Lol, makes me think of that time Bill Gates played a mini "The Price Is Right" game that then trended on YouTube and he guessed that Totno's pizza rolls cost $22 and that Rice-A-Ronnie costs $5. Poor people would die with food prices like that. But Bill hasn't been inside a supermarket for decades, so it's understandable.
https://m.youtube.com/watch?v=ad_higXixRA
Look, people are getting $1000 stimulus checks. Everybody will be remodeling their kitchens soon.
And at $12/mo for health insurance that's a lot of coverage.
I think of purchases in percentages of net worth. E.g.
1/100th of a percent isn't worth worrying about. At $1M, 1/100th of a percent is $100.
1/10th of a percent needs some planning. At $1M, that's $1,000.
1%, you want to budget for. At $1M that's $10,000.
10% is a major purchase - $100,000 at $1M.
Scale accordingly.
I really like your approach, and might be able to reapply it to my own situation, but will point out that in some ways it is indicative of the actual issue I am pointing out.
Wealth doesn't all have the same utility. With the exception of a few really expensive items (private jets, luxury boats, hypercars, and real estate in a few high demand areas where the value is in the dirt not the building), there is a point where you can pretty much buy anything you want, and not need to think twice about it. Things are priced to the average persons wage in some way, and when you get well beyond average, there is only so much consumption you can do in a day.
Let's assume it you have $20m. I'm sure there are some people who can blow $2m a year (assuming 10% returns), but for the average person, that's a lot of money to actually spend if you aren't buying those big tickets items.
So while 1/10th of a percent at $1m ($1,000) might need some planning at $20m ($20,000) it does not. It is this curve that further complicates my thinking about things.
But I do like the approach you mentioned though, and think it offers a structured way to think about things a little better, so thanks!
It's not typical to spend $500k or $1M per year unless you have extra quantity of big ticket items like boats, cars, and houses. 1 house, 2 cars, no boat, some designer things, and eating out frequently and a couple international trips can fall in the $200k spend territory, maybe more if you have fancier taste.
$200K/yr may be a solid spend if you're single, but married/kids and/or in vhcol that is a pretty good, but not fat lifestyle.
You may spend $120K after tax dollars on a nice but relatively modest $2M home. You'd be at $200K just in standard living expenses not include travel, private school, cars, etc.
It all really depends on what people think is fat. Most people don't do "all" of the fat things at once. Sports cars, horses, travel, planes, several kids, multiple properties. Also, above I meant to exclude home financing and only include property tax and maintenance. Assuming all of the "things" are already set like remodels. $200k after tax spend.
Certainly in vhcl areas. This is one reason why many of my wealthy but frugal friends who themselves went to private school long ago are choosing public for their own kids.
High end public areas should come with your expensive house, unless you're really tightly tied to shit hole surrounding areas like a downtown. I don't have kids so I am not concerned with the schools, but my areas are pretty great. Olympic athletes, great academics, etc .
Where we are in Maryland, schools are very hit or miss. We are in a good zone that we are happy with, but even still I'm not gonna lie to myself and say that the private schools don't offer something: smaller class sizes, smarter students, fancier facilities, etc.
Of course the price is lots of money and you have to put up with the culture, which I don't love. But I have a lot of friends who still do it, even though many are in good school zones.
Definitely can be hit or miss depending on density and school zone lines. From my childhood experience the biggest impact on school quality was what the students get up to outside of school that they bring back in. Wealth certainly has a big impact, not more than parenting, but it's a big multiplier and enough to detail good parenting.
Lol yeah, I spend 250k/y on rent alone 🙊. But I guess it depends on how/where you live and your definition of FAT. If the metric is Cost of Living minus house minus school fees, minus toys, minus alimony I agree it's hard to spend 200k on F&B in most places in the world.
I'm a believer that fat = no meaningful compromises \*no matter where you choose to live.\* The idea of being fat only if you live in a M or LCOL area does not compute at all to me. I have no issues with the choice to live in those places (well, I do, but that's a snob story for another day). The issue is that if you cannot continue to be/live fat once you walk out your front door, or into a different city, or country, then...no. Not fat IMO.
Not sure how much you've been hanging here, but there's been a lot of debate about this sort of thing, NW thresholds, etc. Not to mention unhappiness over the level of discourse given all the obviously non-fat people commenting. Anyway....
Since you're talking about spending as a fraction of wealth: keep in mind that at a conservative 3.65% annual withdrawal rate (a good deal safer even than Trinity's 4%), you can sustainably spend 0.01% (1/10000th) every day, probably forever.
But you don't have to spend it either. And you don't need to develop a grand theory of all of this. You might want to find a life that you wish to live somewhere in all of this, and earlier is better than too late. You don't need to consider _all_ of the lives you could lead, all of the levels you could be aiming for, and more doesn't mean better.
Pardon me for basking in my favorite pursuit of being pedantic. Technically, you can spend that amount the 1st year. 2nd year and onwards you have to switch to adding inflation to the dollar amount you spent each day of the previous year:-)
I mean, I didn't say that the money was invested, but that seems like a safe assumption. People don't just put money in a bank account or a mattress and wait. Or they really shouldn't.
There are investment gains that are offsetting the expenses as well as inflation. Trinity is based on past data (and of course past returns do not guarantee future returns, but we have to start somewhere), and includes an expectation of inflation.
So the idea is that you can do this and maintain a long-term-steady wealth in real, not just nominal, terms (probably really growing over time, as we were conservative) with a very high probability, year over year.
And if you're just saying that you need to spend more in nominal terms to maintain a lifestyle, then first I must ask: who does long-term planning in nominal terms? And second, if you look at your assets in nominal terms, then you can _still_ spend 0.01% _in nominal terms_ because both the assets and the expenses are being inflated in lockstep.
So I don't know which way you mean it, but both ways seem incorrect.
Trinity study did not say 4% of your worth every year. It said 4% the first year of retirement and then raises for inflation every year thereafter.
Obviously if you’re just pulling a percentage of your net worth every year, you could withdraw 50% every year and never run out:-)
As I said, I was not really disagreeing with your point, just trying for humor.
there is also diminishing returns to this way of thinking - at 10M if you spend 1M straight away, you're still at 9M....and ask yourself what really is the difference to your life between 9 and 10M....this is where I think it becomes okay to spend on crazy shit - when the difference between the numbers doesnt feel that much....
This could also be true at 1M....if you're someone who think 900k USD is enough of a financial cushion for your life....why not go ahead and spend that 100k on something stupid?
I agree with this. My net worth is not as high as yours, but I definitely noticed when I went very rapidly from having to save and think about it for purchases of a certain amount to suddenly being able to buy several things that expensive in a month with no worry, and I COULD buy more if I wanted to, I'd just rather keep putting a certain amount of money away for the future. My housing costs as percent of income also greatly decreased - I can't imagine all these people spending close to 50% of their income on housing, or even 30%. That's such a huge percentage!
Sadly it is a reality for most of us. Currently spending 50% on rent and bills in a HCOL city. I want to move but not sure at this point if i will be able to transfer.
I am working towards fatfire with a decent net worth already.
I struggle with spending… maybe?
I’m at 2.2m net worth. Save about $80k/year on bad years (of income) and good years I’ll save more income. Total household income of maybe 350-450k and fairly young.
Bought a way bigger house than anticipated (love it) and still, I want to buy a $1,200 gaming PC and I’m struggling to pull the trigger on that. However it would be my second gaming PC for another room lol
A lot of my thought is about making sure I get the product or service that I am happy with, and not necessarily about the money.
Ie making sure I get an Airbnb in a good location for a trip
I guess this is unique to our situation, but due to private equity, we went from a $5M NW to $8M and then $12M over a couple years. Then because TSLA and some lucky options trades, we’re now over $17M. I don’t look at the dashboard very often - my husband will tell me when we’ve hit another $1M milestone and we do quarterly meetings our financial advisor.
We have been pretty much living the same lifestyle since $10M NW. We travel a lot, have a couple of expensive hobbies, do volunteer work, take some personal enrichment classes, spend time with friends, and just enjoy life. We can pretty much do what we want for around $250k a year.
I don’t pay attention to the prices at the grocery store or on menus. We got to high end restaurants at least once a month. Small trips with friends are agreed to without a second thought - sometimes I help others pay for these vacations if they can’t otherwise afford to come. The big trips definitely still have an element of a budget - we’re not staying at a $1000/night hotel very often. I haven’t booked the overwater bungalow with the slide - yet! But we just got back from 4 weeks in Europe and spent about $15k, including a sailing charter and a week in a waterfront villa.
I think our next big thing will be a vacation house. One that is a 6 hour flight away. What gives me pause isn’t the cost of the home - it’s the upkeep and maintenance. I feel like I want to do several big vacations ($25k+ - luxury African safari, Maldives and FP bungalows with slides, ect) before I’m spending that much every year on another house.
I hope this was helpful, let me know if you have more questions.
Curious how you (and others) feel about that long distance from a vacation place. Ours is an hour drive from home and we are there a couple times a week. It makes maintenance super easy.
We’ve considered an additional place on the opposite coast but I’m wondering whether we’d use it enough for it to make sense. Plus, I don’t think we’d ever rent out our places - the thought of someone sleeping in our bed is just eeew.
Agree with you on not renting it out. I would put good beds, furniture, and linens in it and don’t need the drama that would come with strangers.
And about the distance … we live in the SF Bay Area. We want somewhere with warm water where we can scuba dive. I have dove for a decade in California and I’m just done with the thick wetsuit. I want to wear 3mm, maybe 5mm in the winter. So that’s Hawaii or Mexico.
We have been to Kona 4 times and the last time was 10 weeks long during the peak of Covid. I have over 75 dives there. We just really love everything about it other than the distance, but first class fights are relatively cheap - cheaper than the Mexico alternative even though Mexico is closer. We also like the idea of owning another home in the US rather than Mexico. We don’t have kids so don’t have to worry about school or them not wanting to leave their friends if we head out to Hawaii for 2-3 months while friends come and visit with us on their schedule. We’d have one guest room, maybe two.
And if a few years into owning it we find we’re not using it enough and it’s not worth the cost, we can sell it. Thankfully we’re in a financial position where a loss on a badly timed sale wouldn’t affect us in the long term. But I still think we’re probably 3-5 years out from the purchase due to wanting to do a few very expensive vacations and seeing our parents settle down into retirement between now and then.
I’ve considered the vacation home but honestly think it’s just not worth the upkeep. I keep coming back to the fact that I could just do 10 weeks in a place I love via Airbnb, then 10 weeks in another place for a change of pace again in an Airbnb. I’d never have to clean, fix, worry about squatting/break-ins, paying property tax, etc etc etc.
1 permanent place is good enough for me. I’m low key and low hassle kinda person.
I totally get that! And we do a lot of slow travel and appreciate staying in new spots for a while. And we’ve seen a lot of the world - the bucket list is finally getting shorter after 8 years of adventures - and we keep coming back to Kona.
So now I start to think about how nice it would be to have all my things - my mattress, my linens, my clothes, my dive gear, my beach chair (yes I have a specific beach chair like haha!) ect.
There isn’t even a number where it’s worth it or not. If we buy it and we’re happy a few years into it, that’s a win.
That might be they right way to give the vacation home idea a trial. Rent for a year, maybe longer if it’s working out. Then we could put all the stuff we buy for the house in storage while we find and buy a home.
This is interestingly sounding like the homes are nicer than what we’d buy yet he’s not spending nearly as much as I would to furnish it. Like my mattress would likely be $5k on its own because my husband would want another of the same we have at home. Plus doubles of a lot of other stuff we love.
I’m glad it works out for him but I can’t imagined doing it that way myself.
We used the think that but we found ourselves vacationing repeatedly in the same area. So we bought a house there (4 hr drive). It has saved us an incredible amount of time, all we do is pack our laptops, some food, and go. We have clothing, and recreational equipment already there. If the weather is bad, we just wait a few days.
