What is the right level of spending when you’ve met your goals and still have some leftover?

Putting away $36K into DC1’s 529 account (and lowering our emergency fund to less than half of what we need in there before I stop getting paid for the summer) has had the intended effect of making me feel artificially less wealthy.  I’m no longer mentally thinking about things to buy (ex. expensive electronics) other than things we’d be buying anyway on a smaller income (ex.  summer camps that aren’t Interlochen or Concordia).  I’m still doing just-got-paid and making-me-feel-better charitable contributions, but they’re (combined) more in the hundreds/month than the low thousands unlike my first paycheck of the year donating.

I don’t think this money move has got us donating less, but I do suspect it’s got me spending less because I’m back to the default of “if we don’t need it, don’t buy it” rather than an underlying “looking for places to send money to”.  When I see an amount in my savings account that I can’t really comprehend and I don’t know where to put it… it makes sense that when all else fails I might want to spend it.  To be honest– I feel a lot less guilty when I see a reasonable amount in savings that I can understand.  Or when I do have excess money in cash, it is earmarked for something like an upcoming sabbatical.

Sidenote:  If you’re in the 24% tax bracket and ever want to feel artificially low income, just read the case studies in Bogleheads.  So many people with inherited wealth spitting out enormous dividends or salaries above $500K/year.  Even though that’s such a tiny proportion of the population.  If you’re in the 24% tax bracket, you’re still pretty high income.

But what is the right thing to do?  For other people, I war between “If you are meeting your financial needs/goals, do what you will with the excess” and “Nobody needs that much excess.”  I’m fine with Ariana Grande’s panegyric on spending, but not ok with people buying politicians.  And I feel sick (and like getting out pitchforks) when I see the price tags of some of the things that rich people buy and don’t even use.  There’s also the environmental waste of disposable purchases.  And yet, it isn’t my money, so “an it hurts no one, do what you will.”  And yet, I am so strongly in favor of inheritance taxes and higher marginal tax rates.

And maybe what other people should do isn’t as important as what keeps me feeling safe and not squicky.  We probably should replace broken appliances before they start giving me rashes, but there’s something to be said for repairing instead of replacing.  I don’t want stuff we don’t need.  But I don’t regret the iPad Pro purchase which has been great for editing and reviewing other people’s papers, or even the Remarkable purchase though I’ve ended up not really using it.  And I love our Honda Insight with the second level trim.  When I want it, should I got it?  Or should I exercise some self-control and put off the purchase until it’s something we really want?

The best way to curb these spending impulses is to just not have money burning a hole in my bank account.  But should we do that and continue to stockpile money for a rainy day even though we don’t think we want to retire early (still, it would be nice to retire anywhere in the country we want to, not just our current LCOL location).  There’s also the very real fact that the owner of the company where DH works is going to die one of these years (he’s in his 80s) and while we almost spend less than my take-home pay, it would be nice to not have to make any sacrifices while DH decides what to do next.  But this has become much less of a concern since my last raise– we no longer need to have, for example, a full salary’s worth of dividends spitting out each year to cover the gap.  I’m high income on my own even if we’re in a lower tax bracket without DH’s income– we move back to upper-middle-class, which isn’t really a hardship if we don’t get used to higher levels of spending.

When we’re not artificially cash-poor, these are questions we have:

  • Will we keep our ancient fridge until it completely dies?
  • When should we replace our functional computers with faster versions?
  • Should we send our kids to expensive national camps that require plane trips when there’s less-acclaimed versions we can drive to (probably not)?  What if there aren’t substitutes we can drive to (maybe?)?
  • Should we try to pay someone to take care of anything?  But what?
  • Should we eat out more?  Try a meal service?  Eat at the fancy restaurants in town when they’re not paid by my department?  Even though they’re not as good as the fancy restaurants in the city but cost about the same?
  • Should we take more real vacations that aren’t connected to conferences?  But what about the time costs?

And the big one:  Should I hide money from myself?  Or should I be fine with the additional spending that comes with having cash on hand?

If you don’t need to exercise self-control, should you?  When your needs and strongest wants are being met, how do you decide what to spend on?  How do you decide how much to spend on your wants?  How do you prioritize your wants?  What happens to your spending when you get a big income shock?  Do you hide money from yourself?

