How do we give ourselves permission to spend money?
August 11, 2023 5:40 AM Subscribe
My spouse and I are in a very lucky place, career-wise. We'd like to work out a plan to continue saving for long-term goals, but also spend money on things/experiences/causes that make us happy and are important to us in the short term. This is at least as much an emotional question as a budget question.
My partner and I (late 30s/early 40s, no kids) have paid off our debts and are fully funding our retirement accounts and saving aggressively. We have significant non-retirement savings. Like, not FIRE, but "if we both got laid off, we could live comfortably for a year or two" savings, on top of what's in our retirement accounts. We're able to save a significant amount every year. When we were younger, we both had decent but not great jobs, and focused significantly on building up savings for emergency funds, and paying down debt; now we're starting to wonder about the next phase in our lives.
Even with that, our next big life goal (a big enough down-payment to have affordable monthly payments on a house/condo) is close to a decade away because of how ridiculous real estate is here. Like, we could probably get to a 20% down-payment in 2 years assuming housing prices and our employment holds steady, but then the monthly would be 3-4x what we pay in rent right now, which we could pay, but only if we really believe our current level of comp is going to continue for 30 more years. So, the only solution is a bigger down-payment (save RSUs now while we're getting them to avoid having to count on still getting more of them later). We're not sure how much we even want to be homeowners.
At the same time, we're watching our parents age. It's particularly heartbreaking to see my father, at 85, run into the limits of what his body can do, compared to what he wishes he could do / would have done sooner, while he's sitting on years of savings. Also we're getting to the age where friends are having serious health problems/scares, and that's putting things into perspective for both of us.
My partner is on board with saving somewhat less aggressively and doing more things we want to do now. They come from more family money than I do and have always found my obsession with savings a little odd, so this is not a "talk my partner into spending more" question, it's more a "figure out how much more we can/should spend, given we want to spend more now" question.
The question I keep going around and around on is, "saving for a down-payment could consume every single penny we could possibly save for most of the next decade. So, how do we game out how much we're willing to budget to house and not-house things, so that we still get to a house, but maybe in an extra year or two?" There's a lot of ways I can imagine making a spreadsheet model for this, but there are also so many unknowns that I'm not sure a spreadsheet model actually addresses the root anxieties.
I recognize this is not really a coherent question, or rather it's a lot of maybe-extraneous detail trying to prove to myself we could spend a bit on hobbies or charity or other selfish short term not-house things and not need to feel guilty. So how do I give myself permission to spend money?
My partner and I (late 30s/early 40s, no kids) have paid off our debts and are fully funding our retirement accounts and saving aggressively. We have significant non-retirement savings. Like, not FIRE, but "if we both got laid off, we could live comfortably for a year or two" savings, on top of what's in our retirement accounts. We're able to save a significant amount every year. When we were younger, we both had decent but not great jobs, and focused significantly on building up savings for emergency funds, and paying down debt; now we're starting to wonder about the next phase in our lives.
Even with that, our next big life goal (a big enough down-payment to have affordable monthly payments on a house/condo) is close to a decade away because of how ridiculous real estate is here. Like, we could probably get to a 20% down-payment in 2 years assuming housing prices and our employment holds steady, but then the monthly would be 3-4x what we pay in rent right now, which we could pay, but only if we really believe our current level of comp is going to continue for 30 more years. So, the only solution is a bigger down-payment (save RSUs now while we're getting them to avoid having to count on still getting more of them later). We're not sure how much we even want to be homeowners.
At the same time, we're watching our parents age. It's particularly heartbreaking to see my father, at 85, run into the limits of what his body can do, compared to what he wishes he could do / would have done sooner, while he's sitting on years of savings. Also we're getting to the age where friends are having serious health problems/scares, and that's putting things into perspective for both of us.
My partner is on board with saving somewhat less aggressively and doing more things we want to do now. They come from more family money than I do and have always found my obsession with savings a little odd, so this is not a "talk my partner into spending more" question, it's more a "figure out how much more we can/should spend, given we want to spend more now" question.