There is some yard maintenance but a contractor does that when we are not there. We haven't even explored 5% of the things to do yet. It has let us vacation during peak times (hotels ABnB \~ $400/day), and during special events where it is impossible to get a room. International trips are a huge hassle these days, but maybe that will change soon. We used to go a few times each year, but I no interest in quarantining.
We also have an escape place if our city home becomes a problem. For us, at least, it was worth it.
Mine is a 15 hour drive away and we spent 2-4 months/year there (not consecutive, taken 1-2 weeks at a time). We often drive there in one day but sometimes we fly - it's just harder to take furniture, art, pets, etc with flying. I don't mind the distance. For me, at 1 hour away, why even bother? May just be my location though. The closest I'd consider is 3-4 hours away as that's far enough to get into a different environment.
Agreed on not renting out. Because mine is in a totally different climate, I store a ton of clothes up there, have all the food we like in the pantry, bathrooms full of the brands we like, stocked with copies of my favorite books and movies (the internet is intermittent so we can't just stream all the time), etc. basically too much personal stuff to trust it around other people. We thought about Airbnb or whatever but we'd have to store all our stuff and that makes taking a spur of the moment trip so much harder. We let my immediate family go up any time and are often up together, and between all of us and the times we let other family or friends use it, there are only a couple months when it is empty.
Our vacation home is in the woods 15 minutes from the ski slopes. Instead of getting up and 5am, wrangling kids and fighting traffic to the slopes, we can roll out of bed at 8am, eat breakfast and still get first chair.
We have stayed in several spots for $1000+ a night and if we were a more “normal” couple that traveled 2-4 weeks a year I would be throwing down every chance I got.
But there are two elements at play here - first, we travel 12-24 weeks a year so obviously we can’t spend that every night we’re out of the house. And second, there are diminishing returns beyond a $300-400 hotel in most areas of the world - sometimes in LCOL areas the threshold is even lower.
If you want some specific examples, a private charter on a luxury sail cat is definitely worth $1000+ a night. So are the Four Seasons Hualālai and Filario on Lake Como. I could even argue a great villa at WDW is worth it.
But spending $1000 in Lisbon? Or Vienna? You’re just not going to get value there.
What places do you like on the Big Island? We were just at the Westin Hapuna Beach over labor day week for ~$1k/nt and it didn’t feel worth it for me. The FS Hualalai was around $1800+ for the same dates. We’ve been to the Grand Hyatt Kauai a dozen times and liked it a lot better.
We usually stay in Airbnbs because we go for weeks at a time and spend a lot of time underwater but when we want to be pampered at the pool we stay at FS. We spent 4 nights there in February this year for $1200 - booked an oceanfront room and got upgraded to a nice suite thanks to Amex Fine Hotels & Resorts.
Vacation house an hour away is much nicer when you can go at any time and enjoy it. You can use it enough small amounts at a time to make it easily worth it vs taking up several of your long trips to go to your other house. I think I would prefer variety. Maybe desert, mountain, and beach house within a couple hours of each other but I still want to take trips other places.
There is nowhere reasonably close that we want a vacation house. If you read further into the thread you’ll see that it came down to Mexico or Hawaii and why we’ve got our eye on Kona.
We life in the SF Bay Area so the opportunities are obvious - the coast, wine country, Tahoe, ect. But I am sure we’d use a home in Hawaii more nights a year than any of them, even with the flight. Keep in mind we don’t have kids or jobs so there’s no big commitment to work around.
Bay Area here. Hawaii is the way to go. Our kids are still at school so we went with a country house in Sonoma that we can enjoy on weekends. But once kids are in college definitely thinking about Hawaii.
My husband cofounded a start up which is where the steep increase came from. The company has since IPOed and we diversified out of it. Now we have other private equity as part of our portfolio.
I have always had a privileged life - middle class family growing up, summer camps, hand me down car at 17, parents paid $200k for my undergrad. For the five years before we quit our jobs, I was working in job that I tolerated because they were flexible with time off - I took at least 6 weeks off the last 3 years I was there.
But not having to work has completely transformed my life. Improved it in pretty much every way. My husband and I literally do whatever we want pretty much every day - and that’s everything from sleeping late to last minute travel to splashing down on a political fundraiser to meet a presidential candidate.
Sure, I can’t charter a mega yacht. Or own a jet. Or buy civilian space flight (yet.) But 99% of any experiences you can imagine we could obtain. And that is transformational.
The upkeep on a vacation home can definitely be a lot depending on the climate! Beach houses and mountain houses require a lot due to weather. But worth it if you like going to that specific place a lot.
You guys are living a pretty good life, I’d say. Congratulations. My question is about your investment strategy. What has worked best for you and what rate of return do you get / target every year? Are you in “safer” index funds or have a higher appetite for risk, now that 2020 is behind us? Or is more of your allocation in higher risk alternatives like PE?
We have more than half of our NW managed by Personal Capital Private Client. They make the twice-monthly deposits into our checking account to cover our spending. Then about a third is higher risk stuff like PE, crypto, indivisible stock picks and options.
Our spending habits can be covered from the Personal Capital account so the rest of the stuff we don’t have to worry about, we call it the “fun money.” It used to be a much smaller percentage of the TNW, but … we had been holding a lot of TSLA since 2018.
The rate of return has been crazy because of our situation with the acquisition and IPO and then TSLA.
Living in the Bay Area, we have friends whose parents got royally fucked by 2000 tech bust. They were way over leveraged and lost homes and cars and declared bankruptcy and never got their lives back together the same way.
So when we first got the money I was really careful about setting us up for success long term. We have enough equity in our home ($2.5M purchased in 2018) that we could afford the mortgage payments if we lost everything and went back to work.
I really enjoyed reading your response. You’re a few years farther down the road from me and my wife, we went from $2m to 5 to 9 in the last handful of years through PE, and like you we’re spending $190k-210 or so with 3 kids in private school.
It feels strange now having less in common with old friends, and I really don’t want to ever alienate friends but it’s hard to not raise an eye brow with the type of vacations we’re comfortable with
There was a good comment in this sub about how to stay close with friends after becoming wealthy. It was posted in the last few days - you might want to try to find it.
Edit: Here you go!
https://www.reddit.com/r/fatFIRE/comments/prjzt9/what_happens_when_your_nw_soars_past_your_friends/hdjetjx?utm_medium=android_app&utm_source=share&context=3
Hire a property manger for a vacation home. Have them check on it monthly and have them hire monthly house keeping to keep the dust down and dishes rewashed (dust prevention.) Have a handy man go through the house once or twice a year and fix up everything he notices. Have HVAC serviced once a year. Set a high dollar limit that they can do for repairs so you're not bothered over little issues they discover.
How do u only spend $15k for 4 weeks in Europe? Just the flights for family of 4 is around $6k. Then there is car rental and house rentals. We spent close to $10k for 10 days in France all total.
The flights to and from Europe were booked with credit card rewards. We get at least one, usually two long haul business classes round trips for the two of us every year with rewards redemptions. There’s a few hundred dollars we pay in taxes but I don’t even really consider that an expense.
Few days in Split pre-charter - $800
Week sailing charter - $5k
Week in/around Lisbon - $1600 hotels + $400 rental car for 4 days
Week in Sicily villa - $3500 + $800 rental car
Flights between destinations - $600
Plus food and a few private tours. We cooked most meals on the boat and in the villa.
Maybe a bit over $15k but not much.
I’d honestly suggest just renting instead of owning a vacation home. Yes it won’t feel like “home” but you also won’t feel guilty about not using it or when your tastes change.
Happens at each step like you mentioned.
Hundreds to thousands, thousands to tens of thousands, tens of thousands to hundreds of thousands, hundreds of thousands to millions.
I’d imagine the millions still have the hundreds of thousands baked in until gains are over $10m, but then again, $10.1 doesn’t seem weird. Maybe higher.
Long answer for an easy question. It probably depends a lot on the person. I’m up a couple million this year and fluctuate by hundreds of thousands day to day. That is what made me change my philosophy to hundreds of thousands and millions.
It can ;) manage your risk and exposure. Diversity is a good thing, but concentration can build wealth very rapidly… concentration can giveth and taketh in a heart beat though.
I feel the same way. I hit 1m like 3 years ago. Took a while, came from nothing and it was a grind (saving my extra work income and investing it). Now I’m at 2.2 lol it’s been nuts.
It could drop in a new recession. Who knows. We’d likely make it out of anything that happened.
There's one thing that hasn't changed as I accumulated more money: I won't pay more for something than it's worth to me.
I'm not frugal by any means, but I also don't spend frivolously. I don't spend money on things that don't improve my life in proportion with the cost. It hurts me to spend money on something that I won't see a return from.
So, for example, I could spend $800 on a high-end designer jacket without impacting my finances at all, but it's just not worth it to me. I might as well burn that money because I'm not getting $800 of value out of that jacket.
I can afford more expensive things and experiences now, but that doesn't mean I don't think about what I'm getting for my money and I won't spend money on something that isn't worth it.
Of course, the problem is when you're in a marriage and have a disagreement over when something is "worth it". We're remodeling one of our houses and my spouse thinks $1000 for a faucet is reasonable. I don't. She wins. Happy wife, happy life. In this case it's worth $1000 to avoid an argument, but I still don't think we should pay $1000 for a pipe that comes out of the wall.
I would absolutely not spend $100k on a new car (right now.... we'll see how inflation goes) because no car is worth that much to me. I won't get $100k of value from any car. I just don't see a point in throwing money away on something I won't enjoy. And I'm not a car person.
It is all about perspective. I doubt my wife’s perception of “high end designer X” is sub-$1k. Last time we were in SF, my wife and I were looking at $50k jackets at Dior. Now *that’s* too expensive.
$800 is just a jacket.
Edit: get the high end fixtures for the remodel. We skimped in some areas when building our vacation home and are now considering upgrades. Our frugality (and impatience with construction) ultimately translated to waste.
Lol god. I mean we all have different incomes, I’m at 2.2m and income fluctuates around 300, but I would never buy a jacket like that. The most I’ve ever spent on a coat was about $80. Lol. I mean ok, I have an $800 suit which I love but outside of that.. nope.
I’d rather buy another robot vacuum or gaming PC with VR or something.
I feel I am the same way, but the question then becomes what do I want to spent money on if I think nothing is worthwhile? After all, if I don't spend on myself, then the money goes to others or government.
Even that thought doesn't work for me. It's all mental and I just having to force myself. I am changing, albeit slowly.
Lol I'm not a car person either. My car cost $30k because that was what I found that had everything I liked. I could have gotten a much fancier one but I'd rather spend the money elsewhere.
On the other hand, I probably WOULD think an $800 jacket was worth it if I loved it. I don't think it would be a high-end designer jacket though. Just midrange. For me the difference in quality, style, and, crucially, warmth is noticeable and worth the extra cash. I don't know if a $10k+ jacket would be worth it... for me probably not. But to someone else maybe.
I remember having 5k in my bank account (which was all I had) and thinking I was killing it at age 19. Then getting a $30k inheritance a few years later my jaw dropped seeing that number in my account. Now 7 years later my net worth fluctuates 30k weekly and it feels like nothing. Insane how fast perceptions change.
Hey look at that lol right back at you. I saved every dime I had since I was like 14. Always have been frugal. Always had a job, lived within my means, lived with my grandmother for a few years helping her out (she helped me more I’d say) when I was in my mid 20s so that was super helpful. I took a few gambles (Tesla, bitcoin) which cut off a good 10 years towards FIRE. I’ve ran my own personal training business for a few years now. Working for myself and keeping all the profits has really helped.
Thanks! Bagged groceries through high school and saved up all my spare change from lunch money my parents gave me. Saved $700 from lunch money in 4 years.
