Should I go for the Ferrari?

[Matt]

I sometimes feel that we are playing the Game of Life here… imagine yourself going through cycles, from lack of financial awareness, directly into debt in college, and then clawing your way back to Par, and beyond. It really is a common path, and a sadly expensive one. Today, as the dust settles on the new home, I ask myself, where do I stop?

There’s a view out there held by some that the FIRE (Financial Independence/Retire Early) movement should focus on getting to FI as soon as possible, and doing so you can cut down wastefulness. The guys over at Mr Money Mustache are into this. Don’t get me wrong, they are savvy folk, but they cut earning perhaps too soon. They do that by not going for the Ferrari, and leaving work as soon as they have enough of a nestegg to support an often frugal existence.

On the flip side of this, we have the people who are traveling to excess today, claiming that if they work hard now they might not be able to travel when older. My view on that is you might not be able to earn money later either, and you also might have an Android Lollypop Jetpack by then anyway – climbing Everest would really be a blast…. To clear up my view on that, I don’t believe you can travel to excess, but I believe you can use it as an excuse to not knuckle down when you should.

Of course, it seems quite possible to keep earning within FIRE, so there is nothing stopping a person working in the rat race until they have enough money saved to cover their costs, then just work a few months of the year to earn something fancy if they so choose, though doing so would certainly make things a lot slower to achieve.

Personally, I am not at FIRE stage yet, becoming a parent just shifted that equation somewhat further again. However, a lot of that is because of existing lifestyle choices. What do you guys think, are you ready to get out as soon as possible, or willing to put in a bit longer to get the life you really want, not one you will settle for?

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[Badassity]

I love that 'cycle of life' summary you did. So true. For most. I wish I was one who skipped it.

There are many on MMM who seem to have skipped those common mistakes. And I sometimes wish I was one of them... Can you imagine knowing what you know now, then...? Smokin'

That said, I find it kind of easy going completely (or moderately, or cheating a bit) frugal... Because I have the majority of stuff/baggage/garbage/whatever you like to call it, that I'd be missing out on (maybe) if I adopted this philosophy earlier. Pete at MMM has said many times that he lives a ridiculously luxurious lifestyle... So do I, I think. Nothing like the majority buried in mortgage and consumer debt... But way more than if I'd been mustachian in my 20s.

I'm happy where I am right now.... Surrounded in luxury (my hedonicly adapted state of moderate luxury).

It was pretty easy coming down from upper middle class luxury. And I feel a bit of shame... But overall, am relieved that it was easy. And recognize my good fortune.

 

[JoeK]

That said, I find it kind of easy going completely (or moderately, or cheating a bit) frugal... Because I have the majority of stuff/baggage/garbage/whatever you like to call it, that I'd be missing out on (maybe) if I adopted this philosophy earlier. Pete at MMM has said many times that he lives a ridiculously luxurious lifestyle... So do I, I think. Nothing like the majority buried in mortgage and consumer debt... But way more than if I'd been mustachian in my 20s.

I agree with this - I am pretty frugal compared to most people, but I feel like I am living very comfortably. Where many people buy as much house as they can afford, I bought a more modest house in a cheaper suburb so that I could save more.
Where many people spend money on new (or nearly new) cars that waste gas, I just recently purchased a 2001 Toyota Echo for $3500, and it gets 40+ mpg.
My boss goes to Starbucks twice a day and gets whatever is their largest size iced coffee, spending about $120 a month there -- I use the Keurig machine at work and spend about 40 cents a day on coffee ($8/month).

People don't realize how much stuff like this really adds up, and it doesn't really materially change my lifestyle making the choices noted above (among others).

Getting back to the original post --
I do often think about this question. I would definitely like to live a more luxurious lifestyle in retirement. I plan to spend more time traveling, and it would be great to own a vacation home somewhere with a warm climate to spend winters (I live in a suburb of Boston currently -- way too cold here!)

The good thing is there is plenty of flexibility in my plans. I should be able to retire in my late 40s and maintain my current level of spending without too much difficulty ($40k/yr post tax). If I want to, I can work until 55 and collect an early pension from my employer - between that and the extra years of earning/saving, I would be well into 6 figure retirement income, if I choose to go that route. So I figure when I get closer to that point I can make the decision on how much longer I want to work to improve my standard of retirement living.

There's no real reason to decide now because there are too many variables to accurately predict where I'll be in 15+ years, anyway. All my current planning/projecting assumes that I won't ever be promoted at my current workplace and I'll just earn the standard 3% cost of living raise each year, which is pretty unlikely.

So in my view it makes most sense to wait it out, and when I get to the point where I have enough investment income to live off without having to work, I can make that decision on whether I want to keep going in order to increase my wealth and income.

 

[Matt]

I agree with this - I am pretty frugal compared to most people, but I feel like I am living very comfortably. Where many people buy as much house as they can afford, I bought a more modest house in a cheaper suburb so that I could save more.
Where many people spend money on new (or nearly new) cars that waste gas, I just recently purchased a 2001 Toyota Echo for $3500, and it gets 40+ mpg.
My boss goes to Starbucks twice a day and gets whatever is their largest size iced coffee, spending about $120 a month there -- I use the Keurig machine at work and spend about 40 cents a day on coffee ($8/month).

People don't realize how much stuff like this really adds up, and it doesn't really materially change my lifestyle making the choices noted above (among others).

Getting back to the original post --
I do often think about this question. I would definitely like to live a more luxurious lifestyle in retirement. I plan to spend more time traveling, and it would be great to own a vacation home somewhere with a warm climate to spend winters (I live in a suburb of Boston currently -- way too cold here!)