36 Responses to “What is the right level of spending when you’ve met your goals and still have some leftover?”

  1. rose Says:

    Thank you. These are all questions that come up after times of … not having enough or living not close to but below the bone. Based on what I have read over the years you have lived and do live carefully and thoughtfully with money. I am luckily able to be retired at a VERY retirement age because I did the same, with ‘women’s wages’ raising and educating two children. The weirdest thing for me has been realizing how paralyzing it is to be faced with bdays or gift-related holidays and realizing my grown adult children and my barely teen grands do not NEED anything … and I have no idea how to actually go and find some gift that might be a WANT only … or even un-thought of by the recipient. Decades of need only driven responses … very strange. Habits happen.
    Thank you for all your posts. I know I repeat this to you but it is important to me that you hear regularly you are making differences across a wider space. That you are eagerly awaited. That your audience cares and appreciates and learns and that we then act differently than we might otherwise. What a wonderful difference you all make in this world.

    • xykademiqz Says:

      Re gifts. I dislike receiving gifts. I really do. I’m terrible to shop for. What I want to be given are a) experiences — take me to dinner or a show or some activity, so we can make memories or b) small inexpensive gifts that show me you thought of me (a mug with family picture or a shirt from one’s travels). So maybe the presents should be nice “dates” with your grown kids or grandkids? I know that’s what I would love.

    • nicoleandmaggie Says:

      I am grateful to my in-laws for having amazon wishlists! I think we talk on Wednesday about what we’re getting for people.

  2. sp Says:

    We are “lucky” in that there is always going to be the mortgage hanging out there. Until that is paid off I will never have any question of what to do with excess money after all other priorities are covered.

  3. xykademiqz Says:

    We have mortgage for another few years and then that money will be funneled into college for the middle and youngest kids. Then we will finally be kinda flush. That’s when I want to go to DC for a few years as an NSF rotator. I plan on working till retirement age but not beyond. I thought I’d never retire but ,15 years in, the forever is no more.

  4. Michael N Nitabach Says:

    I keep myself from making absurd frivolous impulsive large purchases by stashing excess money in 12 month CDs.

    • nicoleandmaggie Says:

      How do you know what constitutes an absurd frivolous purchase?

      • Michael N Nitabach Says:

        Fancy clothes & perfumes.

      • nicoleandmaggie Says:

        Perfume is horrible for your colleagues with allergies. But what is it about fancy clothes that you know makes them absurd etc.

      • Michael N Nitabach Says:

        That they’re absurdly expensive.

      • nicoleandmaggie Says:

        How do you know that line?

        I’m not trying to play devils advocate… I’m just really not used to having this much excess and it’s like a weird different world. (Note: still not enough to hit really big goals we might not want in the future, and we still need to account for uncertainty… but that’s a huge range of income where that’s still true). Like that’s ridiculous but we can afford it, so…

      • Michael N Nitabach Says:

        It’s subjective & there’s a gray area where it’s ambiguous, but plenty of cases are clear. For example, designer men’s clothes at Bergdorf Goodman cost generally about ten times similar clothes at, e.g., Zara. So that is “absurd”. Altho sometimes I still buy it! But I stash cash in CDs to try to limit how immediately flush I feel.

      • nicoleandmaggie Says:

        There are so many grad students with Apple watches that I have to wonder if my feeling that was an excessive purchase (that I don’t at all regret—DH is delighted with it) is poorly calibrated. Should we be hiding cash or should we be loosening up because the loosening happens when we don’t hide money.

      • nicoleandmaggie Says:

        (I should note that DH says what grad students do is irrelevant as other people spend on all sorts of crazy things and also sometimes get expensive presents from family.)

  5. Revanche @ A Gai Shan Life Says:

    I usually wait until my computers are on the verge before replacing them but I really need to get a back up one that’s just for the household (versus using our work computers for everything, professional and personal). I probably should have done that with recent sales.

    Is there any service you’d LIKE to pay for instead of doing yourselves? I have a couple I’d kind of like but not enough to work at making them happen.

    I have to exercise less self-control now than anytime in the past but I still do exercise some to stay in practice and be sure I don’t lose those muscles.

    With the house, there are so many projects still to come that are good for our quality of life that we’ll be picking and choosing those for a long time to come, we won’t be wondering what we COULD spend it on, just how. Since I’m still making up for many lost years of retirement investing, and we have that massive mortgage, those are going to take top priority over freely spending for a while to come so I know I won’t have to “worry” about how to dispose of income for a long while. But if I get to that point, I know I’ve got plenty of causes to support alongside my wants, because I’d rather take care of someone else’s needs than frivolous wants that I’m going to regret and have to declutter later. :D I’m not GREAT at determining what’s frivolous yet but I will be practicing that along the way.