The question I keep going around and around on is, "saving for a down-payment could consume every single penny we could possibly save for most of the next decade. So, how do we game out how much we're willing to budget to house and not-house things, so that we still get to a house, but maybe in an extra year or two?" There's a lot of ways I can imagine making a spreadsheet model for this, but there are also so many unknowns that I'm not sure a spreadsheet model actually addresses the root anxieties.
I recognize this is not really a coherent question, or rather it's a lot of maybe-extraneous detail trying to prove to myself we could spend a bit on hobbies or charity or other selfish short term not-house things and not need to feel guilty. So how do I give myself permission to spend money?
I went through something similar when my dad had an aneurysm.
My advice would be a little different from the above. I would sit down with your partner and identify what experiences you want to have. For me, travelling with a long-distance girlfriend was one. For my husband, martial arts training was one. We also talked about experiences we didn’t want to budget for - both agreed that we were just as happy with homemade treats and a dvd/Netflix as going out.
Then we looked for ways to do things at a reasonable or lower cost. For example buying equipment used or travelling off-season and staying in cheap places and making do with packet oatmeal breakfasts.
After that we budgeted for those expenses. And by that I mean we prioritized a reasonable amount of expense towards those goals. Under 5% (but we had daycare costs, so our budget was tight) Because home ownership is not the point of your whole life is it? Make sure you are looking at your other goals and not writing them off as frivolous.
posted by warriorqueen at 6:09 AM on August 11, 2023 [3 favorites]
My advice would be a little different from the above. I would sit down with your partner and identify what experiences you want to have. For me, travelling with a long-distance girlfriend was one. For my husband, martial arts training was one. We also talked about experiences we didn’t want to budget for - both agreed that we were just as happy with homemade treats and a dvd/Netflix as going out.
Then we looked for ways to do things at a reasonable or lower cost. For example buying equipment used or travelling off-season and staying in cheap places and making do with packet oatmeal breakfasts.
After that we budgeted for those expenses. And by that I mean we prioritized a reasonable amount of expense towards those goals. Under 5% (but we had daycare costs, so our budget was tight) Because home ownership is not the point of your whole life is it? Make sure you are looking at your other goals and not writing them off as frivolous.
posted by warriorqueen at 6:09 AM on August 11, 2023 [3 favorites]
Something that I've found is that my thoughts about how expensive something is are locked in the past, even though my situation has changed.
So I intentionally think backwards to that time in my life and compare the expense as a percent of income. For example, If I used to make $50,000 and wouldn't have had a problem with spending $50 on dinner for two at a night out, if I make 4x as much now spending $200 on dinner for two should feel about the same. It's not carte blanche to spend on whatever, but it's a data point that helps me get over the sticker shock.
posted by true at 6:38 AM on August 11, 2023 [2 favorites]
So I intentionally think backwards to that time in my life and compare the expense as a percent of income. For example, If I used to make $50,000 and wouldn't have had a problem with spending $50 on dinner for two at a night out, if I make 4x as much now spending $200 on dinner for two should feel about the same. It's not carte blanche to spend on whatever, but it's a data point that helps me get over the sticker shock.
posted by true at 6:38 AM on August 11, 2023 [2 favorites]
It's not perfect, but the recent book Die With Zero is basically entirely about this exact situation (people who earn enough to have saved and who need to transition to spending more unless they want to die with ridiculously large unspent accounts and with regrets about things left undone).
Personally I thought the book could have been pared down to a five to ten page pamphlet without loosing anything, but it's easy to skim past the fluff. I'm not saying you should unconditionally accept all of his points, a few of which seem dubious, but his framework for identifying and making that transition is, to my eyes, entirely correct.