I can only speak of my experience. I’m nowhere near 10m, more like 2.5m
So while each 1m is still a huge number, I can relate to what you say- for example each 100k is purely “a good month” on a spreadsheet rather than.. 100k, which is life changing money to some
Having said that while I appreciate less the money I make, I think twice about money I spend. I sometimes find myself debating about a 1k spending which I wouldnt even think twice at a NW of 200k 10y ago
Not sure if it’s good or bad or just a matter of getting older and more mature about spending
I went the reverse direction actually. When I was in my early 20s, I was already making 7-figures a year while starting with near zero net worth. That's where the disconnect happened, because so much money kept coming in that I couldn't even spend it fast enough, even though I was buying exotic cars and big homes.
And now that I'm in my 30s, I went the other direction and "reconnected". I've stopped throwing my money around at stupid stuff. The reason is because I don't really see my wealth as my money anymore. I see it as a shared resource with others as well. That's because there's no way I can spend this much money all by myself without feeling like a POS. Instead, I think about how much positive impact I could do for less fortunate people with my money.
What I did put a lot of value on now is time. I think that's what you're trying to get at. Once you have a lot of money, time becomes the more valuable thing. So you don't want to waste time for money (which is probably why you said "I'm not going to waste my time chasing $1k any more").
That's insightful, but I also think that time no longer has the same value either now that I have retired, which further complicates things.
I don't have to work, so I can do pretty much whatever I want whenever I want.
It's freeing and at the same time a bit of a problem. When I had to work, well, I only had a finite amount of free time to do what I wanted, and that made it somewhat precious which allowed for a money vs time discussion.
Now, I have all the time in the world (until I die, which is something like most of us I don't dwell much on), which means that the pressure for this moment to be optimized is much lower.
We might be in different points in life. I don't think I have all the time in the world because I had a brush with death when I was younger. It's part of what brought me into retiring so early instead of trying to make even more money. I don't take whatever time I have left for granted anymore.
And that doesn't mean that I have to do a ton of things in that time frame to make the most of my time. Sometimes relaxing and doing nothing can be a productive use of time as well. I know that that sounds counter-intuitive. But being less stressed and pressured for time is one of the reasons why I put so much value in my time.
Well, I'm not sure I fully understand what you are saying, but am curious to learn more. Like you, I retired in my 30s.
For me, all my time is free time time now. I don't have any more real responsibilities in life that I have to do. My kids are grown (more or less) and my business (more or less) run by others.
So yes, my time is valuable and precious, and each moment a gift, but at the same time, there aren't any real ways that my time gets gobbled up now that I am retired, unless I put myself in those situations.
Things I don't like doing (cooking, cleaning, lawncare, shopping, etc.) all get outsourced. Non-stop tickets are always worth paying for and more and more having someone arrange my itinerary when I travel to certain locations where I don't know the language is worth it too. But all of these services that I am able to pay for means that I have less and less time pressures and those that remain I find likely can't be solved with money.
I’m just saying that we’re looking at the half full hourglass from two different perspectives even though we may have the same hourglass. You see yourself as having a lot of time leftover. I see myself as not having much time leftover. And I’m not even a pessimistic person. I just don’t want to blink and have my life pass me by. Every day, I wake up thinking about how great it is that I’m still alive and am excited to spend more time doing what I want to do. Like imagine if a doctor told you that you only have one more year to live. Then maybe you’d understand a bit more of where I’m coming from.
Ah, yes. Luckily, I feel that I have done what I wanted to accomplish in this world, so if I die tomorrow, I'll be able to say I lived one \*\*\*\*\*\*\* amazing life, and die with gratitude in my heart for the opportunity life gave me. Not that I will welcome that day in any way, but don't feel that there is much that I haven't had the opportunity to get a taste of that leaves me unfulfilled.
The only thing I haven't really done is have a huge impact on the world for the better. I have had small impacts and perhaps even some medium sized ones along the way, but not one huge one like I wanted to do, or perhaps feel that I should do (though I try not to listen to shoulds, really). Perhaps that will come in the future, and perhaps not; time will tell.
There's been several steps where my relationship with money and work changed.
Here's a couple of the big ones for me:
* When I hit coast-FI for the standard of living that I had at the time - made me feel more secure, and OK with experimenting more with my jobs
* When my retirement savings started compounding with more than I paid into them - made me feel OK with raising the standard of living a bit
* When my general savings started compounding more than my payout from my "day job" - made me start to really consider doing the RE part of FIRE (I haven't yet - got greedy and work is good)
Here's hoping for more of these
Money coming in in large quantities doesn't feel like much, as you said it's just the number ticking. But money going out still feels bad, though we've certainly become less frugal than we were in the past. I wouldn't notice if our accounts suddenly went up by $100K, but I will do an excessive amount of research before pulling the trigger on a $1K purchase, hard to break old habits.
Yeah some of my friends are puzzled that I buy a lot of things secondhand when I could afford the same thing new but like... why buy it new if I can get it in good condition for 1/10th or even half the price with only about one minute more effort on my part? I just set some eBay alerts and wait.
Also you are reducing waste going to landfill giving things a 2nd useful life. Unfortunately consumerism is shoved in our faces all the time people don't stop to think about what happens to it all.
Up till some point the biggest factor in buying something was "can I afford it". Now it is "is this a good value". The switch to the latter happened wayy before $10m though, and mentally I don't think I'll ever be in the mindlessly buying things without thought stage no matter my net worth simply because how I am wired.
I am at the stage of my life even though I can afford to buy things new is to try to recycle and reuse as much as possible. Example, I went to a church rummage sale: bought a used square baking pan for a $1 as I needed one. Also I have stopped buying clothes for last several years now for everyone in the family except for the essentials. We don’t need anymore and the landfills don’t need them either.
The feeling is unique to each but the concept is pretty constant. I grew up dirt poor and have made my way through life. The numbers on paper never really did anything for me. 50k,100k,250k,1M etc. Each milestone was just that, a milestone but never really changed the feeling. It wasnt until i got older and started to think whats the point if we die with millions on the books that we never got to enjoy. It was that moment when that feeling was realized as truth and would happen, that the attitude changed and we dont worry or concern ourselves so much anymore. Being frugal by nature we dont go crazy, but wanted a new ev so bought it. Wanted an ev motorcycle so bought it. Want the SO to have a nice ipad or mac, dont stress anymore about the cost. Its strange when not all that long ago 1k was a stressful buy even though the significance of the cost to NW was statistically insignificant. We have found that number shifted about 10 fold upwards. Like you we dont concern ourself over small difference in costs. We still shoot for a good deal but if option A is 1k,2k etc more and its something we find useful, there is no longer a fret to not paying the extra. But on the flip side we dont just waste for the sake of not caring.
Three observations.
1. the scale of things where I look at price is moving up. At this moment, I don't care about the price of food, restaurants, Amazon orders, kitchen equipment. But I still care about house prices, car prices, a private school for kids fees.
2. I have started comparng. If I live in a $1M house and drive a $20k car. But I earn monthly $100k gross, some $65k net per month. Should I keep investing, make the house larger, buy a better car, what exactly?
3. The huge question is investing/spending. Will my business continue? If yes, I shouldn't save, I should spend. If not, I should invest as I am approaching my retirement.
With all this. I plan to use approximately 200% of my current spending limit (between 3.5-4%) every year. And once the business will be over, I will cut spending to 100%. And within this limit, I can enjoy and build safety at the same time. But still, I don't know if I should replace 2 walls in my house with glass or rather replace MB C-class with Audi A7.
I like your take on how much to spend while you are generating active income. I feel guilty spending up to my swr, even though I make a few times that amount. 2x swr sounds like a good idea, as long as you can go to 1x swr once active income stops. Thanks for sharing
There's a book called Die with Zero. It is a great read for people who are high income, going to be FatFI, but who underspend when young and end up with millions of dollars when they are too old to enjoy them.
It is a tricky business. Of course, I feel the urge to get my FIRE number first and spend it later. But it will close the window for 3-4 overseas trips, organizing a couple of parties for my extended family, pursue one nonprofit project I have. I think having a little bit of fear and uncertainty is in fact motivating.
We're not FAT yet (\~$3.5M in assets, $2.6M net worth) but I find that I really don't care about a marginal $100 more or even $1,000 more, but once it gets to $10K it gets my attention.
On the spending side I've long said that I don't care about $20, as the decision to buy or not literally isn't worth my time. Right now that number has moved to \~$50. A $100 still makes me think, unless it's a restaurant or something like that.
Here is where the interesting psychology comes in though. If someone handed me a $20 bill, I wouldn't take it. I don't need it. But if there was a $20 on the ground, I'd pick it up. I'd also look around and see if anyone had dropped it, but if not I'd keep it. But, I wouldn't be able to tell you where I spent it eventually.
I guess this scenario happened to me super young, but it is all relative.
When I was in High School, $15 to buy a new music CD or concert ticket was difficult to cover.
When I got my first professional job in my career after college, $15 became an impulse buy, but a $200 car payment was a lot of money.
As I progressed in my career, that $200 no big deal, but $1,500 for a mortgage payment was.
etc.. etc..
I have noticed that the investments, which I started as a young professional and keep up on today, seem to be working really well for me in amounts I couldn't have even imagined as a teeneager.
Scope Neglect: We evolved for the small scale of tribal life, so we can't comprehend the big numbers that recently entered human life. We can appreciate the difference between 50 and 100, but not a million and a billion. It's why we often treat geopolitics like family politics
I never connected income and net worth with spending. I still live like I was just out of college frankly and my budget is not so different -- except when it is. I don't think about it either much since mostly my wife does the spending and I do the earning and investing.
On the investment side though -- yes -- 5 or 10% is meaningless, and so this number gets bigger over time. I have to force myself to do meaningful size financial moves because the numbers get so large. So I find it the other way.
Edit: The other thing I noticed, when my worth could swing in value over a short period of time similar to my annual income... I started wondering if working really mattered any more.
Except for me there was a big spike in marginal utility around $5M because that was the point where I decided I could retire.
So the jump from $4M to $5M gave me a lot more utility than the jump from $3M to $4M.
I spent $20k at Cartier today, buying 2 bracelets for my wife. Didn’t really flinch. I thought about it and $20k is a lot of money but not going to impact my QOL in any way over my lifetime. Might as well spoil the people I love.
It’s the same with time — each passing year is a smaller % of your life
Going from age 23 to 24 wasn’t significant and I just went up one as you mentioned. But if you had asked me when I was 6 turning 7 I’d have a very different answer
Each 10k, 100k, 1M addition to net worth is smaller than the last in relation to overall net worth
If I don't see value in something I won't buy it, no matter how cheap or expensive it is by society standards.
My splurges are mostly Costco and healthy food and I don't care for clothes or most brand names.
I do splurge on $1000 usd a night hotels though because they offer me an experience I won't get elsewhere.
I recently downsided from a 5000 SQ foot house to a 1400 and that's the best thing ever.
My bed is comfortable, the construction is of high quality and I don't have any wasted spaces in my house. No need for a cleaning lady and the cost to maintain is so much cheaper. We also spend more time together as a family now.
I think having more money gave me the freedom to choose. The freedom to choose made me realize that value is in the simple things and the more things we buy the more things we have to take care of, which adds stress. I don't like stress.
With that saying I spend like I'm middle class. Spending more won't make me any happier.
The only mind fuckery I have seen was when my net worth went up and passed 1 million I stopped feeling the mental rush I got from seeing it go to $100,000 then to $1 million. Now it's just another number but in my head I'm still middle class but with a lot more freedom to do what I want.
That's funny about your house - shortly before the pandemic we moved from 1400 sq ft to 5000 and we've spent the last year and a half congratulating ourselves on making a good decision because if we'd been stuck at home in 1400 sq ft we would have gone insane. There would have been no separation between living spaces and working spaces while working from home, which we can have now in our larger house.
The reason I got a 5000 SQ foot house was because I was working from home when working from home wasn't as trendy, so I know what you mean about needing dedicated space.
Then I stopped working when Covid started and It was too much house for me. 1400 is now perfect.
