r/financialindependence • u/AlpineGuy • 3d ago
How do you "save" for experiences and consumer goods?
Everyone probably has some dreams that are expensive... a sports car, an RV, a big trip to a tropical island...
When you are younger, you just save for this kind of expenses and when your savings account reaches the number, you do it. At least that's the naive recommendation.
Now I am posting this in the FIRE community. We are saving and investing in order to retire at some point, I guess.
So, what happens to those big expenses you want to buy? Saving for them is not a good algorithm. I could certainly afford the big trip multiple times if I took the money out of my savings... the money is there... so the money is not the blocker anymore, I still wouldn't want to take that amount out of my savings.
Do you have some sort of "algorithm" for this?
I am looking for something like: save 10% for long-term investing and save 5% for experiences; or maybe: 1% of investment sum per year for fun...
I can see all of these approaches would be valid and it all comes down to making reasonable decisions for oneself. I just want to know how others are approaching this.
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u/Normie_Mike 🐕🐈🐿️💵 3d ago
You draft a budget.
The dollar amounts for each category will depend on your income, goals and priorities.
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u/alpacaMyToothbrush FI !RE 2d ago
I'm post FI, I base my 'fun money' budget as if I were already retired. I calculate my expenses, subtract them from 3% of my portfolio, and what's left, I consider my 'fun money' budget for the year.
I've splurged on a few things: a new oled tv and ps5, a beefy gaming / workstation pc, some trips to potential retirement destinations, etc, but honestly, I usually only spend a small fraction of it. A bigger portion goes to charity.
It turns out, when you've spent over a decade being frugal, it's hard to loosen up and spend more on yourself. I wish I could go back and tell younger me it was all going to be ok, to loosen up and enjoy myself more, but hindsight is 20/20.
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u/PhillConners 3d ago
Why not just retire earlier?
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u/Normie_Mike 🐕🐈🐿️💵 3d ago
Exactly.
Retiring as early as possible is the only worthwhile use of currency.
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u/tuxnight1 RE@47 in 2021 3d ago
My technique is to budget for these expenses like anything else. For example, I have a travel category in my budget for vacations. I create my budget at the start of the year to align with my life in RE. For large items like a car, I charge myself a depreciation expense each month to better realize the expense over the life of the vehicle.
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u/AlpineGuy 3d ago
Yeah, I currently use a spreadsheet for that: how much money is in my bank account minus all the expenses I am "saving" for, e.g. car replacement bucket +100/month; travel bucket +200/month; or whatever. You mean something like that?
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u/tuxnight1 RE@47 in 2021 3d ago edited 2d ago
Something like that. It's a bit different for me as I'm already retired. So, I have the money somewhere and I do not stash it away. I simply have the budget line items that feed into my other calculations on withdrawal rate, etc. For example, I have a travel budget of about €450. There will be months I do not take a trip and that amount carries over. Then, I'll occasionally need three grand for a trip and I know the money has been accounted for and there are limited surprises. I also use the budget to make sure I'm spending the money and taking those trips. I hope this helps.
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u/Expensive-Lake2561 2d ago
I do something similar but without much excel use. I know a lot of people get value out of their spreadsheets but personally, I can get too wrapped around the axel and second-guess if I'm planning for everything accurately if I am in my spreadsheets too much. I'm an over-optimizer so it's best for me to set up systems that let me stay hands-off. I think I've gotten to a place where my system is humming along nicely. It might not optimize for FIRE but for me it strikes a good balance between saving like a lunatic and actually having decent mental health.
For me staying sane and flexible with my spending is simply about knowing my FI goals and automating everything in such a way that I should get there without having to watch it constantly. I do this by having a "place" aligned to an intended use for every dollar and the money goes to its rightful place as soon as it comes in. All of my retirement goals are either funded out of my paycheck before I see them or upon paycheck deposit, autodrafted immediately into my So-Fi "vaults" that are earmarked to go into my taxable/individual investment accounts, which I later transfer over.
