The Joy of Spending My Money Guilt Free

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Yes, this is still a FIRE blog.

I am unashamedly pursuing Financial Independence as a late starter and plan to Retire Early(ish) at 55.

But I’ve also recently enjoyed a not-so-cheap 4 and a half week holiday in the United Kingdom. And … I absolutely loved spending my money during this holiday without any guilt!

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Before finding FIRE

I was the typical happy go lucky person, very laid back about money in my 20s, 30s and early 40s.

My philosophy then was – I earn it, I spend it and I save some of it … to spend later.

As long as I had a job (no worries about that – I was in a stressful, demanding job) and I could pay my expenses including my mortgage and travel, I was good.

Fortunately my parents drummed into me the importance of spending within my means. I will forever be grateful to them for this advice. And grateful to past me for sticking to this advice.

Finding FIRE

It comes as no surprise therefore when one day in my late 40s, I woke up stressed about the thought of retiring. I had a lot of things going on in my head – mainly that work is too stressful and that I can’t handle it anymore. I had a suspicion that I hadn’t saved enough for retirement. I was right.

So I googled how much I needed to retire and stumbled onto the FIRE community. And was inspired by much younger people who implemented these strategies to retire at 30!

Well, that boat has well and truly sailed sometime ago so the next best thing is to retire earlier than the traditional age. Mind you, there is no ‘traditional’ retirement age anymore. In Australia, it is illegal to ask anyone to retire – you can literally work until you die.

Most people aim to retire around 67 when they may be eligible for the government age pension.

Anyway, I thought that if it took the young ones 10 years to retire early, then why can’t I do the same and retire in 10 years? That would mean I’d retire at 57 instead of 67. That’s a 10 year bonus. So I jumped right in!

After finding FIRE

The side effect of me pursuing FIRE is that I feel guilty about spending money. On anything.

Because I thought that every dollar should be squirreled away for investing. Every dollar is earmarked for my retirement, right? The quicker I can accumulate my stash, the quicker I can quit my job and live happily ever after.

And if I spend on gifts, travel, fine dining, I am denying myself early retirement.

After all, I was already starting very late and therefore behind. Time was not on my side – all that compound interest gone, poof!

Thoughtful young woman holding credit card and piggy bank

The struggle between spending and saving is real

I must admit this 180 degree change in how I view spending was very surprising to me. Because all my life, I most identify with being a spender. I honestly cannot relate to being frugal although I’ve tried.

So this push / pull with spending money is annoying and unsettling.

I agonised over buying a Roomba with free gift cards – I didn’t pay a cent for it and yet I felt guilty. How silly is that? (I wrote about that experience here)

Pre FIRE me would have happily forked over more to buy the techiest version.

I felt really guilty on a trip to Uluru, shortly after I started pursuing FIRE. I travelled with a friend and enjoyed unforgettable experiences such as dining under the stars with Uluru in the background. But I felt I’d spent so much money that I didn’t want to track my expenses.

Pre FIRE me would not have felt guilty at all. Pre FIRE me would have justified that I could easily earn back what I spent. No worries at all.

FIRE

Let’s face it – being on the FIRE path can be very intense especially if you have a deadline and a constrained time frame. Late starters, anyone?

Every effort is made to save as much you can, not by societal standards or the general personal finance advice of 10%. No, you must save at least 50% of your income.

Compromises and sacrifices abound – spend $2 per meal only, cycle everywhere, no takeaway meals etc. And when you’ve reduced as many of your expenses as you can, it’s time for side hustles to increase your income.

I’m writing this tongue in cheek – because it is absolutely critical that we look at our spending and identify areas where we can save. And invest those savings. After all, it’s not fun to retire with no savings at all and rely on the mercy and generosity of the prevailing government.

However, I feel it is just as important to look at our expenses and identify which bring us joy or which we value and either not cut those out completely or think of ways to do them less expensively.

Yes, the trade off may be that it’ll take longer to arrive at FIRE, if we can’t free up much money to save and invest.

But the longer I’m on my FIRE journey, the more convinced I am that we need joy in our life NOW. We can’t just wait and defer joy to when we finally achieve FIRE. Ten to fifteen years is a long time to deprive oneself of the things that make us happy.

Of course, what makes us happy may not cost a lot of money. The whole point of FIRE is to discover what it is that fulfills us and make us happy and find the time and money to do those forever.

I don’t want to arrive at FIRE a shell of who I am and desperately in need of healing and a long rest because I’ve hustled so hard to get there.

