This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
In the past few years, as I read more and learn about different methods of organization I began to create lists. I’ve found lists to be quite helpful in my job as I am able to define where my priorities lie and move away from (for me anyways) an inefficient method of multi-tasking. The list that helps my wife and I with our finances the most is a list of “wants”. Currently on this list (in no order of priority) are: A king-sized bed, a 60-inch television, new carpet for our stairways, a fence and deck in our backyard, a vacation next year, as well as various other items (our recently purchased car was on this list).
Currently, my wife and I have approximately 15-20% of our monthly earnings available to spend on “stuff” that we like to buy (dinners out, booze, clothes, etc), the rest of our money goes towards savings and paying off our mortgage. If there is something big that we would both like, it gets added to the list and we save for it together.
If we were to not buy everything off of our list (currently and in the future) we would probably be able to retire 5 to 7 years earlier. Since if we were to eliminate all consumerism from our spending and utilize that last 15-20% of our spending to invest, we would reach our goals much more quickly.
What the list represents is also a compromise between my spouse and I. I would prefer (usually) to not spend money if at all possible, while she would like to live a more “normal” life that includes creature comforts. Rather than battling over every item, we put it on our master list and if the item is still wanted when we have the savings available, we buy it. If we lived a Spartan existence I have a feeling that there would be some marital discord, as I have been told in the past that that is not the kind of party that my wife signed up for.
So, this is how my household system of buying large items works– there are probably better ways to go about deciding on “big-ticket” items (or as I mentioned, not buying them at all), but this system keeps all parties involved happy, and curtails impulse purchases that would probably end up creating debt, which is a situation that I think a lot of people get into.
Do you have a similar system of deciding on large purchases? Do you just not buy the kind of “stuff” that I mentioned on my list in order to retire several years earlier?