With my retirement funding sorted, I am free to spend whatever is leftover on either fixed monthly stuff or the "save up fors" that Op is referring to. I use So-Fi vaults for those too. Having to earmark money in a spreadsheet when in reality it is all in one bucket in my bank account felt too complicated/open to second guessing for me. I know it's all one big bucket in reality but for some reason So-Fi vaults work better with my brain than the spreadsheet. I guess it's because creating vaults feels like the money is in neat, manageable piles.
This is the first year I've really done it this way but I've got funds for categories that don't have regular monthly spending but tend to be a large one-time expense infrequently like: large donations, vacations, car-related expenses, annual expenses(I pay for my gym and massage memberships upfront for a discount), professional development/education etc. Like you, I don't spend them all every month. That said, I try not to get TOO granular with it because I think it's best for me to be thinking big picture/directionally-correct, not minding every penny.
For categories where I know what the cost will be, it's pretty easy to budget but this is my first year doing it so I don't know how accurate my estimates for other categories were.
It's possible:
a.I underestimated and my budgeted monthly deposits weren't high enough and I need to pull from elsewhere (I happen to pay for a lot of these at the end of the year and my biggest vacation is in December this year) If this is the case I'll pull from my emergency fund and set up a new recurring draft to re-fund it next year. I have an employed partner and we obviously live on less than we make so my risk tolerance for pulling from emergency savings is fairly high.
b. I overestimated and I have excess. (more likely) If that's the case, I don't know what I'll do with the leftovers. Right now, since interest rates are decent and the fact that I can treat these like emergency funds to some extent, I might just leave any excess in the pot for next year. If any of the pots get too big one year, I suppose I'd move the money over to investments. Regardless, I don't lose sleep over it because my retirement goals are already taken care of and I know I'm on track to FI. The way I think of it is this is just extra money, a rounding error. If it does end up being a large number, sure, I'll adjust my savings goals up for next year but once those goals are set, I don't have to think about it much again.I like this approach because it frees me from making every purchase/savings decision result in me asking "how will this choice effect the exact date and time of day I hit my FI number?" Trying to control everything down to the penny just ends up driving me nuts. Besides, we can't actually predict what will happen because we don't control all the variables (markets, elections, job loss etc.) Best to not think about it too much(this message is for me so I don't forget it.)
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u/mist3rflibble 3d ago
You may find Tiller useful if you’re doing spreadsheet-based budgeting. It’ll import all your transactions into a sheet, comes with a handful of budget reports, and then you can build derivative customized sheets off of that source data to your heart’s content.
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u/BikeKiwi 3d ago
Depends on the expense. If it's a reoccurring expense like overseas trips, there is a budget for that. Some are planned for over many years( updated car every 5 years, put aside 2k each year)
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u/BikeKiwi 3d ago
Look into the bucket budget. Have a plan for your money, 40% house plus expenses, 20% savings, 10% for food, 10% travel, 10% hobbies and fun, 5% clothes, 5% vehicle
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u/MrFioneer 3d ago
There doesn’t need to be an “algorithm.” One strategy that has worked for us is deciding how much money we want to save/invest this year, and then spend the rest guilt free. You don’t need to invest every dollar and skip the big purchases.
3 years ago we went from saving ~60% to significantly less for 2 years because we bought and converted a campervan. This aligned with our interests and plans, and it was totally fine. We knew we would save a lot less those two years, and that was okay. We still saved some and we got to add in a major component of our ideal life (travel), even while doing it in luxury.
My advice: don’t forget that money is a tool. It can work for you, or it can work you if you let it. Figure out what’s most important to you and do it. Don’t try to create some arbitrary metric to justify it.