We're older than you and probably somewhat less well-off, and we're working on this as well. It's really hard to shift the spending/saving habits of a lifetime, but a family member recently passed away, never having retired but with adequate savings to have retired, and that was really a wake-up call for me. If you don't consciously make changes, you just stay on your default path forever, and don't necessarily end up with great results.
posted by Dip Flash at 7:04 AM on August 11, 2023 [1 favorite]
Personally I thought the book could have been pared down to a five to ten page pamphlet without loosing anything, but it's easy to skim past the fluff. I'm not saying you should unconditionally accept all of his points, a few of which seem dubious, but his framework for identifying and making that transition is, to my eyes, entirely correct.
We're older than you and probably somewhat less well-off, and we're working on this as well. It's really hard to shift the spending/saving habits of a lifetime, but a family member recently passed away, never having retired but with adequate savings to have retired, and that was really a wake-up call for me. If you don't consciously make changes, you just stay on your default path forever, and don't necessarily end up with great results.
posted by Dip Flash at 7:04 AM on August 11, 2023 [1 favorite]
I'm giving you permission, on behalf of my brother.
He and his wife saved diligently, putting every dollar into paying down their debts, their house, their school loans, funding their kids' college plans, etc. His goal was to be debt-free at the age of 50.
And he got there. And then he died of lymphoma the same year.
I mourn his loss, but I also mourn all the adventures and memories he could have built with his family in the decades prior if they had just loosened their time horizons a bit. Lots of people will tell you that debt isn't something to have at all, I believe it can be a tool if done properly. The fact you've paid your debts down is a wonderful wonderful thing. Just don't make it the primary focus of your life.
posted by 68091A50 at 7:30 AM on August 11, 2023 [19 favorites]
He and his wife saved diligently, putting every dollar into paying down their debts, their house, their school loans, funding their kids' college plans, etc. His goal was to be debt-free at the age of 50.
And he got there. And then he died of lymphoma the same year.
I mourn his loss, but I also mourn all the adventures and memories he could have built with his family in the decades prior if they had just loosened their time horizons a bit. Lots of people will tell you that debt isn't something to have at all, I believe it can be a tool if done properly. The fact you've paid your debts down is a wonderful wonderful thing. Just don't make it the primary focus of your life.
posted by 68091A50 at 7:30 AM on August 11, 2023 [19 favorites]
I recommend checking out Ramit Sethi. His book/journal generates some really thought-provoking exercises around money questions, and his podcast is also excellent. He doesn’t offer one-size-fits-all advice, but rather pushes individuals to think about their priorities, dreams, etc. The title I Will Teach You to Be Rich made me cringe at first, but once you get into his work you’ll see that “rich” isn’t about being a tech bro for him; it’s about a rich life and what that looks like for you (generosity, security, travel… whatever your priorities are).
posted by katie at 7:39 AM on August 11, 2023 [3 favorites]
posted by katie at 7:39 AM on August 11, 2023 [3 favorites]
IMO you need to adjust your expectations. My mortgage started out at 3X my rent and is now 4X with tax and insurance increases. The numbers in mine were lower, but the concept is exactly the same.
So that expectation shouldn't drive your decisions - if you happen to get lower paying jobs in the future, you can sell and go back to renting, and probably retain all your money when you sell.
IMO, and completely separate, your thoughts about a down payment are financially wrong. If you can get a decent interest rate (~5% or below) you should stop saving and purchase. You seem to want to put ~50% down, but that's honestly a financially bad idea. It may help you sleep at night, but that doesn't mean it's a good financial idea.
Also if owning a home is your 'big life goal', well 'big life goals' are what people sacrifice for. But later you suggest that maybe you don't even want to own a home, unless it is 100% on your own terms. Something there is not adding up.
I'm not an anti-debt person - debt is a useful tool. I think even if you are saving you should have a list of things you'd like to do (secondary life goals) and do them.
posted by The_Vegetables at 7:46 AM on August 11, 2023 [4 favorites]
So that expectation shouldn't drive your decisions - if you happen to get lower paying jobs in the future, you can sell and go back to renting, and probably retain all your money when you sell.
