I’m not sure if my title conveys what I’m asking. At some income point, you don’t need to budget or clip coupons or watch sales. You can spend what it takes to get what you want without risking your standard of living.
My husband and I were discussing this in light of the prediction that Elon is poised to become a trillionaire, tho he’s not a good example since he was born into wealth. But for the vast majority of us, we must pay attention to income and outgo. There is a point, not the same for everyone, where you no longer need to track your finances. Not to say that you ignore them, but if you want to buy this thing or take that trip you don’t need to consider your budget - you just do it.
Can you put a number to that point for yourself? At what amount of personal wealth could you buy that car you’ve always admired or book first class tickets and a luxury suite for a dream vacation? In fact, do you think you could forgo tracking prices when considering a purchase?
For me, I’m thinking if I had $5-10 million drop in my lap, I might be able to not look at price tags. This assumes that my retirement income continues as it is. Of course, at my stage of life (I’m 72) I don’t need as much of a boon as I would have at 35. Can you put a number to your don’t-need-to-sweat-it threshold?
For me it was 1985, when I got my first full time job. That’s when I stopped balancing my checkbook. My lifestyle is such that I’m not extravigant and a steady income was enough for me to ensure that I’m not going to empty my bank account. But I still check prices because I don’t like to overspend.
Your thread asks a different question. IMO, there’s no amount of money (maybe Elon is the exception) where cost doesn’t matter AT ALL. Once your tastes get used to more expensive things and experiences, your tastes will increase in cost. Once you start flying business class, you’ll want to fly first class.
I found a job that pays 2-3x what I normally make. But instead of spending a ton more, I just put the extra money into investments.
For me, I noticed a big shift started to happen when I had about ~8x my annual spending in investments. That number if kind of arbitrary, but I think around that level of investments I realized that I could easily weather setbacks and spend $50 or $100 w/o having to worry about it. I don’t know why the shift happened at about that level of net worth, but something shifted in me and I moved out of financial survival mode and I realized how many years I could live off of investments.
However regarding this question:
So if you assume investments grow at 8% a year, then 5 million would in theory result in 400k in investment income a year. At that point I wouldn’t sweat a first class ticket, luxury suite, etc. But I wouldn’t go out buying $400,000 cars either since that is an entire years worth of investment income spent in a day.
For me, the answer is undetermined, since I doubt I will ever be wealthy enough to ensure I will have enough money until I die. I’m 71, and I could go tomorrow, or live to be 110. Since I can’t predict when I’m going to die, and just as importantly never want to be a burden for my daughter, I need to have enough money for all my needs, including unforeseen medical expenses. I could contract a disease that doesn’t kill me for a year or two, and at that point, assuming I still have ample savings and investments, I may feel I can stop tracking every penny and spend like there’s no tomorrow. Unfortunately, the future is too unpredictable to be able to do that at this point.
We’ve never tracked every penny, but that’s because we are both frugal and underspend our joint income. It helps to have a decent income.
We don’t have $5 million, but we have enough that we could go first class if we wanted to. It all depends on cash flow. Social Security and investment income amount to more than we typically spend, so I never worry about money.
But someone today in a job that doesn’t pay well and with a ton of student debt is not going to have it so good. So, being born at the right time helps a lot.
With three small kids and a stay-at-home spouse (until all 3 kids were in school), I tracked every penny each month. Once I received a big promotion and wife started working, I wasn’t nearly as detailed, but I still was money-conscious. Once all 3 kids were through college, I relaxed a bit, but not completely.
Now that we’re both retired, and our income is greater than our expenses, I don’t worry one whit about finances, except when tracking our investments.
Our budget has always included an item for discretionary spending or mad money or impulse buys or whatever you want to call it. When we were young and money was tight, it was $20 per paycheck. Now it’s flexible, but it’s still a category we call “unbudgeted expenses.”
“We need new windows and tuckpointing?”
(Check line item income and expenses.)
“New windows first, then tuckpointing.”
That’s a dividing line between my husband and me. He lusts after several boats that easily run in the million+ range. And it’s not just the cost of the boat, but the ongoing dockage, maintenance, and operating costs, so his threshold is probably in the $30 million neighborhood. Even in wealth, I’m not as expensive as he is!
We’re very lucky to have found a great money guy to help us with our retirement. We’re not rich, but neither do we have to rearrange priorities to manage a nice dinner out. But a few extra millions would modify our self-discipline level significantly. Maybe. I’ve been so used to monitoring prices and costs, I don’t know if I could set that aside entirely.
The date that Mrs. H and I inherited a house, which means no more house payment. That helped quite a bit. The inheritance I’m going to get in a few weeks (low five figures) is going to help, too.
This. After we paid off the house, suddenly we had a lot more money left at the end of the month than what we were used to having. It didn’t change our lifestyle much. I mean, I still do the grocery shopping at the cheapest place in town, my wife still hits the Goodwill Outlet a few times a year, and we try to wait for sales for major purchases (real sales, not bogus “Bleak Friday” type sales). The biggest change is the extra coin gave us peace of mind and the security in knowing that if we had to fork out for something unexpected - say, a major plumbing disaster - we could handle it without having to eat rice and beans for months.
We’ve never tracked every penny or had a strict budget and I can’t remember the last time we had to think about whether we could afford something and I surely don’t have multiple millions. Part of it is because we don’t tend to want super expensive things - no boats or very expensive cars. But we’ll never be able to stop looking at price tags - we kind of look at shopping as a competitive sport.
We actually have more money now that we’ve retired * than we did when we were working but it really hasn’t changed much - I think we go on one more vacation a year.
* House is now paid off, we’re no longer saving for retirement , our health insurance is less expensive
Too late to edit, so I’ll just post again. The other thing was that after the house was paid off, we canceled our life insurance policies, so there was another bit of money left in the pocket every month.
I think there’s always a level below which you don’t need to worry, and a level above which you ought to consider whether that expenditure is a good use of your money. But that level varies with your income and wealth. Arguably, wealth is the more important metric.
suggests that a reasonable threshold is that you can spent 0.01% of your wealth for a small splurge without thinking hard about it. So, if you have $500k of savings and you want to have dinner with friends and it will cost $50, you can do it. This isn’t meant to help with everyday purchases. Because if it’s an everyday purchase, you sort of need to think about the… I dunno, maybe monthly impact of that choice.
But this does suggest that something in the $100k to $1m range is enough to stop counting pennies for most items, like clipping coupons. But you need a lot more before you can plunk down the cash for an expensive boat.