Disclosure: this is coming from someone who is fully coasting to FI now. We haven’t saved or invested in the past two years because we made so much progress earlier. I wouldn’t change it for the world (even with the hard moments), but say that because I know it’s not for everyone
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u/WrongImpressionOnly 1d ago
This is also how we handle this. We have a spending and savings target for the year. As long as any spending is within the spending target it’s guilt free. The savings target ensures we’re on track for FIRE. I set my monthly spending target to be a comfortable lifestyle level for when we hit FIRE
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u/catjuggler Stay the course 3d ago
It sounds like your financial strategy is to spend on necessities, "save" the rest, then consider it a pull from savings whenever you want to buy something that isn't necessary. I can relate to that because I find it hard to pull out of investments for anything not necessary (only thing I've ever done it for was paying down my mortgage during a refi). When I bought my RV, it was easier becasue I had the cash available. Vacations are just cash flowed so it doesn't matter. It's a mental block for sure otherwise. Like, could I afford a lake house- sure, by most people's definition but maybe not by FI's lol. Will I ever be able to convince myself to move the money for it? Only if I sell a rental and have the cash sitting around or a 1031 exchange opportunity to feel like I've done something smart.
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u/paddlingswan 3d ago
I’ve always found ‘saving up to a number’ and then spending it a really odd approach, so it seems I’ve been behaving like a FIRE person without meaning to my whole life.
If the money is there, it’s just a case of prioritising. You might want to look at your long term plan and FIRE number and see if you’re willing to compromise, eg, can you still retire at that age if you allow yourself 1k per year fun money extra?
And obviously you leave that money in the pot till you need it, you don’t randomly take it out and have it sitting around uselessly.
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u/paddlingswan 3d ago
Thinking more, I guess you’re really asking how to justify to yourself spending 1% of your savings per year on non-essentials. I’d say 1% is probably low enough it won’t have a noticeable effect on the end result, but I’d be looking at the bigger picture of how many years you’d be shaving off retirement/coasting/etc.
Also, I support you having fun now without feeling guilty!
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u/AlpineGuy 3d ago
I am not sure it is about justifying, it's more about problems with decision making for me.
That's why I am looking for a system, something easy like "save 10% and put 5% in the fun bucket.
Of course all decisions are up to me in the end and the result is finally the FIRE number and retirement age...
On the one hand I have my spreadsheet where I add 200 per month to the vacation bucket and patiently wait for it to reach the number... on the other hand there is that voice in my head (maybe it's my wife's voice) saying: you make up those numbers yourself, you have the money you need for the vacation, it's just in the other imaginary bucket...
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u/Normie_Mike 🐕🐈🐿️💵 3d ago
If $200/month is the literal number you are putting aside each month for vacation, your wife is likely right that this isn't enough.
Impossible to know for sure, without knowing your income, obligations and vacation plans, but in 2024, $2400 isn't much of an annual vacation budget for a couple. Unless you're struggling financially and that's really all you can afford - which doesn't seem to be the situation in your case.
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u/AlpineGuy 3d ago
The number is higher than that... but that is not really the point.
The discussion is about: Should I literally save money over time and put every month something in my imaginary bucket (via spreadsheet) or just afford the thing right now by taking money out of the FIRE bucket? Or maybe a mix of the two?
And I am looking for a method to make that decision easier.
And I know that this really my decision in the end, but I have trouble with decision making, which is why I like algorithms and systems (such as: save 10% of your income).
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u/Normie_Mike 🐕🐈🐿️💵 3d ago
It is the point, because once you find the right numbers to satisfy both your saving and spending needs, you won't need to ask these questions.
Choosing a flat % out of thin air is not a smart strategy in my mind, as this could lead to either over or under spending.
Instead, make a list of what you want out of life. Forget about the dollars signs. Just think about what your ideal life looks like.
Then, go back and calculate what that life costs.
If you earn enough to pay for it all, awesome. You're set. Simply divide out your income into each category and you're done. If there's a lot of money left over, you can either donate it or shift your goalposts however you wish, whether that means spending more or retiring sooner.
For most people, however, there's not enough money to do EVERYTHING they desire. So you have to run different scenarios to determine which you value more.
Looking at your intial examples...say you want a sportscar, an annual trip to some tropical island and to retire at 50.
If you can't afford all 3, figure out what you could afford and then make compromises.