IMO, and completely separate, your thoughts about a down payment are financially wrong. If you can get a decent interest rate (~5% or below) you should stop saving and purchase. You seem to want to put ~50% down, but that's honestly a financially bad idea. It may help you sleep at night, but that doesn't mean it's a good financial idea.
Also if owning a home is your 'big life goal', well 'big life goals' are what people sacrifice for. But later you suggest that maybe you don't even want to own a home, unless it is 100% on your own terms. Something there is not adding up.
I'm not an anti-debt person - debt is a useful tool. I think even if you are saving you should have a list of things you'd like to do (secondary life goals) and do them.
posted by The_Vegetables at 7:46 AM on August 11, 2023 [4 favorites]
One thing that helped me with this, surprisingly enough, was a financial advisor. He has this fun tool that lets us put in all sorts of variables and then it predicted where'd I'd be in X years if A,B,C happened. For me I'm looking at my retirement goals - what happens if 2008 happened again and my RRSP tanks? What happens if inflation continues to get higher? What happens if i can find a couple hundred more a month to save? Or if I spend it? It'll model all sorts of situations. Mine was focused on retirement, but it just as easily have been a house purchase, or any big-ticket financial goal.
This tool wasn't your average retirement calculator you see online, it probably costs his company quite a bit as a subscription so he can offer it to clients. So I don't know if every financial advisor has this type of tool, maybe I lucked out and mine did? But I found it really enlightening and almost reassuring to play with it. Like, if the world collapsed how f'd am I? Ok, I'm a little f'd, but it could be a lot worse, so yay?!?.
posted by cgg at 8:33 AM on August 11, 2023 [2 favorites]
This tool wasn't your average retirement calculator you see online, it probably costs his company quite a bit as a subscription so he can offer it to clients. So I don't know if every financial advisor has this type of tool, maybe I lucked out and mine did? But I found it really enlightening and almost reassuring to play with it. Like, if the world collapsed how f'd am I? Ok, I'm a little f'd, but it could be a lot worse, so yay?!?.
posted by cgg at 8:33 AM on August 11, 2023 [2 favorites]
When my wife and I decide to spend on something "not essential" or "not strategic" in the financial sense, our mantra is "This is why we work." That is, we work to survive and live life outside of work, so spending on stuff that just makes us happy is actually part of the reason we go to work every day.
posted by Rykey at 8:42 AM on August 11, 2023 [2 favorites]
posted by Rykey at 8:42 AM on August 11, 2023 [2 favorites]
In our budget, we reserve roughly 30% for wants, 20% for savings, and the other half for needs. It's literally in my budget that I have money for dinners out, date nights, travel, etc. Elizabeth Warren's book may be helpful for you. She wrote for people struggling to keep up, and even though you aren't struggling, you are struggling with the same sort of money allocation issues.
posted by COD at 8:50 AM on August 11, 2023 [2 favorites]
posted by COD at 8:50 AM on August 11, 2023 [2 favorites]
If you're interested in the kind of tool cgg mentioned, ProjectionLab is a really well-designed tool for that kind of planning and testing. Once you've entered your current situation (assets, debts, income, expenses), you can easily test different scenarios, see how sensitive the plan is to changes in various factors, and generally get a much better idea of things than a simple calculator or spreadsheet model can give you. You can play around with it for free, and there are paid subscriptions for retaining your data and advanced features.
posted by whatnotever at 9:12 AM on August 11, 2023 [2 favorites]
posted by whatnotever at 9:12 AM on August 11, 2023 [2 favorites]
One specific strategy for me that aligns to some of the above: I must literally have separate savings accounts. My bank allows me to do this and to assign nicknames to each account, so that I have a different savings account for "renovation" savings vs. "emergency fund" savings vs. "vacation savings" - and even "this is savings that doesn't have a specific goal, but I should be planning on spending it, not keeping it around forever." That way, I have a plan that aligns to what I do with my savings each month (retirement savings in my retirement account, $X here, $Y there, any extra in account blah blah), and my bank records reconcile to that same plan.