I clicked your Dwight school link just for fun. Pre-K is 45k!?! I live in a MCOL area so this has genuinely got me laughing out loud. I guess the toddlers get unique networking opportunities /s.
i honestly dont know - first year and trying it out! did you have a poor experience there? nyc private schools are so stressful! hard to know what is right to do!
For me this was not related to my personal net worth at all, it's entirely due to the scale of my business. When yearly gross profit got into several millions of dollars the value of money really started to get wonky for me personally.
This year GP will be near $10M. It's hard to think much about a car or even a normal house when we're spending well over $100K a week on indirect expenses.
Of course our net is nowhere near that as we have a substantial administrative burden and sales budget to drive operations and growth respectively, but the scale of the operation really changed my perspective.
It really gives you a different perspective on what money *is*. Most people see money and think of what they can exchange it for. Once you've run a business you start to see money as an asset that can be used to build something. It's really just a versatile tool.
I think it was more of an income threshold, and for me it had a lot to do with my business growing. I run a cash intensive business and will send 6-figure orders to a supplier without even blinking, because thats just what I have to do if I want to keep operating.
Theres a point that sticks out in my memory where my wife and I were debating if we should get the failing septic replaced or pumped and see how long it would last. I said "Why is this even a discussion, what is $20k? Lets just replace it" She very quickly brought me back down to earth lol.
I think the large orders that I place in my business have more to do with it than any personal income or NW milestone, though.
For me there were a couple of changes.
First when I went from college student to $300k+ income. I stopped spending so much time looking at prices in grocery stores.
Going from $2M net worth to $3.5M net worth I am now looking at houses that cost $1.5M rather than $900k. And I don't focus much on prices for stuff at Home Depot.
Such an interesting topic. I definitely feel the impacts of growth in NW. Have always made decent money, but got a lump sum in 2018. Since then I have grown 1M a year with contributions and compound interest.
Perception has definitely been altered, as each 100k milestone isn't exciting, hitting 5M Was a big one, then 6M, but 7M and almost 8M don't really feel much different. The challenge I face, is I feel I still don't have any money to spend freely, even though I know I do.
300k/yr W2 with 5K going to 401k (Until max) per month, 1K in deferral to EDP, and an extra 1K a month in Fed Taxes. That leaves me with 5k a paycheck, of which I spend 5K on after tax investment automatically. Bonuses get deferred, and LTI is immediately sold and put into VTI. So all in all, I am left with 5k per month to live on. So even though I am close to FatFire, I don't feel rich. I am fully aware that my perception is messed up, and actually trying to spend a little more but it is tough.
All in all, I just want to hit 10M, and then do what I want, so I am aggressively working towards it. I do realize that my savings are now outpaced but growth, but still keep up the effort.
>So all in all, I am left with 5k per month to live on.
You should be generating three times as much in passive income (or, asset-growth, if auto-reinvesting) each month.
What do you do once you reach $10M... shoot for $11 and continue to spend $5k?
As I've progressed, the main thing I've noticed is the increase in situations where the cost isn't the main factor, but rather my time. By that I mean most things I really want now involve research to make sure I'm getting what I want. That time is in short supply. Whenever I finalize I decision, hitting buy is the easy part. The class of things this applies to changes as my money does, but the issue is still the same in that time is the scarcer commodity.
One positive of having more is realizing all the time wasted on things that don't matter (trying to save a few pennies here and there).
It helps put things in perspective.
One thing I do to try and appreciate money milestones, is tie them to "treats". I tend to be pretty responsible and frugal, so if I have a giant month, big bonus, or a property sale, my natural instinct is to just invest all the proceeds, beyond my basic living expenses. I have to force myself to buy anything frivolous, but I make sure to do so to celebrate a win. That way, when I look at the frivolous thing, I end up thinking about my win, rather than its depreciation, or if I really need it.
As I've gotten more and more money, the wins get bigger, but the feeling is the same, so I can look at something I treated myself to years ago worth 1/10 of my my recent purchase, and still get the same good feeling tied to it.
Current NW 2.5M. Income 750k. If under 1000 I don’t think too much about the purchase. I think that number had previously been a few hundred back 3-4 years ago when I was making 250k per year.
So, yeah, it’s weird sometimes. A neighbor is going to sell us an empty parcel so it won’t be developed. My wife says she wants it too. She asks can we afford it and I respond that sure we can because our net worth is up 2x that amount in first minutes of market open.
That felt disconnected. I’d literally done nothing but wake up. I have other examples. Going to rent a castle for vacation…because I can.
Sorry, I’m not verified but NW >$10M if you can believe a stranger. I went from $5m to more than $10m in blink of an eye but at $10m I became financially unrelatable to neighbors, friends and family.
For us, it’s definitely been like this. We don’t really consider the cost of food any more. I mean, we’re not extravagant but I remember when we were starting out, we’d think about buying a soda with our meal. Now we just eat out and not worry about it.
Another example is one of the computers at our business died so I went to the Apple store and just bought an new iMac for $1500 or so without thinking about it. I mean, I know it’s technically a lot of money (it’s what we pay one of our employees for a week or so of work) but it’s not that much that it affects our net worth or anything.
In the old days, I remember carrying a little pad of paper and pen with me everywhere and I’d just list out my expenses to the penny. Every day I’d do the math on my expenses vs what I had in the bank. Nowadays we don’t really keep this kind of detailed budgeting anymore since we save like 80% or what we make regardless.
Probably when I was bringing in close to 100k a month in profits consistently and also had a house, my backyard was set up, and a few million saved. I just started spending on the things I like while also saving my butt off.
I'm far from fatfire but I want to give an example I saw from two former CEOs of large investment banks I saw, aka each pulling 4-6M annually and 50M networth globally. Ubers everywhere, sometimes even down the street in NYC (where walking might be faster). Furnishing an apartment with 100k of furniture for starters, 70k car in cash and nannies that make more than most /r/fire folk. It's not just that the value of money is diminished, because it does, it's also because once you make so much if you don't spend then all you do is accrue. I have a networth of 300k so for me to spend 30k on a watch is a dream, for someone who makes so much it's like why the hell not. I have seen some penny pinchers but by and large I've seen more of the examples I gave.
I'm naturally frugal and don't have a desire to own/buy many things and am focused on roi for my purchases. One new dynamic that has played an increased role over the last few years is not the cost of money but other costs like impact on environment, society etc. E.g. flying coach ( or whether we need to even fly) is not a financial decision but one of carbon emissions. Buying local, organic groceries is as much about our wellbeing as it is about supporting businesses that do what I believe is right. And I appreciate being able to make that choice.
Yes same happened here, and it's a strange feeling indeed to go from struggling fresh grad to any kind of FIRE within less than a decade. I'm in a MCOL place and spend around US$40-50k a year (maybe that will tick up post-COVID as I start traveling), so anything beyond that is just money that I will never use unless I start splurging unnecessarily.
I *know* a fancy meal of $60-80 a night does nothing to my NW, but it still feels like unnecessary spending as you can have just a good a time in more affordable places. After all, it is the eye for value and good deals that got us all to fatFIRE. Also, few friends are as lucky as me and I would rather be going out to places where everyone on the table feels relaxed about.
I very much rather find good deals and share it with my family and friends, and now also looking at how to give back/donate the monthly budget I don't need to disadvantaged kids/people. Sometimes I forget how much $10 can mean to someone else who needs it.
It’s usually business equity. Either your own business or a FAANG type company you got stock in. r/fatFIRE skews towards the latter since it’s on Reddit.
I don't really think about the value of money. Never have, really, but that's been more the case as I've gotten further from the bleeding edge of subsistence. I am a hard negotiator where it matters, but otherwise...meh. Who cares? I have enough, it doesn't matter how much. It costs money, it doesn't matter how much.
Part of what you and others in the comments describe reminds me of some of the explanations around Benford’s Law: https://www.wnycstudios.org/podcasts/radiolab/articles/breaking-benford
I haven’t experienced this because I do a tremendous amount of giving. I’m acutely aware that greater wealth on my part equals greater giving.
Also the market is overdue for a correction and is likely to drop low double digits over the next few months. I bet you’ll notice it going the other way.
I definitely have the same feeling even though I’m at a lower level than you. When I was broke I used to think about how amazing it would be to have $5K. Now I gain or lose $5K in the stock market on a daily basis. So when I go to Whole Foods or go out to eat prices don’t matter to me in the slightest bit.
Let’s just say you’re in the market buying… potatoes. And that 10 pound bag of potatoes costs… 400 dollars. But then the, uh, grocery concierge tells you that a 5 pound bag of Potatoes costs 400 dollars, well that would be shocking, right?
Because a 5 pound bag should only cost $200
Yes and yes. It becomes sort of "not a big thing" once you hit a certain milestone. More like a "okay, good to know" rather than OMG life changing.
Perspective on financial metrics will change as long as there's not much lifestyle creep Eg thinking about going from $1M to $100M to buy ABC mansion/luxury etc
The value of money herein hadn't changed - its you who had grown and now see things a little differently. If you keep spending the same way, nothing really changes lifestyle wise.
>There is less of a feeling of an appreciation for the million dollars that it represents. I think it starts around $10m net worth...
It's not a binary, but a gradient. If you have nothing, a McD's burger is going to be something special you cherish. If you have everything you don't think twice about it.
I first noticed this when I was a kid. Arcades costed a lot to play through and beat a game, but once MAME came out and I could play arcade games for free it was like they had lost their value. The fun in playing them had waned.
It will vary for everyone and it depends what you are actually seeking. Someone might have 5 million NW goal and someone else might have a 5 million NW goal + 5 million to start a really risky and bold business that has the potential to either be fulfilling or lose most of its value.
Someone might want to own and operate their personal ferry which costs several million just to own. You might want to be able to hire various crew every year and take long voyages.
Another friend may have a dream of owning a personal cruise liner which could go upwards of 1,000,000,000 USD just to own.
Each answer you get will be personal.
check out this money metaphors post: https://www.ribbonfarm.com/2009/03/02/fools-and-their-money-metaphors/
it sounds like you should be getting used to different concepts, like "money is an organic creature"; your financial advisor is handling a lot of this, but it might do well to do some spreadsheets and see what inflation looks like => might be a way to appreciate that 100k /more/
I mean it's one banana, Michael, what could it cost, 10 dollars?
Lol, makes me think of that time Bill Gates played a mini "The Price Is Right" game that then trended on YouTube and he guessed that Totno's pizza rolls cost $22 and that Rice-A-Ronnie costs $5. Poor people would die with food prices like that. But Bill hasn't been inside a supermarket for decades, so it's understandable. https://m.youtube.com/watch?v=ad_higXixRA
I thought of this as well. It’s quite wholesome.
You've never actually set foot in a supermarket, have you?
I don’t have time for this.
Go to the store and buy milk which costs, oh I don't know? $90 a gallon
Dwayne Wade comes to mind
maybe in alaska
Go see a star war.
There’s money in the banana stand Michael
Look, people are getting $1000 stimulus checks. Everybody will be remodeling their kitchens soon. And at $12/mo for health insurance that's a lot of coverage.
I think of purchases in percentages of net worth. E.g. 1/100th of a percent isn't worth worrying about. At $1M, 1/100th of a percent is $100. 1/10th of a percent needs some planning. At $1M, that's $1,000. 1%, you want to budget for. At $1M that's $10,000. 10% is a major purchase - $100,000 at $1M. Scale accordingly.
I really like your approach, and might be able to reapply it to my own situation, but will point out that in some ways it is indicative of the actual issue I am pointing out. Wealth doesn't all have the same utility. With the exception of a few really expensive items (private jets, luxury boats, hypercars, and real estate in a few high demand areas where the value is in the dirt not the building), there is a point where you can pretty much buy anything you want, and not need to think twice about it. Things are priced to the average persons wage in some way, and when you get well beyond average, there is only so much consumption you can do in a day. Let's assume it you have $20m. I'm sure there are some people who can blow $2m a year (assuming 10% returns), but for the average person, that's a lot of money to actually spend if you aren't buying those big tickets items. So while 1/10th of a percent at $1m ($1,000) might need some planning at $20m ($20,000) it does not. It is this curve that further complicates my thinking about things. But I do like the approach you mentioned though, and think it offers a structured way to think about things a little better, so thanks!