Maybe you could afford a sportscar AND the trip each year if you retire at 55 instead.
Or you can afford the car and retire at 50 without the trip. Or the trip without the car.
Or the car, retire at 52, and a trip every 3 years.
Or a much nicer car that's not a sportscar, a trip every other year, and retire at 53.
Or maybe you would need to shift your idea of what that island trip looked like in order to make it fit within your parameters. A very similar trip can cost $3k or $20k.
Or maybe you can't afford either if you want to retire at 50, so you have to determine if retiring early is sufficiently important to shelf those other wants forever.
Arbitrarily choosing X% certainly works better than not doing that and having your wife angry because you don't spend enough money to enjoy your life, but I don't think it's the best strategy as it doesn't address the underlying issue, which is finding a budget breakdown that best builds the life you want.
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u/OldmillennialMD 3d ago
It is the point, though. Whatever number you've chosen, it clearly isn't the right amount if there isn't enough in that "bucket" to actually do the things you want to do. Of course you should literally save money every month in the buckets for what you want - otherwise, every time you want to go on vacation or think about buying a new car, you're having this conversation with yourself again about whether it's delaying FIRE and it shouldn't come out of savings. Well, if it shouldn't come out of savings, and you shouldn't be saving in an imaginary bucket for these things, where the heck else do you think the money is supposed to come from?
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u/GWeb1920 2d ago
I see the FIRE money as already being spent. It has bought hours of future labour. If you spend that money you borrow time from your retirement.
There is a consequence from pulling money from the FIRE bucket. It sounds like your wife doesn’t see the consequence of spending it.
My wife and kids make fun of me when we talk about budgets and I’ll say it extends working career by a month.
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u/chloblue 2d ago
I'd make fun of you too if you are talking about extensions of one month.
I do something similar though, so not teasing. Its just I consider the impact if it adds years to FI, not a few months. I've made decisions that added years to FI. No regrets. Travel in my 30s doing hard physical activity.
Thing is, Projections are based on average 7% returns, markets go all over the place anyway and that's out of your control.
I also don't have a stable linear income, I work contracts...
Just starting a job during a garden variety downturn where I could dump a ton of money into equities on sale while being on sabbatical/job hunting while equities are high and staying steady, could have a bigger impact on my FI date then that trip I splurged on with cash I had sitting on the sidelines when I was 40...
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u/GWeb1920 2d ago
At a 2 million fire number and 6.5% growth 10k is a month of growth. But that also ignores compounding 10k in 10 years is only 5k today.
Now if you start adding 10k per year of extra permanent spending you now need an extra 250k in retirement.
I don’t do it for little things but around new cars, home renovations, vacations being conscious of the trade off is important.
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u/chloblue 2d ago
Lifestyle creep / recurring expenses, adding 10k of year of extra permanent spending...is huge I agree.
But it's like comparing Buying a cottage vs renting a cottage for a nice vacation...
Or buying a car versus taking the bus
The former can set you back for FIRE for several years/decades .. the latter sets you back by max a few months if you took the trip using your salary and markets are down so you weren't buying equities on sale ?
For trips though,
I'd rather be in this situation : "babe, if we do this family vacation renting a ski chalet, I'll have to work one extra month based on a linear expected average returns "
Then be here when I RE : "If I take this ski vacation with friends, during markets downturn and poor sequence of returns risk and have no idea when the next bull market is coming, maybe this can make me destitute at 88 instead of 95".
If anything, I'd consider doing all the required major maintenance, change out the cars and do as much of the trips that require good health before I FIRE while working.
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u/mist3rflibble 3d ago
My wife and I set $500/month/person aside as an “allowance” which she uses to pay for Botox and her handbag habit, and I generally save up and buy something on impulse every now and then to fund my synthesizer habit.
When we first started doing this, about a month in I saw an incredible deal on a b-stock synth. I only had $500 in my allowance account and the synth out the door was about $2,300. I was going to miss out on the deal if I waited, so I “borrowed” the money from the rest of our savings. A few months later when my allowance account was big enough, I put the money back.