I know and understand that in theory this is no different than having a single savings account and a spreadsheet where I keep track of what I intend to do with each portion, but I just can't feel OK about it unless I can log in and have my bank tell me where things stand. Similarly, I keep annotated, specific plans about what I do with "extra" money - when I manage to save an extra 50 bucks in a month, say, which account it will go in.
I wonder if that might help you a little bit. It's difficult for me - and maybe for you! - to look at a single large savings account that could mean I'm done saving for my emergency fund if we didn't do that renovation and didn't go on that trip, while still convincing myself that of course I'm going to go on the trip and keep the renovation account aligned to the decisions I made ahead of time.
posted by neutralhydrogen at 9:13 AM on August 11, 2023 [4 favorites]
I know and understand that in theory this is no different than having a single savings account and a spreadsheet where I keep track of what I intend to do with each portion, but I just can't feel OK about it unless I can log in and have my bank tell me where things stand. Similarly, I keep annotated, specific plans about what I do with "extra" money - when I manage to save an extra 50 bucks in a month, say, which account it will go in.
I wonder if that might help you a little bit. It's difficult for me - and maybe for you! - to look at a single large savings account that could mean I'm done saving for my emergency fund if we didn't do that renovation and didn't go on that trip, while still convincing myself that of course I'm going to go on the trip and keep the renovation account aligned to the decisions I made ahead of time.
posted by neutralhydrogen at 9:13 AM on August 11, 2023 [4 favorites]
"saving for a down-payment could consume every single penny we could possibly save for most of the next decade. So, how do we game out how much we're willing to budget to house and not-house things, so that we still get to a house, but maybe in an extra year or two?"
Is home ownership in your current location a realistic goal? You are in your late 30s/early 40s with no kids. These are your prime earning years. You only have a standard mortgage length amount of time left until retirement. Setting to one side the economy for the moment, if you look at the financial arc of your life then now, not in 10 years, may be more likely to be the optimum time to buy a home with a substantial mortgage.
I guess I'm slightly wondering whether what's helping make this harder for you is that you feel you should be chasing a particular kind of home ownership but the numbers just don't stack up.
posted by plonkee at 9:21 AM on August 11, 2023
Is home ownership in your current location a realistic goal? You are in your late 30s/early 40s with no kids. These are your prime earning years. You only have a standard mortgage length amount of time left until retirement. Setting to one side the economy for the moment, if you look at the financial arc of your life then now, not in 10 years, may be more likely to be the optimum time to buy a home with a substantial mortgage.
I guess I'm slightly wondering whether what's helping make this harder for you is that you feel you should be chasing a particular kind of home ownership but the numbers just don't stack up.
posted by plonkee at 9:21 AM on August 11, 2023
Does your current budget and spending habits give you maximum joy?
If money was not a consideration, what would your life look like? If you had 6 months, a year, 5 years to accomplish everything on your bucket list what would you do?
What did you want most of all during COVID?
There are some goals (e.g. travel/experiences) that are possible now, but won't be possible in the future due to factors such as climate change, political instability, fragility of the human condition, and/or "bad luck."
Do the thing that is in your sweet spot between urgency, interest, and feasibility.
Regarding buying a house, are you willing to relax your location constraint? How would you feel about owning a house that might get increasingly difficult to insure? How do you feel about house hacking, tiny home living, and/or van life? Do you even want to own a home?
posted by oceano at 10:53 AM on August 11, 2023 [1 favorite]
If money was not a consideration, what would your life look like? If you had 6 months, a year, 5 years to accomplish everything on your bucket list what would you do?
What did you want most of all during COVID?
There are some goals (e.g. travel/experiences) that are possible now, but won't be possible in the future due to factors such as climate change, political instability, fragility of the human condition, and/or "bad luck."
