You Shouldn’t Fear Spending in Retirement

I was chatting with my wife earlier today and I mentioned that I was a proud of a something relatively minor in my retirement so far:  I don’t obsess about our spending.  I also don’t ignore it either.   I keep an eye on our spending but I don’t sit down every month examine every dollar in detail.  Instead I keep track of the big picture – how much we spend over  a year and not so much about a given month.

My wife’s reply was to the point “You better not care about every single dollar you spend or what was the point of retiring in the first place?”

She is right of course.  If you have to worry about every dime you spend in retirement it won’t be a fun life regardless of having all the extra free time.

Which brings me to the point of today’s post that every retirement budget needs something: slack or buffer.  Or excess spending dollars or what ever you want to call the concept.  The point is you NEVER want to retire on a shoestring budget with nothing extra in it.

I know when you are saving for retirement there is a temptation to reduce spending as far as it will go to get to your early retirement sooner.  Which honestly that isn’t a bad short term exercise so you know what the shoestring number is but often a short term dip in spending can’t be sustainable in the long run.  Why?  People often will push off replacement of items and make due.  Which honestly can work just fine in the short run.  It just can easily start to fall apart over a long period of time.

For example, I bought a new weed trimmer this morning to finally replace the one I originally bought with our first house over 12 years ago.  Why?  Well the line feeder started acting up during the end of last season.  So this year I just made do the first few times I used it but then the plastic guard with the line cutter broke off.  Now it was just a pain to use the old weed trimmer and while it sort of did the job but only with a lot of hassle and screwing around with it.  So avoiding replacing it would have just ended up costing me a lot of time and frustration in the long run.  Rather than do that I looked for a new one and found a cordless battery powered weed trimmer on sale and bought it this morning.  I already love not having to drag out my extra long extension cord to trim the lawn after cutting it (my previous one was a corded model).

So for a cost of less than $100 I managed to replace my old weed trimmer and also do a small upgrade by going cordless which makes me much happier since I can accomplish the job faster than using my old one.

In the end, I wasn’t afraid to spend the money and I ended up with something better for me in the long run.  That is because our budget includes some slack for the things that do break down over time and need to be replaced.  You can’t predict where these will occur so you best to just add in a buffer or slack to your budget to account for it.

So how do you deal with the eventually replacement of things in your home?  Do you keep a set dollar amount or percentage of budget for your buffer or just use your actual yearly spending with those one off items in it?

9 thoughts on “You Shouldn’t Fear Spending in Retirement”

  1. Same here, Tim. One condition of my being able to retire 10 years ago at age 45 was that there would be no change to my everyday lifestyle. To further achieve that goal, my ER budget is set up to allow a surplus or cushion of income of expenses to allow for small, unforeseen expenses. If I get a little “spendy” from time to time, it won’t bust my budget, just use up the surplus. No big deal, and it happens fairly often.

    I live in an apartment in a large co-op complex, so I am not terribly liable for any large expenses the co-op may face. As for any large, personal expense which may arise, I have about $40k in an intermediate-term muni bond fund I can use to pay for them. I bought my current car just before I retired, so it is only 11 years old and running well and won’t need replacement for at least 5 more years.

  2. Yes it is the replacement of cars I keep trying to plan in. And my husband keeps talking about an RV . Also the hot water tank, furnace and carpeting and hard wood floors are all jobs that people in our townhouse complex have done and I am trying to figure out the budget for those items. Oh and new chesterfield.

  3. We just allowed an extra 10 % to our required yearly income to allow for expected and more importantly unexpected costs . That meant we had to work longer but we don’t have to worry about little extras .Works for us and unused yearly amounts are saved up for replacing out truck .

  4. I’m still in the workforce (but I’m on school holidays at the moment) and I’ve decided to work for another 2 or 3 years to enable an extra 10K or so into my yearly spend, mainly for travel. I want to see the world and Australia is a very expensive place to fly to and from.
    I like the idea of being able to choose where I want to go based on my personal inclination, not my wallet.
    I just discovered your blog through MMM – I’m gradually working my way through his archives. I like what I see and I’ve popped you on my feed reader.

  5. Hi Tim, still love your blog. I’m working my way towards FIRE as well. But can’t help but wonder, is one reason you don’t worry about spending in retirement is you have a head in the sands approach to your finances? Specifically I haven’t seen a net worth update in a few months. 2018 has proven to be a tough year to grow net worth without income. Wonder if you are ignoring it or just not showing it.

  6. Nope, not ignoring the finances. I collect the data every month but I’m just behind on posting the results…can you guess what is on my to do list this week? 😉

  7. Haha…my favorite part of your blog is seeing your monthly results! When I’m down you are down and helps me realize we are all in the same boat. That is the part that scares me the most, no longer seeing my net worth increases I have gotten so used to.

  8. Yes me too, I’ve been wondering the same about Tim’s net worth posts. I’m 38 and in my first month of early retirement!

  9. We tend to take a bit more of a holistic approach in terms of budgeting for one-off or ‘unexpected’ expenses. Every two weeks we put a set amount in a savings account. We try to keep a set minimum amount in that account for emergencies, and when it builds much past this we evaluate what to do with the amount. Sometimes we invest it, and other times we put it toward renovations or a needed purchase. As for nursing things along, I totally get it. I tend to use things to the very last, but sometimes you just have to bite the bullet when things become a nuisance or unreliable (such as the family car for example).

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