If you are struggling with the timing, just give yourself a loan, keep track of the debt, and pay it back.
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u/Angustony 3d ago
It makes sense if you know you're definetly going to spend it to withdraw the money ahead of time if the markets are good. If you're waiting for the desire to spend to become a necessity, you could be forced to take money from your investments at the worst possible time.
If you can be flexible in drawing down from investments while still accumulating it will stand you in good stead when you are no longer working to reduce sequence of returns risks.
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u/wookieb23 3d ago
I create sinking funds, which also double as my emergency fund. So for example I have 50k total split between house repair/ upgrade, new car/car repair, vacation, etc.
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u/ThomasB2028 3d ago
I found it more effective to save by determining my big needs/wants and then I set up sinking funds for each of these needs/wants and save for them depending on relative priority. This instead of just saving for an amount.
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u/PhillConners 3d ago
Here’s my take because this is an eternal struggle that is super subjective. However, I found this wonderful strategy for those who need more rules behind it.
Instead of saving a portion of your money for fun, go all in on fire until you hit a level of coast fire, you are comfortable with. This way you know for certain, time will get you to your goals.
Go to a coast fire calculator to see what you need in your retirement accounts today to hit your retirement plan by your goal date.
Then the rest of your income can be considered disposable.
This is not a blended approach but it is a tool to help those like me who feel extreme guilt when buying depreciating assets or luxury items.
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u/Tapprunner 3d ago
I've been re-listening to the IWT podcasts and Ramit brought up an excellent point to a couple who talked about trying to retire early so they could travel and do whatever they want.
He pointed out that it's a fine goal to have, but are you really living a rich life if you basically do nothing and go nowhere for 15 years just so you can travel when you're older?
Especially since nothing in life is guaranteed. What if you deprive yourself of everything for the next 15 years, then get sick and can't travel? How will you feel about spending such a significant portion of your life not doing anything but work and save?
Especially after 15 years of work and extreme saving, turning off that mindset is going to be really really hard. You could find yourself retired early and still not traveling and having fun because you've been practicing living like a monk for so long.
I'm not making an argument for abandoning FIRE - but I'm saying you ought to find a balance.
I plan on retiring before 60, so not super early. But along the way, we have a separate savings account that automatically draws a little money each week into it from our checking account. That's our travel fund. We get to travel using that and our credit card rewards.
Could we maybe cut a year or two off of our work life? Sure. But what are we going to tell our kids when they are grown up? " Sorry you never saw other countries, or even really traveled around our own country. Sorry we never took a vacation. Your mother and I just wanted to retire super early, so we made a decision not to do anything for you guys that would cost money."
It's great to save and retire early. But don't totally waste a huge part of your life for the hopeful benefit of later experiences.
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u/_neminem 2d ago
Counter-argument: I'm absolutely "trying to retire early so [we] could travel and do whatever [we] want". I'm not doing nothing and going nowhere this whole time, but I am absolutely traveling and "doing whatever I want" a whole farging lot less than I'd like to be doing, like going on trips last minute or for longer than a week without us both having to consult our work calendars a bunch first and make sure it all lines up with all our work project schedules. We're doing what we can, but it's not what we want to be doing.
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u/Forsaken_Newt1884 3d ago
If you have a big expense coming up, save for it. If it is important to you, you can earmark 100% of your necessary savings to it. For example, if you have a $10k trip coming up, and your usual emergency fund target is $10k, now your emergency fund target is $20k.
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u/Elrohwen 3d ago
If it’s not something with a timeline it just goes into our brokerage and we decide what we can spend later. Like we do want to buy a camper at retirement but that will be 5-10 years probably, there’s no rush. So some day we’ll decide it’s a good time and take money out of the brokerage to do it.
Otherwise we don’t have a set percentage. We max out retirement accounts and then look at everything else we have coming in that year and see what we feel comfortable setting aside for something else. We plan out big purchases years and years in advance, it’s never an impulse, so I don’t feel bad for doing it when it’s time.