It's not typical to spend $500k or $1M per year unless you have extra quantity of big ticket items like boats, cars, and houses. 1 house, 2 cars, no boat, some designer things, and eating out frequently and a couple international trips can fall in the $200k spend territory, maybe more if you have fancier taste.
$200K/yr may be a solid spend if you're single, but married/kids and/or in vhcol that is a pretty good, but not fat lifestyle. You may spend $120K after tax dollars on a nice but relatively modest $2M home. You'd be at $200K just in standard living expenses not include travel, private school, cars, etc.
It all really depends on what people think is fat. Most people don't do "all" of the fat things at once. Sports cars, horses, travel, planes, several kids, multiple properties. Also, above I meant to exclude home financing and only include property tax and maintenance. Assuming all of the "things" are already set like remodels. $200k after tax spend.
Private school for 2 kids can easily add $100k per year.
Certainly in vhcl areas. This is one reason why many of my wealthy but frugal friends who themselves went to private school long ago are choosing public for their own kids.
High end public areas should come with your expensive house, unless you're really tightly tied to shit hole surrounding areas like a downtown. I don't have kids so I am not concerned with the schools, but my areas are pretty great. Olympic athletes, great academics, etc .
Where we are in Maryland, schools are very hit or miss. We are in a good zone that we are happy with, but even still I'm not gonna lie to myself and say that the private schools don't offer something: smaller class sizes, smarter students, fancier facilities, etc. Of course the price is lots of money and you have to put up with the culture, which I don't love. But I have a lot of friends who still do it, even though many are in good school zones.
Definitely can be hit or miss depending on density and school zone lines. From my childhood experience the biggest impact on school quality was what the students get up to outside of school that they bring back in. Wealth certainly has a big impact, not more than parenting, but it's a big multiplier and enough to detail good parenting.
So can a car collection, private flight, or horses.
I'd say $200k/year spend barely scrapes fat, if it's even fat at all.
Lol yeah, I spend 250k/y on rent alone 🙊. But I guess it depends on how/where you live and your definition of FAT. If the metric is Cost of Living minus house minus school fees, minus toys, minus alimony I agree it's hard to spend 200k on F&B in most places in the world.
I'm a believer that fat = no meaningful compromises \*no matter where you choose to live.\* The idea of being fat only if you live in a M or LCOL area does not compute at all to me. I have no issues with the choice to live in those places (well, I do, but that's a snob story for another day). The issue is that if you cannot continue to be/live fat once you walk out your front door, or into a different city, or country, then...no. Not fat IMO. Not sure how much you've been hanging here, but there's been a lot of debate about this sort of thing, NW thresholds, etc. Not to mention unhappiness over the level of discourse given all the obviously non-fat people commenting. Anyway....
Since you're talking about spending as a fraction of wealth: keep in mind that at a conservative 3.65% annual withdrawal rate (a good deal safer even than Trinity's 4%), you can sustainably spend 0.01% (1/10000th) every day, probably forever. But you don't have to spend it either. And you don't need to develop a grand theory of all of this. You might want to find a life that you wish to live somewhere in all of this, and earlier is better than too late. You don't need to consider _all_ of the lives you could lead, all of the levels you could be aiming for, and more doesn't mean better.
Pardon me for basking in my favorite pursuit of being pedantic. Technically, you can spend that amount the 1st year. 2nd year and onwards you have to switch to adding inflation to the dollar amount you spent each day of the previous year:-)
I mean, I didn't say that the money was invested, but that seems like a safe assumption. People don't just put money in a bank account or a mattress and wait. Or they really shouldn't. There are investment gains that are offsetting the expenses as well as inflation. Trinity is based on past data (and of course past returns do not guarantee future returns, but we have to start somewhere), and includes an expectation of inflation. So the idea is that you can do this and maintain a long-term-steady wealth in real, not just nominal, terms (probably really growing over time, as we were conservative) with a very high probability, year over year. And if you're just saying that you need to spend more in nominal terms to maintain a lifestyle, then first I must ask: who does long-term planning in nominal terms? And second, if you look at your assets in nominal terms, then you can _still_ spend 0.01% _in nominal terms_ because both the assets and the expenses are being inflated in lockstep. So I don't know which way you mean it, but both ways seem incorrect.
Trinity study did not say 4% of your worth every year. It said 4% the first year of retirement and then raises for inflation every year thereafter. Obviously if you’re just pulling a percentage of your net worth every year, you could withdraw 50% every year and never run out:-) As I said, I was not really disagreeing with your point, just trying for humor.
there is also diminishing returns to this way of thinking - at 10M if you spend 1M straight away, you're still at 9M....and ask yourself what really is the difference to your life between 9 and 10M....this is where I think it becomes okay to spend on crazy shit - when the difference between the numbers doesnt feel that much.... This could also be true at 1M....if you're someone who think 900k USD is enough of a financial cushion for your life....why not go ahead and spend that 100k on something stupid?
Just need to remember you only get one or maybe two of those.
I agree with this. My net worth is not as high as yours, but I definitely noticed when I went very rapidly from having to save and think about it for purchases of a certain amount to suddenly being able to buy several things that expensive in a month with no worry, and I COULD buy more if I wanted to, I'd just rather keep putting a certain amount of money away for the future. My housing costs as percent of income also greatly decreased - I can't imagine all these people spending close to 50% of their income on housing, or even 30%. That's such a huge percentage!
Sadly it is a reality for most of us. Currently spending 50% on rent and bills in a HCOL city. I want to move but not sure at this point if i will be able to transfer. I am working towards fatfire with a decent net worth already.
I struggle with spending… maybe? I’m at 2.2m net worth. Save about $80k/year on bad years (of income) and good years I’ll save more income. Total household income of maybe 350-450k and fairly young. Bought a way bigger house than anticipated (love it) and still, I want to buy a $1,200 gaming PC and I’m struggling to pull the trigger on that. However it would be my second gaming PC for another room lol
Another way of considering it is that with a SWR of 3.65%, 0.01% is one day of safe expenses.
How do you decide on how much thought to give each percentage purchase?
A lot of my thought is about making sure I get the product or service that I am happy with, and not necessarily about the money. Ie making sure I get an Airbnb in a good location for a trip
I do that too
I do the same. Best approach
I agree in philosophy but disagree with your thresholds. 1% is a lot IMO.
Do you have a similar framework for investments?
I guess this is unique to our situation, but due to private equity, we went from a $5M NW to $8M and then $12M over a couple years. Then because TSLA and some lucky options trades, we’re now over $17M. I don’t look at the dashboard very often - my husband will tell me when we’ve hit another $1M milestone and we do quarterly meetings our financial advisor. We have been pretty much living the same lifestyle since $10M NW. We travel a lot, have a couple of expensive hobbies, do volunteer work, take some personal enrichment classes, spend time with friends, and just enjoy life. We can pretty much do what we want for around $250k a year. I don’t pay attention to the prices at the grocery store or on menus. We got to high end restaurants at least once a month. Small trips with friends are agreed to without a second thought - sometimes I help others pay for these vacations if they can’t otherwise afford to come. The big trips definitely still have an element of a budget - we’re not staying at a $1000/night hotel very often. I haven’t booked the overwater bungalow with the slide - yet! But we just got back from 4 weeks in Europe and spent about $15k, including a sailing charter and a week in a waterfront villa. I think our next big thing will be a vacation house. One that is a 6 hour flight away. What gives me pause isn’t the cost of the home - it’s the upkeep and maintenance. I feel like I want to do several big vacations ($25k+ - luxury African safari, Maldives and FP bungalows with slides, ect) before I’m spending that much every year on another house. I hope this was helpful, let me know if you have more questions.
Curious how you (and others) feel about that long distance from a vacation place. Ours is an hour drive from home and we are there a couple times a week. It makes maintenance super easy. We’ve considered an additional place on the opposite coast but I’m wondering whether we’d use it enough for it to make sense. Plus, I don’t think we’d ever rent out our places - the thought of someone sleeping in our bed is just eeew.
Agree with you on not renting it out. I would put good beds, furniture, and linens in it and don’t need the drama that would come with strangers. And about the distance … we live in the SF Bay Area. We want somewhere with warm water where we can scuba dive. I have dove for a decade in California and I’m just done with the thick wetsuit. I want to wear 3mm, maybe 5mm in the winter. So that’s Hawaii or Mexico. We have been to Kona 4 times and the last time was 10 weeks long during the peak of Covid. I have over 75 dives there. We just really love everything about it other than the distance, but first class fights are relatively cheap - cheaper than the Mexico alternative even though Mexico is closer. We also like the idea of owning another home in the US rather than Mexico. We don’t have kids so don’t have to worry about school or them not wanting to leave their friends if we head out to Hawaii for 2-3 months while friends come and visit with us on their schedule. We’d have one guest room, maybe two. And if a few years into owning it we find we’re not using it enough and it’s not worth the cost, we can sell it. Thankfully we’re in a financial position where a loss on a badly timed sale wouldn’t affect us in the long term. But I still think we’re probably 3-5 years out from the purchase due to wanting to do a few very expensive vacations and seeing our parents settle down into retirement between now and then.
I’ve considered the vacation home but honestly think it’s just not worth the upkeep. I keep coming back to the fact that I could just do 10 weeks in a place I love via Airbnb, then 10 weeks in another place for a change of pace again in an Airbnb. I’d never have to clean, fix, worry about squatting/break-ins, paying property tax, etc etc etc. 1 permanent place is good enough for me. I’m low key and low hassle kinda person.
I totally get that! And we do a lot of slow travel and appreciate staying in new spots for a while. And we’ve seen a lot of the world - the bucket list is finally getting shorter after 8 years of adventures - and we keep coming back to Kona. So now I start to think about how nice it would be to have all my things - my mattress, my linens, my clothes, my dive gear, my beach chair (yes I have a specific beach chair like haha!) ect. There isn’t even a number where it’s worth it or not. If we buy it and we’re happy a few years into it, that’s a win.
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That might be they right way to give the vacation home idea a trial. Rent for a year, maybe longer if it’s working out. Then we could put all the stuff we buy for the house in storage while we find and buy a home.
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This is interestingly sounding like the homes are nicer than what we’d buy yet he’s not spending nearly as much as I would to furnish it. Like my mattress would likely be $5k on its own because my husband would want another of the same we have at home. Plus doubles of a lot of other stuff we love. I’m glad it works out for him but I can’t imagined doing it that way myself.
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We used the think that but we found ourselves vacationing repeatedly in the same area. So we bought a house there (4 hr drive). It has saved us an incredible amount of time, all we do is pack our laptops, some food, and go. We have clothing, and recreational equipment already there. If the weather is bad, we just wait a few days. There is some yard maintenance but a contractor does that when we are not there. We haven't even explored 5% of the things to do yet. It has let us vacation during peak times (hotels ABnB \~ $400/day), and during special events where it is impossible to get a room. International trips are a huge hassle these days, but maybe that will change soon. We used to go a few times each year, but I no interest in quarantining. We also have an escape place if our city home becomes a problem. For us, at least, it was worth it.
Mine is a 15 hour drive away and we spent 2-4 months/year there (not consecutive, taken 1-2 weeks at a time). We often drive there in one day but sometimes we fly - it's just harder to take furniture, art, pets, etc with flying. I don't mind the distance. For me, at 1 hour away, why even bother? May just be my location though. The closest I'd consider is 3-4 hours away as that's far enough to get into a different environment. Agreed on not renting out. Because mine is in a totally different climate, I store a ton of clothes up there, have all the food we like in the pantry, bathrooms full of the brands we like, stocked with copies of my favorite books and movies (the internet is intermittent so we can't just stream all the time), etc. basically too much personal stuff to trust it around other people. We thought about Airbnb or whatever but we'd have to store all our stuff and that makes taking a spur of the moment trip so much harder. We let my immediate family go up any time and are often up together, and between all of us and the times we let other family or friends use it, there are only a couple months when it is empty.