Do the thing that is in your sweet spot between urgency, interest, and feasibility.
Regarding buying a house, are you willing to relax your location constraint? How would you feel about owning a house that might get increasingly difficult to insure? How do you feel about house hacking, tiny home living, and/or van life? Do you even want to own a home?
posted by oceano at 10:53 AM on August 11, 2023 [1 favorite]
Do you think that if you buy a condo or house, interest rates will never go down and you'll want to live there forever? It seems unlikely that both of these things are true. If you buy soon with 20% down and a higher interest rate, you'll benefit from a slightly softer real estate market; when rates go down, house prices might go up again. If you buy now and cover it for a few years, you can refinance. You don't have to buy of course, but you seem to be suggesting you should only buy if it'll be about the same as renting, which doesn't make a ton of sense if you are also thinking of your home purchase as an investment.
Regardless, you might decide you don't like home ownership, or that you want to move. You live in an expensive city, it sounds like. Do you all think you'll want to live there forever? If so, buying makes sense, so you can pay off your place at some point. But it also might make sense to realize that you might move to someplace less expensive or different in retirement.
Have you ever made a list of the non-financial things you want to do in life? What are your dreams? Is there a hobby you'd like to pursue that costs some money? Is there some kind of adventure you'd like to have? Make a list of all this stuff, dreaming wildly. And then ask your spouse to do the same. And then compare your lists, and see if you have any things in common. Pick one and do it.
posted by bluedaisy at 4:24 PM on August 11, 2023
Regardless, you might decide you don't like home ownership, or that you want to move. You live in an expensive city, it sounds like. Do you all think you'll want to live there forever? If so, buying makes sense, so you can pay off your place at some point. But it also might make sense to realize that you might move to someplace less expensive or different in retirement.
Have you ever made a list of the non-financial things you want to do in life? What are your dreams? Is there a hobby you'd like to pursue that costs some money? Is there some kind of adventure you'd like to have? Make a list of all this stuff, dreaming wildly. And then ask your spouse to do the same. And then compare your lists, and see if you have any things in common. Pick one and do it.
posted by bluedaisy at 4:24 PM on August 11, 2023
I'm just going to take you literally and offer you one way to find an answer using a simple back-of-the envelope way to come up with a number. You say you would be willing to delay the house purchase for a few years to free up some money. You know how much you are putting into your home buying fund each month. Say $1000. Multiply that by 36 (the number of extra months of savings that you are willing to divert) So $36,000. Now divide by the 156 months (13 years) - total number of months that you are going to spread this out over. That gives you $231 per month or $2772 per year. Not a lot, but maybe enough to make a difference especially if your actual monthly savings rate is higher than my arbitrary choice of $1000. Or maybe once you start, you might find some other places in your budget where you could tighten up in order to free up more money for this special spending.
Also, as someone who grew up careful about money, it was really important for me to set up a separate checking account. That way you can put money in every month and be able to check your planned spending against the balance in the account. This will give you permission to spend and make it clear that you are within your budget. It also gives you the opportunity to see what has accumulated and encourage you to spend it since that is what is already earmarked for - spending.
posted by metahawk at 4:29 PM on August 11, 2023 [1 favorite]
Also, as someone who grew up careful about money, it was really important for me to set up a separate checking account. That way you can put money in every month and be able to check your planned spending against the balance in the account. This will give you permission to spend and make it clear that you are within your budget. It also gives you the opportunity to see what has accumulated and encourage you to spend it since that is what is already earmarked for - spending.
posted by metahawk at 4:29 PM on August 11, 2023 [1 favorite]
I'm not sure it's a saying, but Inflation Repudiates Debt.
Here is an example. When we bought out house in 1976, my salary was $15,000, the mortgage was $30,000, the payment was $308. When we made the last payment in 2006, my earnings were over $50K, and the paymeny was a triviality. (Taxes and utilities grew with inflation, of course.) The equity in the house grew as the mortgage was paid off and with inflation.