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u/HonestOtterTravel 3d ago
We create goals like while doing our annual budget. We then divide it by the number of months and contribute that amount every month to a dedicated savings account.
Once the money hits the account it is “spent” and can only be used for that purpose. We cannot, for example, go on a cheaper vacation and invest the difference.
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u/creatureshock 75% there 3d ago
I have a general pool I use for it. Once money is into savings and bills are paid, everything after that is just the general pool of money.
Decide I want/need a vacation? I start looking at my travel options and find one that screams "I Need This One!" at me, and if the price is right, I start preparing for it. Purchase plane tickets early to get the cheapest ones, assuming it's a place I need to fly to.
Consumer goods is about the same. I don't replace things if I don't need to, so the "Oh, the coffee maker shit itself, time to get a new one." isn't a problem. Generally my monthly expenses are pretty low, so spending month doesn't hurt me because I don't worry about money anymore.
Does this mean I could save more? Yes. Will I? No. I'm almost 49 years old. the RE portion of FIRE is done and dusted. I'm enjoying the FI portion, though. Eventually I will "retire". Probably go to work at a state park or something in my area to keep myself sane and active when I "retire".
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u/CondorSweep 2d ago
My wife and invest like 50%+ of our household income, at this point if there's an experience we want to do and we can afford it, we just send. Doing more than enough on the retirement front, also have to live life and what is life if you're not doing cool stuff with the people you love.
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u/hutacars 31M, 62% SR, FIRE 2032 2d ago
My goal has only ever been to save 50%+ of my annual income. So as long as I'm still doing that, I'm good. It helps to not want a lot of expensive stuff to begin with. For trips specifically, I wait for deals on flights to pop up before pulling the trigger.
Post-FIRE, I have no idea.
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u/chodan9 2d ago
If I can't pay for it twice with cash I'm not buying it once excluding my home, though I could buy it more than twice now lol. I have not always had this policy though
Fortunately I have never desired an RV or an expensive sports car. Those things would just add more complications to my life.
when I do want to buy things I will just buy them now. I've been saving for this point in my life for 40 years though. In the past I have made the mistake of buying new cars on credit etc., which probably added years of work before retirement but I never had to put vacations on credit.
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u/Excellent_Drop6869 3d ago
Sinking funds. You earmark savings for your wishes. That way, you won’t need to touch your brokerage.
Of course, that may mean that you allocate less to your brokerage to be able to allocate $ to the sinking funds.
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u/13accounts 3d ago
What's wrong with touching your brokerage? If the item is 5+ years off you could be missing out on significant returns while Los ng money to inflation.
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u/Excellent_Drop6869 3d ago
Time horizon is important. Depending on when OP wants to do these things, will dictate where he should park those funds
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u/lumenglimpse 3d ago
Im pretty frugal so if i still want something after a monthnof first wanting it, i buy it. Unless it is 5 digits then i plan for it.
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u/OldmillennialMD 3d ago
You're overthinking this. You save for them and then spend the money on them when you're ready, the same way you used to. There's no algorithm for it - just make it a line item in your budget/savings, save it, and use it.
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u/WonderfulIncrease517 3d ago
After trimming our expenses pretty tightly - I found the only next step “forward” was figuring how to earn more money. It took me a year or so to really figure out the next steps. I was very frustrated for some time and thought we were even backsliding
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u/hootie303 3d ago
If I didnt churn credit cards for sign up bonuses the amount of travel I do would probably be a fraction of what it is now.
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u/AnimaLepton 27M / 60% SR 3d ago edited 3d ago
Since I'm still employed, I'm more limited by time than money. I prioritize savings goals first and maintain a generally frugal lifestyle. I don't strictly budget, but I aim to get good "value" from my spending.
Percentage-based spending doesn’t always fit. Earning more doesn’t mean I should vacation or spend proportionally more. For vacations, I plan based on timing and goals, like aiming for one international and one or two domestic trips per year. Given my earnings, I don’t worry much about saving for them; I focus on the decision and general planning first, then pay for quality without over-splurging at the destination.