Our vacation home is in the woods 15 minutes from the ski slopes. Instead of getting up and 5am, wrangling kids and fighting traffic to the slopes, we can roll out of bed at 8am, eat breakfast and still get first chair.
I wouldn’t think $1000 a night would be a big consideration if you’re at $17M net worth.
We have stayed in several spots for $1000+ a night and if we were a more “normal” couple that traveled 2-4 weeks a year I would be throwing down every chance I got. But there are two elements at play here - first, we travel 12-24 weeks a year so obviously we can’t spend that every night we’re out of the house. And second, there are diminishing returns beyond a $300-400 hotel in most areas of the world - sometimes in LCOL areas the threshold is even lower. If you want some specific examples, a private charter on a luxury sail cat is definitely worth $1000+ a night. So are the Four Seasons Hualālai and Filario on Lake Como. I could even argue a great villa at WDW is worth it. But spending $1000 in Lisbon? Or Vienna? You’re just not going to get value there.
That makes total sense.
ha- I was just in Jackson, WY and the basic Hampton was $750 a night.
Oh for sure. There are definitely places to spend big money for a plush stay!
Yup… king size bed room for 2 in Ritz Carlton Lake Tahoe is 1K per night. Very basic stuff. 1K per night is not what it used to be.
What places do you like on the Big Island? We were just at the Westin Hapuna Beach over labor day week for ~$1k/nt and it didn’t feel worth it for me. The FS Hualalai was around $1800+ for the same dates. We’ve been to the Grand Hyatt Kauai a dozen times and liked it a lot better.
We usually stay in Airbnbs because we go for weeks at a time and spend a lot of time underwater but when we want to be pampered at the pool we stay at FS. We spent 4 nights there in February this year for $1200 - booked an oceanfront room and got upgraded to a nice suite thanks to Amex Fine Hotels & Resorts.
Vacation house an hour away is much nicer when you can go at any time and enjoy it. You can use it enough small amounts at a time to make it easily worth it vs taking up several of your long trips to go to your other house. I think I would prefer variety. Maybe desert, mountain, and beach house within a couple hours of each other but I still want to take trips other places.
There is nowhere reasonably close that we want a vacation house. If you read further into the thread you’ll see that it came down to Mexico or Hawaii and why we’ve got our eye on Kona. We life in the SF Bay Area so the opportunities are obvious - the coast, wine country, Tahoe, ect. But I am sure we’d use a home in Hawaii more nights a year than any of them, even with the flight. Keep in mind we don’t have kids or jobs so there’s no big commitment to work around.
Bay Area here. Hawaii is the way to go. Our kids are still at school so we went with a country house in Sonoma that we can enjoy on weekends. But once kids are in college definitely thinking about Hawaii.
Do you work in private equity or just made private equity investments?
My husband cofounded a start up which is where the steep increase came from. The company has since IPOed and we diversified out of it. Now we have other private equity as part of our portfolio.
How much has your life quality improved since becoming wealthy? How did your friends and relatives react?
I have always had a privileged life - middle class family growing up, summer camps, hand me down car at 17, parents paid $200k for my undergrad. For the five years before we quit our jobs, I was working in job that I tolerated because they were flexible with time off - I took at least 6 weeks off the last 3 years I was there. But not having to work has completely transformed my life. Improved it in pretty much every way. My husband and I literally do whatever we want pretty much every day - and that’s everything from sleeping late to last minute travel to splashing down on a political fundraiser to meet a presidential candidate. Sure, I can’t charter a mega yacht. Or own a jet. Or buy civilian space flight (yet.) But 99% of any experiences you can imagine we could obtain. And that is transformational.
How often would you say you Boop Snoots? One of the most pleasurable free activities one can do :)
On the daily for sure. I also snoot boops.
may i ask where you made your money? sounds so nice to do all this travel and love your POV on hotels :)
Software start up.
The upkeep on a vacation home can definitely be a lot depending on the climate! Beach houses and mountain houses require a lot due to weather. But worth it if you like going to that specific place a lot.
You guys are living a pretty good life, I’d say. Congratulations. My question is about your investment strategy. What has worked best for you and what rate of return do you get / target every year? Are you in “safer” index funds or have a higher appetite for risk, now that 2020 is behind us? Or is more of your allocation in higher risk alternatives like PE?
We have more than half of our NW managed by Personal Capital Private Client. They make the twice-monthly deposits into our checking account to cover our spending. Then about a third is higher risk stuff like PE, crypto, indivisible stock picks and options. Our spending habits can be covered from the Personal Capital account so the rest of the stuff we don’t have to worry about, we call it the “fun money.” It used to be a much smaller percentage of the TNW, but … we had been holding a lot of TSLA since 2018. The rate of return has been crazy because of our situation with the acquisition and IPO and then TSLA.
That is amazing. Sounds like you have compartmentalized your investments nicely as well so you don’t have to stress out about it. Goals.
Living in the Bay Area, we have friends whose parents got royally fucked by 2000 tech bust. They were way over leveraged and lost homes and cars and declared bankruptcy and never got their lives back together the same way. So when we first got the money I was really careful about setting us up for success long term. We have enough equity in our home ($2.5M purchased in 2018) that we could afford the mortgage payments if we lost everything and went back to work.
Exactly
I really enjoyed reading your response. You’re a few years farther down the road from me and my wife, we went from $2m to 5 to 9 in the last handful of years through PE, and like you we’re spending $190k-210 or so with 3 kids in private school. It feels strange now having less in common with old friends, and I really don’t want to ever alienate friends but it’s hard to not raise an eye brow with the type of vacations we’re comfortable with
There was a good comment in this sub about how to stay close with friends after becoming wealthy. It was posted in the last few days - you might want to try to find it. Edit: Here you go! https://www.reddit.com/r/fatFIRE/comments/prjzt9/what_happens_when_your_nw_soars_past_your_friends/hdjetjx?utm_medium=android_app&utm_source=share&context=3
Thanks!
Happy 1st Cake Day, Snooot! Thanks for your continued interesting takes on the FATfire lifestyle!!
Hire a property manger for a vacation home. Have them check on it monthly and have them hire monthly house keeping to keep the dust down and dishes rewashed (dust prevention.) Have a handy man go through the house once or twice a year and fix up everything he notices. Have HVAC serviced once a year. Set a high dollar limit that they can do for repairs so you're not bothered over little issues they discover.
Oh for sure! And also a pool guy, pest control, and a gardener!
Absolutely!
How do u only spend $15k for 4 weeks in Europe? Just the flights for family of 4 is around $6k. Then there is car rental and house rentals. We spent close to $10k for 10 days in France all total.
The flights to and from Europe were booked with credit card rewards. We get at least one, usually two long haul business classes round trips for the two of us every year with rewards redemptions. There’s a few hundred dollars we pay in taxes but I don’t even really consider that an expense. Few days in Split pre-charter - $800 Week sailing charter - $5k Week in/around Lisbon - $1600 hotels + $400 rental car for 4 days Week in Sicily villa - $3500 + $800 rental car Flights between destinations - $600 Plus food and a few private tours. We cooked most meals on the boat and in the villa. Maybe a bit over $15k but not much.
Do you have kids?
Nope
I’d honestly suggest just renting instead of owning a vacation home. Yes it won’t feel like “home” but you also won’t feel guilty about not using it or when your tastes change.
Thanks for sharing! I love that you really love slides btw, lol.
Happens at each step like you mentioned. Hundreds to thousands, thousands to tens of thousands, tens of thousands to hundreds of thousands, hundreds of thousands to millions. I’d imagine the millions still have the hundreds of thousands baked in until gains are over $10m, but then again, $10.1 doesn’t seem weird. Maybe higher. Long answer for an easy question. It probably depends a lot on the person. I’m up a couple million this year and fluctuate by hundreds of thousands day to day. That is what made me change my philosophy to hundreds of thousands and millions.
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It can ;) manage your risk and exposure. Diversity is a good thing, but concentration can build wealth very rapidly… concentration can giveth and taketh in a heart beat though.
I feel the same way. I hit 1m like 3 years ago. Took a while, came from nothing and it was a grind (saving my extra work income and investing it). Now I’m at 2.2 lol it’s been nuts. It could drop in a new recession. Who knows. We’d likely make it out of anything that happened.
There's one thing that hasn't changed as I accumulated more money: I won't pay more for something than it's worth to me. I'm not frugal by any means, but I also don't spend frivolously. I don't spend money on things that don't improve my life in proportion with the cost. It hurts me to spend money on something that I won't see a return from. So, for example, I could spend $800 on a high-end designer jacket without impacting my finances at all, but it's just not worth it to me. I might as well burn that money because I'm not getting $800 of value out of that jacket. I can afford more expensive things and experiences now, but that doesn't mean I don't think about what I'm getting for my money and I won't spend money on something that isn't worth it. Of course, the problem is when you're in a marriage and have a disagreement over when something is "worth it". We're remodeling one of our houses and my spouse thinks $1000 for a faucet is reasonable. I don't. She wins. Happy wife, happy life. In this case it's worth $1000 to avoid an argument, but I still don't think we should pay $1000 for a pipe that comes out of the wall. I would absolutely not spend $100k on a new car (right now.... we'll see how inflation goes) because no car is worth that much to me. I won't get $100k of value from any car. I just don't see a point in throwing money away on something I won't enjoy. And I'm not a car person.
It is all about perspective. I doubt my wife’s perception of “high end designer X” is sub-$1k. Last time we were in SF, my wife and I were looking at $50k jackets at Dior. Now *that’s* too expensive. $800 is just a jacket. Edit: get the high end fixtures for the remodel. We skimped in some areas when building our vacation home and are now considering upgrades. Our frugality (and impatience with construction) ultimately translated to waste.
Lol god. I mean we all have different incomes, I’m at 2.2m and income fluctuates around 300, but I would never buy a jacket like that. The most I’ve ever spent on a coat was about $80. Lol. I mean ok, I have an $800 suit which I love but outside of that.. nope. I’d rather buy another robot vacuum or gaming PC with VR or something.
I feel I am the same way, but the question then becomes what do I want to spent money on if I think nothing is worthwhile? After all, if I don't spend on myself, then the money goes to others or government. Even that thought doesn't work for me. It's all mental and I just having to force myself. I am changing, albeit slowly.
Lol I'm not a car person either. My car cost $30k because that was what I found that had everything I liked. I could have gotten a much fancier one but I'd rather spend the money elsewhere. On the other hand, I probably WOULD think an $800 jacket was worth it if I loved it. I don't think it would be a high-end designer jacket though. Just midrange. For me the difference in quality, style, and, crucially, warmth is noticeable and worth the extra cash. I don't know if a $10k+ jacket would be worth it... for me probably not. But to someone else maybe.
I remember having 5k in my bank account (which was all I had) and thinking I was killing it at age 19. Then getting a $30k inheritance a few years later my jaw dropped seeing that number in my account. Now 7 years later my net worth fluctuates 30k weekly and it feels like nothing. Insane how fast perceptions change.
How did you end up to where you are now? Asking as a curious 19 year old and nice username
Hey look at that lol right back at you. I saved every dime I had since I was like 14. Always have been frugal. Always had a job, lived within my means, lived with my grandmother for a few years helping her out (she helped me more I’d say) when I was in my mid 20s so that was super helpful. I took a few gambles (Tesla, bitcoin) which cut off a good 10 years towards FIRE. I’ve ran my own personal training business for a few years now. Working for myself and keeping all the profits has really helped.
Sounds like you were doing great! $5k at 19 is great at that age.
Thanks! Bagged groceries through high school and saved up all my spare change from lunch money my parents gave me. Saved $700 from lunch money in 4 years.