So the typical arc of home ownership is tight finances at the begining getting looser over time.
posted by SemiSalt at 5:03 AM on August 12, 2023
Here is an example. When we bought out house in 1976, my salary was $15,000, the mortgage was $30,000, the payment was $308. When we made the last payment in 2006, my earnings were over $50K, and the paymeny was a triviality. (Taxes and utilities grew with inflation, of course.) The equity in the house grew as the mortgage was paid off and with inflation.
So the typical arc of home ownership is tight finances at the begining getting looser over time.
posted by SemiSalt at 5:03 AM on August 12, 2023
Some random points:
A thing I see a lot is people who worry too much about running out of money and not enough about running out of time.
Given your ages, your biggest asset is not the financial assets you have saved, but the human capital in your heads. Your wages indicate that your skills are valued, you’re willing to work, etc. so add this capital to the balance sheet. You should feel richer than the dollars on the ledger indicate. This might make it easier to spend.
A reason some don’t spend ample savings is they want a pot of cash to set against a risk. Illness, disability, a partner dying, are all reasons to have a big saving account. But you can buy insurance to offset these risks. Then you might feel more comfortable spending.
posted by thenormshow at 9:15 AM on August 12, 2023 [1 favorite]
A thing I see a lot is people who worry too much about running out of money and not enough about running out of time.
Given your ages, your biggest asset is not the financial assets you have saved, but the human capital in your heads. Your wages indicate that your skills are valued, you’re willing to work, etc. so add this capital to the balance sheet. You should feel richer than the dollars on the ledger indicate. This might make it easier to spend.
A reason some don’t spend ample savings is they want a pot of cash to set against a risk. Illness, disability, a partner dying, are all reasons to have a big saving account. But you can buy insurance to offset these risks. Then you might feel more comfortable spending.
posted by thenormshow at 9:15 AM on August 12, 2023 [1 favorite]
even "this is savings that doesn't have a specific goal, but I should be planning on spending it, not keeping it around forever."
We are in a similar position to you guys. This is what I do, my account is called the Buying Shit Fund, and it gets contributed to with a regular automatic transfer the same as retirement savings. Although obviously only 15-20% as much as the other savings.
I don't include it in estimates of net worth or whatever; as far as I am concerned it's money to be spent. Then, buying an expensive thingy or a lovely trip is mostly a function of checking the balance in this account, guilt free.
posted by Superilla at 10:42 AM on August 12, 2023 [3 favorites]
We are in a similar position to you guys. This is what I do, my account is called the Buying Shit Fund, and it gets contributed to with a regular automatic transfer the same as retirement savings. Although obviously only 15-20% as much as the other savings.
I don't include it in estimates of net worth or whatever; as far as I am concerned it's money to be spent. Then, buying an expensive thingy or a lovely trip is mostly a function of checking the balance in this account, guilt free.
posted by Superilla at 10:42 AM on August 12, 2023 [3 favorites]
A spreadsheet helped me with similar anxieties. Very simple, 1 column per year, with formulas to show how my account balances should grow from investments & savings. Then I added rows to show things like: what will my financial situation look like in 10 years if I start spending $X on vacation every year? Most of the time, the answer is: still very good! and then I go and do the thing with no guilt or worry.
posted by acidic at 12:07 PM on August 12, 2023
posted by acidic at 12:07 PM on August 12, 2023
I came in to 2nd Ramit Sethi. My spouse and I (no kids) recently worked through his journal and it was a really eye opening experience on what we both find important to do with our money. We've been following his advice since back when he was just a blogger, have worked through his book, and his guidance is part of the reason we have the advantage of asking this question of how to spend. His Conscious Spending Plan was another approach we found very helpful in realigning our thinking about money and what we can spend.