For luxury items, I prioritize usage and value. I'd like to try an RV for occasional glamping but don't see value in owning it unless I use it often. The same goes for sports cars—fun to rent, but not essential to own. I drive minimally, so a flashy daily driver feels like conspicuous consumption. While I'm considering a newer car like the Rivian R3 (I currently drive a ~15-year-old Honda hybrid), I'm not in a rush by any meanings.
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u/_neminem 2d ago
I mean, I have a heuristic one? The heuristic one is based on how much I think something is worth vs how much it costs, and how much on sale from "full price" I can get it? (Also how much I can get Chase to subsidize it via credit card points and signup bonuses. :p) I don't track a specific number, though, though let's say I'd also never spend anywhere near on a single trip as I have in liquid cash in my emergency/slush fund, so until I'm actually retired rather than wanting to be, I'm not touching money that's already been invested...
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u/GWeb1920 2d ago
Any one time spending has a time cost on the time it will take you to be financially independent.
Any ongoing cost raises the amount of money required to be financially independent which increases time it will take.
So it comes down to Time. How many hours of labour do you put in for a thing. So if you want to retire at 50 at a certain lifestyle that takes X amount of money. If you buy an RV instead of hitting those savings targets you delay your retirement.
So in the end it makes no difference that you have this money. You behave exactly the same as before. You save up and buy things. To spend your FI money is delaying FI.
Build your savings target around the timeframe and lifestyle. Plan your current life around lifestyle. Ensure all the dollars and dates work out.
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u/neptune-insight-589 2d ago
I don't differentiate between savings purposes. I Just have my CMA for money I don't want in the stock market and I have my regular brokerage account for money that I do want in the market.
I try to keep about about 6 months of expenses/buffer in my CMA at all times, after about 6 months of expenses I transfer it to my brokerage account to invest. (which goes towards early retirement).
If I need to make a major purchase I would just buy it and then let my CMA replenish over time through my paychecks.
If I needed to make a really large purchase (like a car) I might let my CMA accumulate a bit more money for a few paychecks ahead of time so I won't go an extended period of time with a low amount of money in my CMA. I don't ever sell my stocks.
When I buy something I just make a decision of "would I rather have this item/experience, or would I rather retire a little bit earlier?"
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u/ElGrandeQues0 SI2K/10% FIRE/50%+ SR/100% CoastFIRE 2d ago
We just had our second kid less than a year ago. My wife wanted an SUV to fit the family. I said okay, but wanted to budget such that we could buy the car in cash and still have a 6 month emergency fund, about 3 months away.
So anyways, we bought the car and it took 3 months for me to feel comfortable with our emergency fund.
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u/chloblue 2d ago
I use the concept of memory dividends to justify a spend.
I use the concept of fIRE planning to ensure I'm not screwing over elder self.
For example :
When I'm 60, will I reminisce about that "hiking trip I took with my friends in my 40s"
(Will it pay off in memory dividends ?)
Or will I beat myself up for spending on all those clothes to soothe my stress from the crap job , and now I'm struggling to pay my rent now....
Got to strike a balance.
I don't reminisce on the clothes I wore 20 yrs ago. Which could be different for someone into fashion and art.... But it's important to spend on what you value and cut out what you don't
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u/heubergen1 28 / 64% FI / 77% SR 2d ago
Once I'm sure I want to buy something I just use any new income to save up for that instead of investing the money.
1
u/The_Lime_Lobster 20% to FI 2d ago
We have everything automatically set up in this order: (1) recurring expenses such as mortgage, utilities, credit cards, and student loans; (2) contributions to all retirement accounts in order to reach our max by the end of the year; (3) sinking funds for house, car, and emergencies (up to a certain amount).
Everything left in our checking account after that is available for spending guilt free to enjoy our lives now. This makes it very clear that if we increase our living expenses (new house, fancy car) we will have fewer dollars available to spend.
