is lower than your WR%.
I agree. I'm definitely not trying to say that anyone who spends less than x% is a miser. We all have our reasons for savings, different comfort levels, different obligations, etc. For me personally, I'm trying to warm up to the idea that I can spend 5% of my portfolio balance and be fine. That probably seems odd to some, but for whatever reason I have a mindset of "how much can I can save" and sometimes I'll have trouble spending on myself. Since I haven't gotten flamed too bad yet, maybe it's not a horrible idea at least for my own circumstance :happy
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Re: Simple rule to not become a miser?

Post by Marseille07 »

ThankYouJack wrote: Wed Nov 23, 2022 2:09 pm I agree. I'm definitely not trying to say that anyone who spends less than x% is a miser. We all have our reasons for savings, different comfort levels, different obligations, etc. For me personally, I'm trying to warm up to the idea that I can spend 5% of my portfolio balance and be fine. That probably seems odd to some, but for whatever reason I have a mindset of "how much can I can save" and sometimes I'll have trouble spending on myself. Since I haven't gotten flamed too bad yet, maybe it's not a horrible idea at least for my own circumstance :happy
5% FWR is a very decent idea and you are likely to be just fine. If you look at VPW, it starts off at 4.5% WR (this depends on your retirement age) and goes higher, hitting 6, 7, 8% WR later in life.

I think the sticky point here is that you appear as trying to *forcibly* spend 5%. I don't think it makes sense to do so. It's fine to try spending 5%, but if you end up only spending 4.1%, so be it I say.
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ThankYouJack
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Re: Simple rule to not become a miser?

Post by ThankYouJack »

afan wrote: Wed Nov 23, 2022 1:59 pm Spending 5% of assets after retirement would have a significant risk of going broke, unless Social Security or pensions covered part of that spending.

While working, I suppose one could do it, provided they also save from their earned income.
A few months ago I started this thread about a 5% fixed withdrawal rate that led to some interesting discussion - viewtopic.php?t=385236

I realize the change in income isn't for everyone, but I still like the idea and the simplicity behind it.
White Coat Investor wrote: Wed Nov 23, 2022 1:57 pm
Giving money away helps with this.

But if you really want to force yourself to spend, make a rule that whatever you don't spend of your designated spending amount for that year has to be given to a PAC for your least favorite political party.
Haha, I try to stay somewhat middle of the road, but having to donate to my least favorite politician or national association or criminal would do the trick :beer
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Re: Simple rule to not become a miser?

Post by Riprap »

miamivice wrote: Wed Nov 23, 2022 1:29 pm I don't havre any suggestions, but let me tell you, I really despise wealthy misers.
Don't hang out with farmers then. Asset rich, cash poor.
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Re: Simple rule to not become a miser?

Post by Marseille07 »

afan wrote: Wed Nov 23, 2022 1:59 pm Spending 5% of assets after retirement would have a significant risk of going broke, unless Social Security or pensions covered part of that spending.

While working, I suppose one could do it, provided they also save from their earned income.
5% FWR (not to confuse with 5% SWR) is fairly safe. The OP is talking about FWR here.
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ThankYouJack
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Re: Simple rule to not become a miser?

Post by ThankYouJack »

Marseille07 wrote: Wed Nov 23, 2022 2:19 pm I think the sticky point here is that you appear as trying to *forcibly* spend 5%. I don't think it makes sense to do so. It's fine to try spending 5%, but if you end up only spending 4.1%, so be it I say.
I get that.

I do feel I'd be putting the extra money to good use and the "rule" would help me feel more comfortable with "extravagant" spending.

Have you read Die With Zero? I don't agree with everything or even most of the book, but it did shift my thinking on a few things.
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Re: Simple rule to not become a miser?

Post by Marseille07 »

ThankYouJack wrote: Wed Nov 23, 2022 5:05 pm I get that.

I do feel I'd be putting the extra money to good use and the "rule" would help me feel more comfortable with "extravagant" spending.

Have you read Die With Zero? I don't agree with everything or even most of the book, but it did shift my thinking on a few things.
I haven't read Die With Zero as my philosophy is the complete opposite. I'd rather keep my withdrawals small and grow the pile, instead of making big cuts and stop the growth or deplete it in the end.
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afan
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Re: Simple rule to not become a miser?