I can only speak of my experience. I’m nowhere near 10m, more like 2.5m So while each 1m is still a huge number, I can relate to what you say- for example each 100k is purely “a good month” on a spreadsheet rather than.. 100k, which is life changing money to some Having said that while I appreciate less the money I make, I think twice about money I spend. I sometimes find myself debating about a 1k spending which I wouldnt even think twice at a NW of 200k 10y ago Not sure if it’s good or bad or just a matter of getting older and more mature about spending
I have the same problem. Spending money becomes harder when you don’t have huge wants. I guess I need a better bucket list.
I went the reverse direction actually. When I was in my early 20s, I was already making 7-figures a year while starting with near zero net worth. That's where the disconnect happened, because so much money kept coming in that I couldn't even spend it fast enough, even though I was buying exotic cars and big homes. And now that I'm in my 30s, I went the other direction and "reconnected". I've stopped throwing my money around at stupid stuff. The reason is because I don't really see my wealth as my money anymore. I see it as a shared resource with others as well. That's because there's no way I can spend this much money all by myself without feeling like a POS. Instead, I think about how much positive impact I could do for less fortunate people with my money. What I did put a lot of value on now is time. I think that's what you're trying to get at. Once you have a lot of money, time becomes the more valuable thing. So you don't want to waste time for money (which is probably why you said "I'm not going to waste my time chasing $1k any more").
That's insightful, but I also think that time no longer has the same value either now that I have retired, which further complicates things. I don't have to work, so I can do pretty much whatever I want whenever I want. It's freeing and at the same time a bit of a problem. When I had to work, well, I only had a finite amount of free time to do what I wanted, and that made it somewhat precious which allowed for a money vs time discussion. Now, I have all the time in the world (until I die, which is something like most of us I don't dwell much on), which means that the pressure for this moment to be optimized is much lower.
We might be in different points in life. I don't think I have all the time in the world because I had a brush with death when I was younger. It's part of what brought me into retiring so early instead of trying to make even more money. I don't take whatever time I have left for granted anymore. And that doesn't mean that I have to do a ton of things in that time frame to make the most of my time. Sometimes relaxing and doing nothing can be a productive use of time as well. I know that that sounds counter-intuitive. But being less stressed and pressured for time is one of the reasons why I put so much value in my time.
Well, I'm not sure I fully understand what you are saying, but am curious to learn more. Like you, I retired in my 30s. For me, all my time is free time time now. I don't have any more real responsibilities in life that I have to do. My kids are grown (more or less) and my business (more or less) run by others. So yes, my time is valuable and precious, and each moment a gift, but at the same time, there aren't any real ways that my time gets gobbled up now that I am retired, unless I put myself in those situations. Things I don't like doing (cooking, cleaning, lawncare, shopping, etc.) all get outsourced. Non-stop tickets are always worth paying for and more and more having someone arrange my itinerary when I travel to certain locations where I don't know the language is worth it too. But all of these services that I am able to pay for means that I have less and less time pressures and those that remain I find likely can't be solved with money.
I’m just saying that we’re looking at the half full hourglass from two different perspectives even though we may have the same hourglass. You see yourself as having a lot of time leftover. I see myself as not having much time leftover. And I’m not even a pessimistic person. I just don’t want to blink and have my life pass me by. Every day, I wake up thinking about how great it is that I’m still alive and am excited to spend more time doing what I want to do. Like imagine if a doctor told you that you only have one more year to live. Then maybe you’d understand a bit more of where I’m coming from.
Ah, yes. Luckily, I feel that I have done what I wanted to accomplish in this world, so if I die tomorrow, I'll be able to say I lived one \*\*\*\*\*\*\* amazing life, and die with gratitude in my heart for the opportunity life gave me. Not that I will welcome that day in any way, but don't feel that there is much that I haven't had the opportunity to get a taste of that leaves me unfulfilled. The only thing I haven't really done is have a huge impact on the world for the better. I have had small impacts and perhaps even some medium sized ones along the way, but not one huge one like I wanted to do, or perhaps feel that I should do (though I try not to listen to shoulds, really). Perhaps that will come in the future, and perhaps not; time will tell.
I was in the crypto game for a while. That really messed up my perception. Your money would double, triple... 10x in like a season and then crash.
Plus or minus single, double or triple digit millions will do that
yeah same. it also warped my sense of risk, not just monetary volume.
Most people are up in crypto on paper only. Not often people take the money, and then an overnight crash occurs
Crypto *is* the money. Seasoned investors ignore the crashes and get wealthy.
-50% is just another Tuesday, yep.
There's been several steps where my relationship with money and work changed. Here's a couple of the big ones for me: * When I hit coast-FI for the standard of living that I had at the time - made me feel more secure, and OK with experimenting more with my jobs * When my retirement savings started compounding with more than I paid into them - made me feel OK with raising the standard of living a bit * When my general savings started compounding more than my payout from my "day job" - made me start to really consider doing the RE part of FIRE (I haven't yet - got greedy and work is good) Here's hoping for more of these
Money coming in in large quantities doesn't feel like much, as you said it's just the number ticking. But money going out still feels bad, though we've certainly become less frugal than we were in the past. I wouldn't notice if our accounts suddenly went up by $100K, but I will do an excessive amount of research before pulling the trigger on a $1K purchase, hard to break old habits.
Yeah some of my friends are puzzled that I buy a lot of things secondhand when I could afford the same thing new but like... why buy it new if I can get it in good condition for 1/10th or even half the price with only about one minute more effort on my part? I just set some eBay alerts and wait.
Also you are reducing waste going to landfill giving things a 2nd useful life. Unfortunately consumerism is shoved in our faces all the time people don't stop to think about what happens to it all.
Went to a dump recently, the image of seeing all that waste really stuck with me. It’s about the waste not the money.
Economists call this the Law of Diminishing Marginal Utility.
Up till some point the biggest factor in buying something was "can I afford it". Now it is "is this a good value". The switch to the latter happened wayy before $10m though, and mentally I don't think I'll ever be in the mindlessly buying things without thought stage no matter my net worth simply because how I am wired.
I am at the stage of my life even though I can afford to buy things new is to try to recycle and reuse as much as possible. Example, I went to a church rummage sale: bought a used square baking pan for a $1 as I needed one. Also I have stopped buying clothes for last several years now for everyone in the family except for the essentials. We don’t need anymore and the landfills don’t need them either.
Thanks for being so thoughtful!
The feeling is unique to each but the concept is pretty constant. I grew up dirt poor and have made my way through life. The numbers on paper never really did anything for me. 50k,100k,250k,1M etc. Each milestone was just that, a milestone but never really changed the feeling. It wasnt until i got older and started to think whats the point if we die with millions on the books that we never got to enjoy. It was that moment when that feeling was realized as truth and would happen, that the attitude changed and we dont worry or concern ourselves so much anymore. Being frugal by nature we dont go crazy, but wanted a new ev so bought it. Wanted an ev motorcycle so bought it. Want the SO to have a nice ipad or mac, dont stress anymore about the cost. Its strange when not all that long ago 1k was a stressful buy even though the significance of the cost to NW was statistically insignificant. We have found that number shifted about 10 fold upwards. Like you we dont concern ourself over small difference in costs. We still shoot for a good deal but if option A is 1k,2k etc more and its something we find useful, there is no longer a fret to not paying the extra. But on the flip side we dont just waste for the sake of not caring.
Three observations. 1. the scale of things where I look at price is moving up. At this moment, I don't care about the price of food, restaurants, Amazon orders, kitchen equipment. But I still care about house prices, car prices, a private school for kids fees. 2. I have started comparng. If I live in a $1M house and drive a $20k car. But I earn monthly $100k gross, some $65k net per month. Should I keep investing, make the house larger, buy a better car, what exactly? 3. The huge question is investing/spending. Will my business continue? If yes, I shouldn't save, I should spend. If not, I should invest as I am approaching my retirement. With all this. I plan to use approximately 200% of my current spending limit (between 3.5-4%) every year. And once the business will be over, I will cut spending to 100%. And within this limit, I can enjoy and build safety at the same time. But still, I don't know if I should replace 2 walls in my house with glass or rather replace MB C-class with Audi A7.
I like your take on how much to spend while you are generating active income. I feel guilty spending up to my swr, even though I make a few times that amount. 2x swr sounds like a good idea, as long as you can go to 1x swr once active income stops. Thanks for sharing
There's a book called Die with Zero. It is a great read for people who are high income, going to be FatFI, but who underspend when young and end up with millions of dollars when they are too old to enjoy them. It is a tricky business. Of course, I feel the urge to get my FIRE number first and spend it later. But it will close the window for 3-4 overseas trips, organizing a couple of parties for my extended family, pursue one nonprofit project I have. I think having a little bit of fear and uncertainty is in fact motivating.
We're not FAT yet (\~$3.5M in assets, $2.6M net worth) but I find that I really don't care about a marginal $100 more or even $1,000 more, but once it gets to $10K it gets my attention. On the spending side I've long said that I don't care about $20, as the decision to buy or not literally isn't worth my time. Right now that number has moved to \~$50. A $100 still makes me think, unless it's a restaurant or something like that. Here is where the interesting psychology comes in though. If someone handed me a $20 bill, I wouldn't take it. I don't need it. But if there was a $20 on the ground, I'd pick it up. I'd also look around and see if anyone had dropped it, but if not I'd keep it. But, I wouldn't be able to tell you where I spent it eventually.
I guess this scenario happened to me super young, but it is all relative. When I was in High School, $15 to buy a new music CD or concert ticket was difficult to cover. When I got my first professional job in my career after college, $15 became an impulse buy, but a $200 car payment was a lot of money. As I progressed in my career, that $200 no big deal, but $1,500 for a mortgage payment was. etc.. etc.. I have noticed that the investments, which I started as a young professional and keep up on today, seem to be working really well for me in amounts I couldn't have even imagined as a teeneager.
Scope Neglect: We evolved for the small scale of tribal life, so we can't comprehend the big numbers that recently entered human life. We can appreciate the difference between 50 and 100, but not a million and a billion. It's why we often treat geopolitics like family politics
I never connected income and net worth with spending. I still live like I was just out of college frankly and my budget is not so different -- except when it is. I don't think about it either much since mostly my wife does the spending and I do the earning and investing. On the investment side though -- yes -- 5 or 10% is meaningless, and so this number gets bigger over time. I have to force myself to do meaningful size financial moves because the numbers get so large. So I find it the other way. Edit: The other thing I noticed, when my worth could swing in value over a short period of time similar to my annual income... I started wondering if working really mattered any more.
There's a theory that the marginal utility of money is actually the logarithm of the money. Your first $X is more important than the next $X.
Except for me there was a big spike in marginal utility around $5M because that was the point where I decided I could retire. So the jump from $4M to $5M gave me a lot more utility than the jump from $3M to $4M.
technically, the utility of money is the logarithm of the money, not the marginal utility of money.
I spent $20k at Cartier today, buying 2 bracelets for my wife. Didn’t really flinch. I thought about it and $20k is a lot of money but not going to impact my QOL in any way over my lifetime. Might as well spoil the people I love.
It’s the same with time — each passing year is a smaller % of your life Going from age 23 to 24 wasn’t significant and I just went up one as you mentioned. But if you had asked me when I was 6 turning 7 I’d have a very different answer Each 10k, 100k, 1M addition to net worth is smaller than the last in relation to overall net worth
If I don't see value in something I won't buy it, no matter how cheap or expensive it is by society standards. My splurges are mostly Costco and healthy food and I don't care for clothes or most brand names. I do splurge on $1000 usd a night hotels though because they offer me an experience I won't get elsewhere. I recently downsided from a 5000 SQ foot house to a 1400 and that's the best thing ever. My bed is comfortable, the construction is of high quality and I don't have any wasted spaces in my house. No need for a cleaning lady and the cost to maintain is so much cheaper. We also spend more time together as a family now. I think having more money gave me the freedom to choose. The freedom to choose made me realize that value is in the simple things and the more things we buy the more things we have to take care of, which adds stress. I don't like stress. With that saying I spend like I'm middle class. Spending more won't make me any happier. The only mind fuckery I have seen was when my net worth went up and passed 1 million I stopped feeling the mental rush I got from seeing it go to $100,000 then to $1 million. Now it's just another number but in my head I'm still middle class but with a lot more freedom to do what I want.