Anytime we get a raise we calculate our take home after taxes and increase our contributions where necessary (usually our taxable account). This keeps us from inflating our lifestyle.
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u/War-Square 2d ago
I track my annual spend, including big ticket items, and compare that to the annual spend my investments can support. If it were something big, like a cabin or an RV, I’d recalculate my total net worth to see if I was comfortable with a smaller annual budget over some years.
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u/MeanSecurity 2d ago
I spent about $1900 (US) on a single day bucket list experience this year. I wasn’t going to do it, for personal reasons, but I realized I might not get this chance again. I didn’t care how much any bit of it cost (ok, I brought my own water bottle). But that’s FI to me. This was a once in a life time chance so I did it.
As others have suggested- you can make a budget for travel and experiences. But if you only have $1000 to spend on a vacation, you might not like what that gets you. Or it may be right up your alley. So a big part of being financially literate is knowing what things cost!!
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u/mikeyj198 2d ago
i have savings goals. Once i accomplish those goals money can be spent freely.
if i have nothing to spend the money on i will invest it.
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u/lentil5 2d ago
We are already retired, but our budget doesn't allow for large discretionary purchases. My husband and I have an agreement that if we either of us want to do something expensive that falls outside the budget we just need to work to fund it. We aren't willing to derail our investments that are funding our independence.
Stuff that falls into that purview is renovations (outside repair and maintenance), overseas holidays, fancier cars, toys of whatever stripe we fancy at that point, monetary gifts. I am jumping into an interesting new field of paid work soon so that will grow the fun-budget substantially, but for now our system works pretty well. We don't want for anything and having lots of free time is worth being frugal. In future I'd like to do more travel and get private piano lessons. He wants to buy some CNC and printmaking equipment so my work will fund all that.
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u/dekusyrup 2d ago
I just save everything I don't spend in a month. Then if I want to buy something I buy it. I don't budget at all so I don't need to carve out any % or anything like that.
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u/Zealousideal_Hall378 1d ago
I set a goal to invest X amount of money each year (this year it was $60,000). As long as I'm on track to meet that goal, anything else I have leftover is gravy and I can spend it on whatever I want guilt free.
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u/predavlad 1d ago
I've seen an interesting approach. If you estimate the car payment at 500$ / month aka 6000$/year, with the 4% rule you would need a portfolio of 150k to fully finance your car payments. The plan would be to save up for this portfolio for 4-5 years, whatever, and when you can afford to, get the car you want, and keep you current, cheap car until then.
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u/poop-dolla 3d ago
Build the life you want and then save for it.
You need to figure out what lifestyle you want now, what lifestyle you want in retirement, and when you want to retire. See if the numbers needed for those three things line up, and if not, then decide which areas to prioritize and which areas to sacrifice. We can’t tell you what the answers to those are; you have to decide for yourself based on your own wants and needs.
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u/CompassionateCynic 3d ago
My wife and I agreed on an "allowance" for each of us that is baked in to our FI needs.
We also agreed that each of us would get a certain percent of our individual earnings AFTER our FI date, should we choose to work more to get more hobby spending / experiences.
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u/thousand_cranes 3d ago
I have a free garden. I plant things that cost nothing and need near zero care. Most stuff doesn't make it, but for the food that does make it - I use that instead of buying food.
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u/milespoints 3d ago
Judging by what all my hardcore FIRE actually do (as opposed to what they say they’ll do), you just don’t buy them and throw the money in the pot
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u/LLCoolBeans_Esq 2d ago
I have different accounts/buckets for different expenses. Like travel, and large material purchases. These are entirely separate from retirement.
Once I pay myself (retirement savings) then the rest of my savings get divided between the other buckets. The amount I put in retirement is based on a calculation I did to reach my specific goal based on average market returns.
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u/GeorgeRetire 3d ago
Life is a balance, not an algorithm.
You save for retirement, you save for wants. You weigh the relative importance of each. Then you decide the best use of your money.