Post by afan »

Marseille07 wrote: Wed Nov 23, 2022 2:45 pm
afan wrote: Wed Nov 23, 2022 1:59 pm Spending 5% of assets after retirement would have a significant risk of going broke, unless Social Security or pensions covered part of that spending.

While working, I suppose one could do it, provided they also save from their earned income.
5% FWR (not to confuse with 5% SWR) is fairly safe. The OP is talking about FWR here.
You are right. I was thinking of SWR.
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ThankYouJack
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Re: Simple rule to not become a miser?

Post by ThankYouJack »

Marseille07 wrote: Wed Nov 23, 2022 5:26 pm
ThankYouJack wrote: Wed Nov 23, 2022 5:05 pm I get that.

I do feel I'd be putting the extra money to good use and the "rule" would help me feel more comfortable with "extravagant" spending.

Have you read Die With Zero? I don't agree with everything or even most of the book, but it did shift my thinking on a few things.
I haven't read Die With Zero as my philosophy is the complete opposite. I'd rather keep my withdrawals small and grow the pile, instead of making big cuts and stop the growth or deplete it in the end.
I get where you're coming from. I like seeing the growth as well and the pile grow. It exciting, comforting, maybe even addicting.

But I hope to get more fulfillment from seeing money be used while alive. "Richest in the graveyard" and "you can't take it with you" comes to mind.
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Re: Simple rule to not become a miser?

Post by Marseille07 »

ThankYouJack wrote: Wed Nov 23, 2022 6:19 pm I get where you're coming from. I like seeing the growth as well and the pile grow. It exciting, comforting, maybe even addicting.

But I hope to get more fulfillment from seeing money be used while alive. "Richest in the graveyard" and "you can't take it with you" comes to mind.
The problem is that 5% WR isn't likely to grow your pile. And if something bad happens then you might have to return to the workforce at an inopportune time.

Wanting to donate 5% in full after expenses is a noble cause but I think we should secure our footing beforehand, especially when one retires early.

Also, if you get struck by huge medical bills or long-term care later in life, you might regret generously donating your money earlier in life. In that sense I don't think being the richest in the graveyard is such a bad thing.
Last edited by Marseille07 on Wed Nov 23, 2022 9:53 pm, edited 1 time in total.
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delamer
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Re: Simple rule to not become a miser?

Post by delamer »

Since you have a concern about miserly tendencies then I think your 5% plan is a good one.

When this topic of “reluctance to spend” comes up, I always think of my father. He had also wanted to own a Jaguar, but could never overcome his thrift gene and actually purchase one (even used). By the time he was my age, any rational person looking at my parents’ finances would have said “Buy the Jaguar!” But he didn’t.

My husband and I just paid way more for an EV than we ever have for a car. I’m not sure if my father would have applauded or been appalled. But I learned him.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Simple rule to not become a miser?

Post by SnowBog »

We plan to use VPW for our withdrawal phase. The intent is to have guidance on how much you can spend (inclusive of taxes), based on your age, retirement income, and portfolio. If followed (meaning you spend, gift, or donate the "recommended" amount), you should avoid being a miser.

Presumably for those of use who've saved for years, the "trick" is getting yourself to do so... I know I've already "given up" (before even getting there) trying to do so in our first 5 retirement years, as we'd rather have any excess grow to help offset our likely bad attempt at estimating expenses 20+ years away.
White Coat Investor wrote: Wed Nov 23, 2022 1:57 pm But if you really want to force yourself to spend, make a rule that whatever you don't spend of your designated spending amount for that year has to be given to a PAC for your least favorite political party.
It took me a second, but I realized the wisdom in this suggestion. If the "fall back" plan is something you really don't want to do, you'll be far more inclined to put the money to "better use" - whatever that use may be...

Might be something I need to consider in our plan eventually.
Triple digit golfer
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Re: Simple rule to not become a miser?

Post by Triple digit golfer »

Marseille07 wrote: Wed Nov 23, 2022 5:26 pm
ThankYouJack wrote: Wed Nov 23, 2022 5:05 pm I get that.

I do feel I'd be putting the extra money to good use and the "rule" would help me feel more comfortable with "extravagant" spending.