I want to arrive at FIRE, raring to go, with lots of plans underway. I’m up for a short rest of course, doing absolutely nothing.

I also don’t want to arrive at FIRE, scared to spend my hard earned money, worried that my money will run out. It will be difficult as it is to switch from an accumulation mentality to spending the dividends or drawing down my shares portfolio.

Guilt Free Spending

In my humble opinion, the way to still have joy in our lives now while pursuing FIRE is to have money set aside for guilt free spending.

This is for spending on things that you won’t give up or find really hard to give up, that bring you joy and that you’d be miserable without it. Some describe it as Fun money.

But there were so many competing priorities when I started my FIRE journey. Do I build my non existent emergency fund? Should I invest? What should I invest in? Salary sacrifice into superannuation (retirement account)?

I had read The Barefoot Investor by Scott Pape and was therefore aware of having a splurge account ie money set aside for guilt free spending.

But I never set this up this account because my priority was investing in my superannuation and then investing in my shares portfolio outside of superannuation.

There was only so much in the kitty.

All my spending was therefore lumped under living expenses. Except Travel.

Lighthouse on cliff at Neist Point in Isle of Skye
Neist Point lighthouse in Isle of Skye, Scotland

My Travel Fund

Travel was in its own category.

And I’ve realised that this is my one true guilt free spending money account.

I don’t care about massages, spa treatments, Friday night drinks, trendy clothes etc. What really depresses me is if I didn’t have any money for travel.

After reading Ramit Sethi’s I Will Teach You to be Rich, I renamed one of my sinking funds to Invest in Self. But when money is tight, I stop contributing to it.

By contrast, it is very rare when I don’t contribute to my Travel fund. It only happened recently when I needed to build up my Bills account to be one month ahead. I felt the sacrifice keenly but knew I’d feel more secure if my Bills account was one month ahead. So it was worth the sacrifice.

At one stage, the Travel fund was larger than my Emergency Fund, at which point, I switched them around and swapped names. In fact, that was how my Emergency Fund was fully funded the first time.

I contributed all through the years the pandemic closed borders when I had nowhere to go. I did use some funds to buy online courses and programs in 2020 and 2021. But even so, the fund had a healthy balance by the time I booked my flights in February.

Heck, even when I was on holidays, I was contributing to the fund.

This is easy to do because my contributions are automatic. I set up automatic transfers from my weekly pay so I don’t have to think about it. Every week, a predetermined amount is automatically deposited into my travel fund. It is in a savings account that earns bonus interest if a minimum of $300 per month is deposited with no withdrawals. So I always make sure to deposit the minimum to get the bonus interest.

How I Spent Guilt Free on my Holiday

I accessed this account before I travelled, to pay for flight taxes and airport charges, attractions, train tickets, car hire deposit, travel insurance etc. I used Qantas frequent flyer points for return premium economy seats on the flights.

At the start of my holidays, I transferred an amount that I thought I’d need for the duration of the holiday into my global everyday account that can accommodate 5 different currencies. As I was travelling to the UK, I would need pounds (£) to pay for everything.

And that was my ‘budget’, an amount that I was happy to spend. There was money left in the Travel fund because I didn’t want to spend all of it. There is always more travel ahead!

I did not break it down to what I’m ‘allowed’ to spend on entertainment, food, transport etc. It was just a lump sum that I could spend however I liked.

At the end of the holiday, I transferred what hadn’t been converted to British £ back into my Travel fund.

souffle, rhubarb sorbet
Part of an 8 course meal at Three Chimneys

Feeling Free to Spend Again

In the past, even though my head knew that it was ok to spend this sum that I’d saved diligently for the last 3 years, I’d still feel a degree of guilt.

I’m not sure if it’s because I haven’t travelled for 3 years but this time I felt totally guilt free about spending my allocated ‘budget’.

I think it’s knowing that I still have money in my Travel fund for another trip. And I hadn’t sacrificed investing for my future.

To be honest, it felt really, really good. And so freeing, not having to think about each expense.

Final Thoughts

Don’t get me wrong – I have no desire to go back to my pre FIRE days when I spent money without a care or much thought.

And I’m not advocating that you spend money you don’t have (in the form of accruing credit card debt, for example) or spend money on fun things at the expense (pun not intended) of saving for retirement.

But I do want to strike the right balance between spending intentionally on the things I love now and saving as much as I possibly can to reach FIRE faster.

I want to do both – to have some money for the things that bring me joy (travel) now AND invest for my imminent retirement, early or otherwise.