The good thing is there is plenty of flexibility in my plans. I should be able to retire in my late 40s and maintain my current level of spending without too much difficulty ($40k/yr post tax). If I want to, I can work until 55 and collect an early pension from my employer - between that and the extra years of earning/saving, I would be well into 6 figure retirement income, if I choose to go that route. So I figure when I get closer to that point I can make the decision on how much longer I want to work to improve my standard of retirement living.

There's no real reason to decide now because there are too many variables to accurately predict where I'll be in 15+ years, anyway. All my current planning/projecting assumes that I won't ever be promoted at my current workplace and I'll just earn the standard 3% cost of living raise each year, which is pretty unlikely.

So in my view it makes most sense to wait it out, and when I get to the point where I have enough investment income to live off without having to work, I can make that decision on whether I want to keep going in order to increase my wealth and income.

The key is - are you enjoying it? I get too wrapped up in the future and forget the present, and if you are saving too much and not enjoying today because of it that's not good. I'm OK with sucking that up to an extent, but long term, it isn't the thing to strive for.

In terms of your plans, there are many ways to skin the cat we call life. It could be that Starbucks is worth it if it creates the right emotional reaction in you, and the numbers while 'serious' are also completely insignificant, if for example, your boss meets with his boss there and he gets a promotion out of the relationship.

Regarding the home choice, you bought more frugally to save more - but the flip side of that is that my first home purchase was by far my best investment. I probably doubled my money in 3 years (gross) on my first property - (I don't mean deposit money, I mean purchase price) and I wish I had bought bigger - that was a cash purchase, if it was leveraged I would have done a lot better. So it is all swings and roundabouts.

If you want to buy overseas, maybe look into the cost/benefit of buying now, and having a cash flow property, you could rent it out when you aren't there, and in the future keep it for yourself when paid off, or start a chain of them- property is great way to expand future income streams.

 

[KennyBSAT]

Our 13 year old son asked for a Ferarri so we got him one for Christmas. As in a Matchbox car, the likes of which he hasn't played with in years. The look on his face: priceless!

 

[JoeK]

The key is - are you enjoying it? I get too wrapped up in the future and forget the present, and if you are saving too much and not enjoying today because of it that's not good. I'm OK with sucking that up to an extent, but long term, it isn't the thing to strive for.

I agree. I try to save as much as possible, while at the same time spending enough that I feel comfortable. I don't take it to excess as many in the MMM world do. However, I do save a lot more than the average person. Once you get used to living below your means, it's not really as difficult as most people imagine it would be, nor does it really impact your enjoyment of things all that much.

In terms of your plans, there are many ways to skin the cat we call life. It could be that Starbucks is worth it if it creates the right emotional reaction in you, and the numbers while 'serious' are also completely insignificant, if for example, your boss meets with his boss there and he gets a promotion out of the relationship.

Networking is absolutely important, you're right. I go out to lunch a couple times a week with my boss and a couple other colleagues - but I don't mind spending $100/month on work lunches because I'm saving way more than that in other areas. It all balances out.

Regarding the home choice, you bought more frugally to save more - but the flip side of that is that my first home purchase was by far my best investment. I probably doubled my money in 3 years (gross) on my first property - (I don't mean deposit money, I mean purchase price) and I wish I had bought bigger - that was a cash purchase, if it was leveraged I would have done a lot better. So it is all swings and roundabouts.

If you want to buy overseas, maybe look into the cost/benefit of buying now, and having a cash flow property, you could rent it out when you aren't there, and in the future keep it for yourself when paid off, or start a chain of them- property is great way to expand future income streams.

I'm glad it worked out for you, but using a primary residence as an investment is just not a sound decision in my view. Investment properties are a separate area and definitely can be worthwhile for those that know how to manage them since they provide ongoing cash flow/ROI. If you spend more on a primary residence home, it costs more in taxes and more upkeep/maintenance, for very little return. Historically the average return on real estate roughly matches inflation.

Some people get lucky with the timing and may have made some money - others, who bought in 2007-08, for example, are probably not doing so well right now. I don't believe in market timing and thus I don't consider a primary residence to be an investment from my perspective.

 

[Silverthunder]

This is a good topic. I think the previous posts all make good points. I have lived relatively frugally. That being said, there are some drawbacks of the frugal life style.

Probably the value of free time when you are young carries a premium. In other words, there is more to do when you are young. So say you forgo free time/ experiences when you are young, those experiences may not be available to you when you are older. There is probably more of a "wide open" social scene available when you are younger. What I am saying is that the mustacians can overdo it.

I think you also can't ignore the "doomsdayist." There is some risk in purchasing power preservation strategies. Numbers on a bank statement can be wiped away in many scenarios.

 

[Alex1432]

I say the best is to pick one or two "vices" and splurge on those and save elsewhere. If you like nice cars get one and enjoy it. Just don't get a nice car, an expensive house, and multiple international trips a year.

 

[Matt]

I say the best is to pick one or two "vices" and splurge on those and save elsewhere. If you like nice cars get one and enjoy it. Just don't get a nice car, an expensive house, and multiple international trips a year.

Wait a minute... haven't we figured out how to take multiple international trips a year for free already?

 

[Alex1432]

I guess based on my vacations even if I don't pay for the flight or hotel I still spend a lot on food and excursions/experiences.

 

[Matt]

I guess based on my vacations even if I don't pay for the flight or hotel I still spend a lot on food and excursions/experiences.

That really depends though. It is possible to spend less on vacation, but I agree dining out 'generally' will increase costs. However, I would never find it acceptable to reduce experiences. In fact, that is basically the point of the thread. Once we have already got ourselves to a point of basic FI - how much further do we go?

For me FIRE means enough to at least travel and enjoy the hell out of it. I'm asking, how much more than that should we earn? Enough for a Ferrari also?

 

[HariOm]

A weekend Ferrari rental can satiate the desire and serve as a demonstration of its practicality.