A big realization we had recently was related to the difference between our non-retirement investment and our retirement investments. We realized, after looking at some retirement calculators, that based on our savings rate in our 401(k)s etc., and our projected additions until retirement, that we will be doing quite well with ONLY the money that is in those funds. So, we realized that we could either / both be a little less aggressive on saving in our non-retirement investments, and draw some money out of those funds WITHOUT hurting our retirement needs at all. It was a huge mind-blown moment. Not sure if this is the case for you, but it may be worth running the numbers, which some of Ramit's stuff can be really helpful in doing.
Much like you, we rent. Any purchase of property would increase our costs AND mean that we couldn't just call the landlord when something goes wrong. I also grew up in a house that was NEVER FINSHED due to constant and incomplete renovations, so have no interest in ever being responsible for repairs beyond painting and changing a lightbulb. While we might buy later in our lives, it will be quite some time. We have a small amount of our non-retirement investments mentally set aside in case we want to pursue such a path in the future and we would shift our spending at that time. (Ramit is one of the few finance bloggers who DOES NOT have a heavy-bias toward home ownership, and is part of the reason why we are really into him.)
After working through Ramit's journal, we set up plans for trips in both the near and far term, determined some saving goals for both the short and longer term, and thought about how our money can have impact in both our community and with those we care about. It is still a process to adjust our money psychology, but we are getting much more comfortable with enjoying what we have while we can.
posted by chiefthe at 6:46 AM on August 13, 2023 [2 favorites]
A big realization we had recently was related to the difference between our non-retirement investment and our retirement investments. We realized, after looking at some retirement calculators, that based on our savings rate in our 401(k)s etc., and our projected additions until retirement, that we will be doing quite well with ONLY the money that is in those funds. So, we realized that we could either / both be a little less aggressive on saving in our non-retirement investments, and draw some money out of those funds WITHOUT hurting our retirement needs at all. It was a huge mind-blown moment. Not sure if this is the case for you, but it may be worth running the numbers, which some of Ramit's stuff can be really helpful in doing.
Much like you, we rent. Any purchase of property would increase our costs AND mean that we couldn't just call the landlord when something goes wrong. I also grew up in a house that was NEVER FINSHED due to constant and incomplete renovations, so have no interest in ever being responsible for repairs beyond painting and changing a lightbulb. While we might buy later in our lives, it will be quite some time. We have a small amount of our non-retirement investments mentally set aside in case we want to pursue such a path in the future and we would shift our spending at that time. (Ramit is one of the few finance bloggers who DOES NOT have a heavy-bias toward home ownership, and is part of the reason why we are really into him.)
After working through Ramit's journal, we set up plans for trips in both the near and far term, determined some saving goals for both the short and longer term, and thought about how our money can have impact in both our community and with those we care about. It is still a process to adjust our money psychology, but we are getting much more comfortable with enjoying what we have while we can.
posted by chiefthe at 6:46 AM on August 13, 2023 [2 favorites]
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I would also try to change your perception of money and its functionality. Present you is absolutely worth spending money on. You do not only have to spend money on future you. Your future you probably wants you to indulge a little too!
Also, it's a lot easier to make a decision to spend money on an experience when you are specific. It can be hard to get excited about spending money on travel, but it's a lot easier when you've identified where you want to go and have done the research to get really excited about it.
To the question of how much to save, just decide on how much to save. Ok, we will save X from every paycheck, and Y percent from any bonus, and generally keep all the RSUs for the down payment. Or flip it, and say, each month we allocate X to fun money and Y to joint vacation money, and then practice spending that guilt free!
I would also try to remove from your mind on saving for a specific outcome. Yes you're saving to buy a place in your current HCOL place, but if prices go up 50% in the time period, does that mean you should save 50% more? Some things you cannot control, but what you can control is how you live your life in the NOW and how you set up for your life in the future. You might find that in a decade, you both have decided to work remotely and that changes the math, in which case the work you've done is still helpful in getting you to what you want.
posted by ellerhodes at 5:58 AM on August 11, 2023 [2 favorites]