Have you read Die With Zero? I don't agree with everything or even most of the book, but it did shift my thinking on a few things.
I haven't read Die With Zero as my philosophy is the complete opposite. I'd rather keep my withdrawals small and grow the pile, instead of making big cuts and stop the growth or deplete it in the end.
I would too, but it comes with a price and that price is working longer. So, it's a pick your poison situation I suppose. As soon as I'm at 25 years of conservative expenses (allowing for lumpy expenses, golf, vacations, new car every 10 years, etc), I'm done working.
bh1
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Re: Simple rule to not become a miser?

Post by bh1 »

My rule is that there are two kinds of problems: those that can be solved with money and the other kind. Is you encounter a problem that can be solved with money, just do it. Mechanic says the car needs five random repairs? Just fix it! Ordered the wrong thing in a restaurant? Just order what you wanted and pay for both! Hotel $400 a night? Whatevs! Waist thickening up? Fly business class. No reservation? Here's a $100 bill! Just get the unlimited phone plan. This is what spare money buys.
Admiral
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Re: Simple rule to not become a miser?

Post by Admiral »

I'm confused. Are you speaking of spending down your retirement portfolio by 5% (occasionally perhaps) while also still working and contributing? Assuming you are over age 59 or can otherwise withdraw w/o penalty?

If you have $1m and are contributing a max (not including catch up) of 3%, that's $30k. If you want to withdraw 5%, then why not simply stop contributing anything?

If you are no longer contributing but still have an income--and thus do not need to withdraw--then taking out some money for whatever you want seems reasonable. Taking 5% seems fine IF it's not in addition to the money you need to live.

But no, taking 4% + 5% is unwise unless you have a lot of retirement income (SS, pension, etc).

Only you know your living expenses.
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asset_chaos
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Re: Simple rule to not become a miser?

Post by asset_chaos »

If I'm enjoying life and the people I care about enjoy spending some time with me, that's what I care about and spending an arbitrary percentage of the retirement pile is uncorrelated with that enjoyment. But if implementing a spending rule as a mental trick to get yourself to focus on stuff that's more personally fulfilling, then by all means play the mental trick and enjoy life more.
Regards, | | Guy
Normchad
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Re: Simple rule to not become a miser?

Post by Normchad »

I like the way you are thinking! You should enjoy the fruits of your labor. Around here, the notion of living below your means quickly degenerates into miserly behavior for some. I applaud you for being vigilant to prevent that.

Old habits die very hard though. You’re probably not going to suddenly buy a plane or a boat.

I recommend you make a conscious effort to meet up with your friends and old colleagues frequently, and treat them to lunch or a ball game, that sort of thing. Use your money to do things that bring you some fulfillment.

And if you have heirs to think of, you could start giving now. Gifts given now will have more years to make a meaningful impact for your heirs.

For me, I wouldn’t tie it to portfolio size though. I’d buy my friends lunch once a month, buy season theatre tickets annually, something like that. Set goals or commitment devices, but not necessarily tied to your wealth.

All the best!
7eight9
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Re: Simple rule to not become a miser?

Post by 7eight9 »

Buy a SPIA - spend it all. Next year the same amount is coming in (plus Social Security with an increase (hopefully)).
I guess it all could be much worse. | They could be warming up my hearse.
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Sandtrap
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Re: Simple rule to not become a miser?

Post by Sandtrap »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am 1
As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good
2
balance for me between being an extreme saver to spending more freely.


Thoughts?
To OP:
Notes and questions for you:
1
Not knowing your exact data and financial situation: IE: 50X on retirement. . . 100X on retirement at age 65? (What?)
There's no input that can be valid except to make assumptions.
a) However, whether one has 50X or 15X ("x" annual expenses in retirement in income generating/portfolio/etc, etc, ad infinitum). . . "on one end of thought" is the danger of the inevitable; "health and financial and life, financial Blank Swans" that can bankrupt even substantial assets. IE: medical and health needs based on trauma or extreme lifestyle medical needs, lawsuit, family disasters, etc.

2
You mention 1 million is assets or investments and 40k in annual expenses.
While the 1 million is known. The 40k can change overnight. IE: 24/7 in home medical/assist care can run 10-15k+ per month.

So. . becoming complacent or entitled or so forth. . then spendy. . . may not be a good idea.
(add to the wiki on behavioral dangers to finances). . . IE: "Lotus Elite now and tuna helper later?. . there's no predicting the future.