This pendulum will swing differently in various ‘seasons’ of my life but the key is to find the right balance.

How do you find the balance between spending and saving? Do you feel guilty about spending?

Mid Year 2022 Goals Update and Review

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Oops, it’s nearly the end of July as I write this “mid year” review of 2022 goals. But as I didn’t set my goals for 2022 until February … I think it’s just the right time to do a review!

I’m writing in my attic room as the sun is setting – I can just glimpse the orange glow from the corner of my eye. I’m in London on a 4.5 week holiday. My first overseas holiday in 3 years.

After an epic 17 hours 15 minutes non stop flight from Perth to London (in addition to a 4 hour flight from Melbourne to Perth earlier with an one hour transit in Perth airport), I arrived as dawn was breaking on Thursday. Phew, tested negative upon arrival. But 24 hours later, I was coughing and spluttering and yes, tested positive to Covid.

This is really ironic. I’d splurged on premium economy seats using my Qantas Frequent Flyer points (amassed from not travelling for 3 years) so there are less people in my vicinity. I chose the long direct flights because I didn’t want to transit outside Australia.

But the rules had changed just before my flight. Passengers need not be vaccinated nor do we need a negative test to board. Masks were mandatory from Melbourne to Perth but not on the international flight from Perth to London. The vast majority of passengers, including the guy next to me did not wear a mask.

I’m blaming the 17 hour flight. Even though I wore a mask throughout the flights (and changed the masks a few times), it wasn’t enough. I always knew the possibility that I’d catch Covid on this trip and brought medicines with me for symptomatic relief. But I thought I’d catch it from gallivanting about in London, not from the flight over.

Anyway, this enforced rest with lots of sleeping and reading will prepare me for lots of adventure ahead.Thank goodness for the Libby app – I have access to thousands of books from the two libraries I’m a member of in Melbourne. I’ve already read 5 books.

But I am frustrated at missing out on a family outing to see The Jungle Book at Kew Gardens and having to cancel a lunch with Sam (Late Starter to FI Series #2) in Bath. I was so looking forward to meeting up in person.

The silver lining I suppose, is that it’s now out of the way and I can enjoy the rest of the holiday without worrying about when I’d be getting it.

I’ll be posting my shenanigans in the UK on my Instagram and Facebook ‘stories’ if you’re interested in following along 🙂

All right, now that you’re up to date with my Covid status, how have I been travelling in 2022? Am I any closer to achieving my goals?

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Goal 1 - Invest $30k into my Shares Portfolio

So far, up until today, I’ve invested $18492 so I should be on target here. Even though this is on auto pilot, I’ve had to review my weekly amounts as I transition to working 4 days a week. It is still my absolute priority though to invest $30k this year.

And yes, the share market has been rather volatile in the last seven months but I can’t control that. I can only control how much I invest in it.

Goal 2 - Rebuild my Emergency Fund

I raided my Emergency Fund last year to replace major appliances when they broke down plus some home maintenance expenses. It’s slowly being rebuilt.

I feel secure with holding 6 months’ of expenses in it and I’m up to 5 months now.

I stopped contributing to it for a month or so in order to build up one month of expenses in my Bills account so that I would always have enough to pay next month’s bills. The anticipation of reduced pay from working 4 days a week brought up some feelings of insecurity.

Goal 3 - Make a Will

I won’t lie. This was very challenging. And confronting. I wrote about it – What Happens if You Die Tomorrow? How to Make a Valid Will.

But after my lawyer sent me all the paperwork for review, the thick pile of papers just sat on my dining table. For MONTHS.

Then everything kind of happened to make it all come together.

There were two close family members’ deaths within my circle of friends. It suddenly brought home to me again how crucial (and kind) it is to leave clear instructions for the people left behind.

And it became clearer who my people should be – the executors of my will, attorneys for Enduring Power of Attorney and Medical Treatment Decision Makers.

I had dragged my feet for months, not wanting to initiate a conversation with them and asking their consent to take on the specific role.

With my overseas holiday looming, suddenly everything needed to be in place. And it was easier than I had imagined. All said yes, thankfully! And it was then just meeting with my lawyer one more time to get final documents plus obtaining everyone’s signatures.

I’ve also sent off my binding death benefit nomination to my superannuation.

So I can say that this goal has been achieved! Woohoo!