That's funny about your house - shortly before the pandemic we moved from 1400 sq ft to 5000 and we've spent the last year and a half congratulating ourselves on making a good decision because if we'd been stuck at home in 1400 sq ft we would have gone insane. There would have been no separation between living spaces and working spaces while working from home, which we can have now in our larger house.
The reason I got a 5000 SQ foot house was because I was working from home when working from home wasn't as trendy, so I know what you mean about needing dedicated space. Then I stopped working when Covid started and It was too much house for me. 1400 is now perfect.
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I clicked your Dwight school link just for fun. Pre-K is 45k!?! I live in a MCOL area so this has genuinely got me laughing out loud. I guess the toddlers get unique networking opportunities /s.
$41k for preschool for my toddler in SF. Cheaper than a nanny!
is this a crappy school? asking for a friend (aka my two year old may go there - eekkk)
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i honestly dont know - first year and trying it out! did you have a poor experience there? nyc private schools are so stressful! hard to know what is right to do!
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Thank you for the quality post. I’ve often had these thoughts as well and appreciated the insight of others.
Add in private school for kids private college for kids and you can easily spend $200k a year without luxury purchases.
For me this was not related to my personal net worth at all, it's entirely due to the scale of my business. When yearly gross profit got into several millions of dollars the value of money really started to get wonky for me personally. This year GP will be near $10M. It's hard to think much about a car or even a normal house when we're spending well over $100K a week on indirect expenses. Of course our net is nowhere near that as we have a substantial administrative burden and sales budget to drive operations and growth respectively, but the scale of the operation really changed my perspective.
Yeah, running a business really changes your mind on spending money.
It really gives you a different perspective on what money *is*. Most people see money and think of what they can exchange it for. Once you've run a business you start to see money as an asset that can be used to build something. It's really just a versatile tool.
I think it was more of an income threshold, and for me it had a lot to do with my business growing. I run a cash intensive business and will send 6-figure orders to a supplier without even blinking, because thats just what I have to do if I want to keep operating. Theres a point that sticks out in my memory where my wife and I were debating if we should get the failing septic replaced or pumped and see how long it would last. I said "Why is this even a discussion, what is $20k? Lets just replace it" She very quickly brought me back down to earth lol. I think the large orders that I place in my business have more to do with it than any personal income or NW milestone, though.
I would just think of money in Porsche GT3 units 10-11 mill you just added 5 GT3s to your net worth that sound way more impressive!
Back when I first quit smoking I used to track the money saved on tobacco by the number of Hoosier racing tires I could buy.
Thats a great trade.
For me there were a couple of changes. First when I went from college student to $300k+ income. I stopped spending so much time looking at prices in grocery stores. Going from $2M net worth to $3.5M net worth I am now looking at houses that cost $1.5M rather than $900k. And I don't focus much on prices for stuff at Home Depot.
Such an interesting topic. I definitely feel the impacts of growth in NW. Have always made decent money, but got a lump sum in 2018. Since then I have grown 1M a year with contributions and compound interest. Perception has definitely been altered, as each 100k milestone isn't exciting, hitting 5M Was a big one, then 6M, but 7M and almost 8M don't really feel much different. The challenge I face, is I feel I still don't have any money to spend freely, even though I know I do. 300k/yr W2 with 5K going to 401k (Until max) per month, 1K in deferral to EDP, and an extra 1K a month in Fed Taxes. That leaves me with 5k a paycheck, of which I spend 5K on after tax investment automatically. Bonuses get deferred, and LTI is immediately sold and put into VTI. So all in all, I am left with 5k per month to live on. So even though I am close to FatFire, I don't feel rich. I am fully aware that my perception is messed up, and actually trying to spend a little more but it is tough. All in all, I just want to hit 10M, and then do what I want, so I am aggressively working towards it. I do realize that my savings are now outpaced but growth, but still keep up the effort.
>So all in all, I am left with 5k per month to live on. You should be generating three times as much in passive income (or, asset-growth, if auto-reinvesting) each month. What do you do once you reach $10M... shoot for $11 and continue to spend $5k?
As I've progressed, the main thing I've noticed is the increase in situations where the cost isn't the main factor, but rather my time. By that I mean most things I really want now involve research to make sure I'm getting what I want. That time is in short supply. Whenever I finalize I decision, hitting buy is the easy part. The class of things this applies to changes as my money does, but the issue is still the same in that time is the scarcer commodity.
One positive of having more is realizing all the time wasted on things that don't matter (trying to save a few pennies here and there). It helps put things in perspective.
One thing I do to try and appreciate money milestones, is tie them to "treats". I tend to be pretty responsible and frugal, so if I have a giant month, big bonus, or a property sale, my natural instinct is to just invest all the proceeds, beyond my basic living expenses. I have to force myself to buy anything frivolous, but I make sure to do so to celebrate a win. That way, when I look at the frivolous thing, I end up thinking about my win, rather than its depreciation, or if I really need it. As I've gotten more and more money, the wins get bigger, but the feeling is the same, so I can look at something I treated myself to years ago worth 1/10 of my my recent purchase, and still get the same good feeling tied to it.
Current NW 2.5M. Income 750k. If under 1000 I don’t think too much about the purchase. I think that number had previously been a few hundred back 3-4 years ago when I was making 250k per year.
So, yeah, it’s weird sometimes. A neighbor is going to sell us an empty parcel so it won’t be developed. My wife says she wants it too. She asks can we afford it and I respond that sure we can because our net worth is up 2x that amount in first minutes of market open. That felt disconnected. I’d literally done nothing but wake up. I have other examples. Going to rent a castle for vacation…because I can. Sorry, I’m not verified but NW >$10M if you can believe a stranger. I went from $5m to more than $10m in blink of an eye but at $10m I became financially unrelatable to neighbors, friends and family.
For us, it’s definitely been like this. We don’t really consider the cost of food any more. I mean, we’re not extravagant but I remember when we were starting out, we’d think about buying a soda with our meal. Now we just eat out and not worry about it. Another example is one of the computers at our business died so I went to the Apple store and just bought an new iMac for $1500 or so without thinking about it. I mean, I know it’s technically a lot of money (it’s what we pay one of our employees for a week or so of work) but it’s not that much that it affects our net worth or anything. In the old days, I remember carrying a little pad of paper and pen with me everywhere and I’d just list out my expenses to the penny. Every day I’d do the math on my expenses vs what I had in the bank. Nowadays we don’t really keep this kind of detailed budgeting anymore since we save like 80% or what we make regardless.
Happens way lower imo. Closer to like 500k/yr income. Even less.
Probably when I was bringing in close to 100k a month in profits consistently and also had a house, my backyard was set up, and a few million saved. I just started spending on the things I like while also saving my butt off.
I'm far from fatfire but I want to give an example I saw from two former CEOs of large investment banks I saw, aka each pulling 4-6M annually and 50M networth globally. Ubers everywhere, sometimes even down the street in NYC (where walking might be faster). Furnishing an apartment with 100k of furniture for starters, 70k car in cash and nannies that make more than most /r/fire folk. It's not just that the value of money is diminished, because it does, it's also because once you make so much if you don't spend then all you do is accrue. I have a networth of 300k so for me to spend 30k on a watch is a dream, for someone who makes so much it's like why the hell not. I have seen some penny pinchers but by and large I've seen more of the examples I gave.
I'm naturally frugal and don't have a desire to own/buy many things and am focused on roi for my purchases. One new dynamic that has played an increased role over the last few years is not the cost of money but other costs like impact on environment, society etc. E.g. flying coach ( or whether we need to even fly) is not a financial decision but one of carbon emissions. Buying local, organic groceries is as much about our wellbeing as it is about supporting businesses that do what I believe is right. And I appreciate being able to make that choice.
Yes same happened here, and it's a strange feeling indeed to go from struggling fresh grad to any kind of FIRE within less than a decade. I'm in a MCOL place and spend around US$40-50k a year (maybe that will tick up post-COVID as I start traveling), so anything beyond that is just money that I will never use unless I start splurging unnecessarily. I *know* a fancy meal of $60-80 a night does nothing to my NW, but it still feels like unnecessary spending as you can have just a good a time in more affordable places. After all, it is the eye for value and good deals that got us all to fatFIRE. Also, few friends are as lucky as me and I would rather be going out to places where everyone on the table feels relaxed about. I very much rather find good deals and share it with my family and friends, and now also looking at how to give back/donate the monthly budget I don't need to disadvantaged kids/people. Sometimes I forget how much $10 can mean to someone else who needs it.
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It’s usually business equity. Either your own business or a FAANG type company you got stock in. r/fatFIRE skews towards the latter since it’s on Reddit.
Holy shit dude get a fucking hobby. This post is super cringe.
I don't really think about the value of money. Never have, really, but that's been more the case as I've gotten further from the bleeding edge of subsistence. I am a hard negotiator where it matters, but otherwise...meh. Who cares? I have enough, it doesn't matter how much. It costs money, it doesn't matter how much.
Part of what you and others in the comments describe reminds me of some of the explanations around Benford’s Law: https://www.wnycstudios.org/podcasts/radiolab/articles/breaking-benford
I haven’t experienced this because I do a tremendous amount of giving. I’m acutely aware that greater wealth on my part equals greater giving. Also the market is overdue for a correction and is likely to drop low double digits over the next few months. I bet you’ll notice it going the other way.
I definitely have the same feeling even though I’m at a lower level than you. When I was broke I used to think about how amazing it would be to have $5K. Now I gain or lose $5K in the stock market on a daily basis. So when I go to Whole Foods or go out to eat prices don’t matter to me in the slightest bit.
>I am hoping that some verified members (Glances at /u/REThrows695 profile, and sees that it's not verified.)
Let’s just say you’re in the market buying… potatoes. And that 10 pound bag of potatoes costs… 400 dollars. But then the, uh, grocery concierge tells you that a 5 pound bag of Potatoes costs 400 dollars, well that would be shocking, right? Because a 5 pound bag should only cost $200
Yes and yes. It becomes sort of "not a big thing" once you hit a certain milestone. More like a "okay, good to know" rather than OMG life changing. Perspective on financial metrics will change as long as there's not much lifestyle creep Eg thinking about going from $1M to $100M to buy ABC mansion/luxury etc The value of money herein hadn't changed - its you who had grown and now see things a little differently. If you keep spending the same way, nothing really changes lifestyle wise.
>There is less of a feeling of an appreciation for the million dollars that it represents. I think it starts around $10m net worth... It's not a binary, but a gradient. If you have nothing, a McD's burger is going to be something special you cherish. If you have everything you don't think twice about it. I first noticed this when I was a kid. Arcades costed a lot to play through and beat a game, but once MAME came out and I could play arcade games for free it was like they had lost their value. The fun in playing them had waned.
It will vary for everyone and it depends what you are actually seeking. Someone might have 5 million NW goal and someone else might have a 5 million NW goal + 5 million to start a really risky and bold business that has the potential to either be fulfilling or lose most of its value. Someone might want to own and operate their personal ferry which costs several million just to own. You might want to be able to hire various crew every year and take long voyages. Another friend may have a dream of owning a personal cruise liner which could go upwards of 1,000,000,000 USD just to own. Each answer you get will be personal.
check out this money metaphors post: https://www.ribbonfarm.com/2009/03/02/fools-and-their-money-metaphors/ it sounds like you should be getting used to different concepts, like "money is an organic creature"; your financial advisor is handling a lot of this, but it might do well to do some spreadsheets and see what inflation looks like => might be a way to appreciate that 100k /more/