Question for you (op):
1
How much will you have on your retirement and/or at age 65?
100X?

2
What is a "miser" vs "frugal" vs "thrifty" etc, to you?
3
Does being more "spendy" satisfy what needs?

Note:
There is no "rule" to these things except for each person and even that will change with life and financial dynamics since much of that does not fit on a spreadsheet.

j :D
dis laimer: zillions of ways to do things and opinionizations and onions based on nil to zero to extensive actual experiential personal and professional experience.
Wiki Bogleheads Wiki: Everything You Need to Know
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ThankYouJack
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Re: Simple rule to not become a miser?

Post by ThankYouJack »

Admiral wrote: Wed Nov 23, 2022 7:52 pm I'm confused. Are you speaking of spending down your retirement portfolio by 5% (occasionally perhaps) while also still working and contributing? Assuming you are over age 59 or can otherwise withdraw w/o penalty?

If you have $1m and are contributing a max (not including catch up) of 3%, that's $30k. If you want to withdraw 5%, then why not simply stop contributing anything?

If you are no longer contributing but still have an income--and thus do not need to withdraw--then taking out some money for whatever you want seems reasonable. Taking 5% seems fine IF it's not in addition to the money you need to live.

But no, taking 4% + 5% is unwise unless you have a lot of retirement income (SS, pension, etc).

Only you know your living expenses.
I'm still working so not spending down my portfolio yet. So while working I'm still accumulating and won't need to withdrawal from my portfolio to hit my spending "goal".

Say my portfolio balance is $1M and spending is $40k. I'll have a $10k surplus. If I made $60k for the year, my income would cover the additional expenses.
Admiral
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Re: Simple rule to not become a miser?

Post by Admiral »

ThankYouJack wrote: Thu Nov 24, 2022 7:52 am
Admiral wrote: Wed Nov 23, 2022 7:52 pm I'm confused. Are you speaking of spending down your retirement portfolio by 5% (occasionally perhaps) while also still working and contributing? Assuming you are over age 59 or can otherwise withdraw w/o penalty?

If you have $1m and are contributing a max (not including catch up) of 3%, that's $30k. If you want to withdraw 5%, then why not simply stop contributing anything?

If you are no longer contributing but still have an income--and thus do not need to withdraw--then taking out some money for whatever you want seems reasonable. Taking 5% seems fine IF it's not in addition to the money you need to live.

But no, taking 4% + 5% is unwise unless you have a lot of retirement income (SS, pension, etc).

Only you know your living expenses.
I'm still working so not spending down my portfolio yet. So while working I'm still accumulating and won't need to withdrawal from my portfolio to hit my spending "goal".

Say my portfolio balance is $1M and spending is $40k. I'll have a $10k surplus. If I made $60k for the year, my income would cover the additional expenses.
Then I still don't understand what you are asking. If your income covers your expenses--defined as "whatever I want to spend my money on"--then there is no need to spend anything from your portfolio. If you are saying, "well, my expenses are $x, and I want to spend $x+$10k, and my income won't cover the $10k, can I withdraw it from my portfolio?" the answer is: Yes. That's 1% of $1m.

My point was that, as you noted, if you are still accumulating/contributing AND you want to spend more, the act of not contributing is the same as contributing and then withdrawing the money (assuming the amounts are identical). Just stop contributing and voila, you have more money.

If it helps, we have reduced our retirement contributions after reaching our retirement goal so we have more money to spend in our 50s. We still contribute to get the match, and my spouse has to contribute $10k per year into a pension.

ETA: I would add that once you have “enough” the each year you delay retirement equals more money you can withdraw. So if you feel you are in good shape financially but are still working, then it’s perfectly fine to spend some of your savings. That’s what it’s there for. There is no rule. But spending a few percent (or not saving it) is not going to move the needle on a $1m portfolio. The increase comes from growth not contributions once you are near retirement age.
Last edited by Admiral on Thu Nov 24, 2022 8:34 am, edited 1 time in total.
Marylander1
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Re: Simple rule to not become a miser?