It really does feel good (and a weight off my shoulders!) to have all these estate planning documents in place. There are now instructions for what to do when I’m dead AND what to do if I’m alive but incapacitated (which is the scarier option, to be honest).

illustration of women's legs standing in front of a scale

Goal 4 - Make Health & Wellbeing a Priority

I have lost 1kg out of the 5kg I wanted to lose.

I started off quite well early in the year, walking for at least 20 minutes every morning before work. Then I had a terrible cough that everyone thought sounded like a Covid cough. But several RATs and a PCR test confirmed it wasn’t due to Covid, influenza or RSV. So no one knew what it was from but all concluded I needed to rest. The weather became colder and I stopped going out in the mornings.

I plan to walk every day when I’m on holidays so I’m hoping to kickstart the habit again. (It hasn’t happened yet, holing up in my attic room!)

Besides March when my savings challenge involved me paying myself $5 a day if I didn’t eat chips or chocolate but penalising myself $10 if I did, I wasn’t very controlled in my snacking habits.

I’m trying to learn not to be an “All or Nothing” person. My word for 2022 is Consistency and it is this area that I need to apply it most. I have been consistently inconsistent in my prioritising of health and wellbeing.

I prioritise it when I’m in pain and then forget when I’m not. For example, I have consistently seen a massage therapist and osteopath to keep my shoulder pain under control. And now I also have jaw pain due to all the jaw clenching in my sleep.

But what I really need to do is to prevent the pain in the first place. That will be the goal for the next 5 months.

Goal 5 - Prepare for the Non Financial Aspects of Retirement

I read 2 books to help me with this goal – How to Retire Happy, Wild and Free by Ernie J Zelinski and Keys to a Successful Retirement by Fritz Gilbert – I reviewed them both plus Retirement Made Simple by Noel Whittaker which I read last year.

All emphasised preparing for the non financial aspects – in particular, finding purpose in retirement. I’ve started lists based on the Get-a-Life Tree illustration in Zelinski’s book.

My travel list is by far the longest among the lists of activities I can pursue. And while I’m on holidays, I’ll indulge in what I know has brought me joy in the past – exploring new places, eating good food, seeing live theatre, visiting museums and galleries plus spending time with my family. Just to confirm that they still bring me joy, haha!

FIRE Progress Update

There are 5 metrics that I track on the way to FIRE and here is their progress in the first 6 months of the year.

Net Worth

Chart of net worth progress from 2018 to 2022

The above chart shows that my net worth fell by 6% compared to the end of Dec 2021. This is totally expected due to the volatility of the share market. I am not too concerned about it. This net worth figure does not include my paid off house which I have no intention of selling in the near future.

Bridge the Gap Fund

My goal is to retire at 55. This means I need a Bridge the Gap fund to support me for 5 years before I can access my superannuation (retirement fund) at 60.

My Bridge the Gap fund is comprised of my shares portfolio and cash. Right now I’m focusing on investing as much as I can into the shares portfolio and have not started accumulating cash.

It has only fallen 0.6% compared to the end of 2021 so I’ll just be consistent here and stay the course.

Superannuation

How is my retirement fund going since it is what I will rely on once I turn 60?

The balance as at the end of June 2022 was 8.7% less than the balance at the end of December 2021. Once again, this was expected due to market volatility. Since I haven’t sold anything, this is only ‘paper’ loss. Hopefully, the next nine years will see a return to growth.

And the balance is still higher than the balance when I declared I was at Coast FI in April last year.

Dividends

Chart of dividends from 2018 to 2022

Dividends is hands down my favourite metric to track!

So far, the first 6 months of 2022 has been stellar – dividends received are equivalent to 72% of total received in 2021.

My aim is for dividends to support half my expenses by the end of 2026. It’s at 30% of achieving this goal so a fair way off yet.

Expenses

2022 has been kinder than 2021, mainly in the absence of failing appliances and home maintenance.

So far, I’m on track to spend less than $40k this year but of course, not all my holiday expenses are part of this progress report. I can already tell you that July and August will be much more expensive than the previous two Covid years!

Final Thoughts

I do love this time of year as a second chance to refocus where I need to and to celebrate if I’ve achieved a goal.

After this review, I need to stay the course financially and I should be on target to achieve my goals for 2022.

Where health and wellbeing is concerned, I need to refocus my energy on preventative measures. Otherwise I’d be spending heaps on osteopath treatments and remedial massage. Plus not able to keep my weight down. Wealth without health is useless.

And I’m totally celebrating achieving and exceeding one goal ie estate planning done instead of just making my will. Yay!

How has the first half of 2022 treated you?

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