Post by Marylander1 »

afan wrote: Wed Nov 23, 2022 1:56 pm
miamivice wrote: Wed Nov 23, 2022 1:29 pm

I don't havre any suggestions, but let me tell you, I really despise wealthy misers. My in-laws are like that. They own three houses worth nearly $2-$3 million plus an unknown amount in their IRA accounts and also some inherited stock.
A new concept. Misers with three houses. I would have cut off my definition of miser at any figure greater than 1.
A billionaire with 3 yachts and 5 mansions is still a miser if they go to a restaurant in the United States and don't tip reasonably.
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Re: Simple rule to not become a miser?

Post by dknightd »

ThankYouJack wrote: Wed Nov 23, 2022 10:41 am As I get older and my financial situation continues to improve (getting closer to financial independence but still plan to work a while longer), I want to make sure I'm not too into hoarding wealth.

I'm thinking a "rule" where I'll spend at least 5% of my portfolio balance each year. Say I have a $1M portfolio and only spent $40k for the year. Then I'll have a $10k surplus to spend. Where would I spend it? - I'll give more (great timing with the holidays), some things in my house could use upgrades, I'll eventually need to replace a car, hobbies.

I realize this "rule" won't make sense for a lot of people (maybe even most) on here, but I think it's a good balance for me between being an extreme saver to spending more freely.

Thoughts?
First thought. You have not yet reached financial independence (however YOU define it). And you may not ever, if you do not continue to save. Your ability to earn money could disappear at any time. Human capital is a wonderful thing, as long as it does not disappear when you need it.

Second thought. I do not like "rules" on how we spend our money.

Third thought. I think we are financially independent. But I would not mind a 20% buffer. I'm not going to purposely spend money I don't want to spend. Why would somebody want to force themselves to spend more money than they wanted to spend?

Fourth thought. How do you define "financial independence?" My finances depend on many things that are out of my control. I think we have enough, but I could be wrong!

Fifth thought. I do not want to die rich. But I do not want to die poor. But die I must.

Sorry, I've been thinking about this. Maybe too much. Good luck on your quest.

I'm thankful we have to make these decisions. Some people are not as lucky.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
dknightd
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Re: Simple rule to not become a miser?

Post by dknightd »

You've seen those people with cardboard signs at intersections. I once offered one a job helping me clean up the yard. I offered $20/hour. And lunch. They said sorry, I make more money doing this. I admit. This has soured my willingness to donate money. I still donate to PBS and local food bank. Spouse donates through the church.
Perhaps my offer was too miserly?
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
dknightd
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Re: Simple rule to not become a miser?

Post by dknightd »

I sometimes laugh out loud at TV adds to "save the elephants". Or similar causes. I can't help myself, they all use that similar pitiful sounding voice.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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praxis
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Re: Simple rule to not become a miser?

Post by praxis »

Make a personal list. Call it "Cheap Riches", or "Things I'm Grateful For". Make it real long. Fill it with things that make you happy. Like:

my wife's laughter
ocean sunrises
not judging
the milky way
blueberry pancakes
haikus
girls with a boy's name
seeing a dog that looks like a dog I know
baby toes
lobster
sandals
rivers
fresh juicy ideas
carving a ski turn
confidence
harmony
commitment

Keep it in your wallet.
hudson
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Re: Simple rule to not become a miser?

Post by hudson »

praxis wrote: Thu Nov 24, 2022 9:50 am Make a personal list. Call it "Cheap Riches", or "Things I'm Grateful For". Make it real long. Fill it with things that make you happy.
I never thought of that; in progress. thanks!

Back to the original question:
I have 3 columns on a spreadsheet that show much extra that I could spend depending on how many years I want my money to last. I have another section of the spreadsheet that shows the major items that I've bought by-year since 2015. I can look at these two spreadsheet sections and see if I'm on track. I don't live like a miser, but I've been trained by several misers that survived the Great Depression.
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JoMoney
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Re: Simple rule to not become a miser?

Post by JoMoney »

I think planning to spend potentially large amounts of money, not tied to any specific need or objective other than out of fear of being something poorly described as being "a miser", isn't a good objective, and probably worthy of more scorn than whatever you think being "a miser" is.
If there are worthwhile charities or people you would enjoy gifting to, give, because you want to or your heart and mind are calling you to do that... not because you feel you must spend else "become a miser" (with some vague implication that miser=bad, compared to lots of other words that can be used to describe thoughtful spending and saving implying something better)
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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