  6. Mai Says:

    I would superfund the 529 and then that money can’t really be taken out so it will artificially lower the amount under your name.
    Similarly I never take anything out of brokerage accounts and I don’t login to see how much is in there so once it goes there it’s like I don’t own it. Ditto for treasury I bonds which I never log in to see except the once a year I log in to buy more. So basically moving your money from liquid accounts to investment accounts you can’t readily change or see.
    I don’t withhold anything but I also tend to use up
    Something until it’s broken before buying new.
    Nowadays it feels like all times have a “self destruct” timeline.

  7. Alice Says:

    If you don’t need to exercise self-control, should you?
    I do exercise it, though I think if an outside person were to look at my finances, they’d say that I don’t need to. It’s partly because it’s a pretty integral part of who I am, but I also think that the habits that got me to this place are the same ones that enable me to stay here.

    When your needs and strongest wants are being met, how do you decide what to spend on?
    I don’t have a very strong drive to spend. For me, if it’s something that I want, I usually let the wanting-state sit to see if I still want whatever it is as time passes. Do I remember it? Am I still thinking about it? Do I feel like it’s a justified and worthwhile thing to get? Do I want it, but only to the level of $, yet the price is $$ or $$$? If it’s in a category that requires research, have I done the research and made a decision, or did I do the research and decide that I wasn’t done researching? I am capable of waiting for years before I pull the trigger on some decisions. (Or possibly infinity. There are a number of things I haven’t gotten to yet.)

    How do you decide how much to spend on your wants?
    I don’t have a set value. I decide things more on a case-by-case basis.

    How do you prioritize your wants?
    Less expensive things don’t have to meet as high of a threshold. But there isn’t really a clear plan for prioritizing wants.

    What happens to your spending when you get a big income shock?
    During an early-career layoff, my spending remained about the same: rent, food, internet, etc. were all still there. For the second one– giving birth, taking maternity, and then rebuilding work post-child–spending was up because there were baby-related expenses that weren’t part of the previous equation. I would have liked for it to remain about the same or to have dropped, but it wasn’t in the cards for that one.

    Do you hide money from yourself?
    Not exactly. I have bank account money that’s for covering emergencies and things I’m likely to spend money on for the next year or so (groceries, mortgage, trip to visit family, etc.). Longer-term money goes to Vanguard, either in official retirement accounts (IRAs) or nebulous “long-term, maybe retirement” accounts. I don’t actively look at the Vanguard money much, though I know it’s there.

    One question that you didn’t ask, but which your post sort of gets to is the question of how much to save and at what point do you decide that you’re at “enough” for long-term saving. My general plan is to keep living in a way that allows me to keep maximizing my retirement accounts and also put money into the long-term accounts for the foreseeable future. I could stop working and live for years if I were to draw down those accounts… but I don’t think I’m to where those accounts could sustain me for the rest of my likely lifespan if I were to stop earning entirely. And aside from that, I take huge comfort from knowing in the back of my mind that if I have a crisis, I can most likely pay for it and not have it become an ongoing financial crisis. I had a birth complication and–even with insurance– the final hospital bill came to about $20,000. It was an unpleasant shock to see that number, but it was good to be able to tell myself that bills like that are what savings are for. And to be able to just pay it. I still don’t know what my own “enough” is. When all is said and done, it may turn out not to be a number, but rather a feeling.

    • nicoleandmaggie Says:

      I don’t actually know how long we’d be able to survive given our current spending and our current savings. I suspect if we had a lot of free time we’d have higher spending because we’d be going places and trying expensive hobbies and buying even fancier foods. Things will also change once the kids are (started and) done with college.

  8. Matthew Healy Says:

    Right now I’m a poster child for why it’s great to have plenty in the emergency fund: I recently resumed working after six months unemployed. We were accustomed to spending at a level that DW’s take home would almost cover, so between her income and plenty in our emergency fund I had the luxury of finding a new job that’s a good fit rather than just get a job, any job, ASAP.

    • nicoleandmaggie Says:

      That’s definitely a good reason to have extra money, which DH has found useful in the past.

      But what about if your emergency fund is already well full enough or you can live on your wife’s take-home pay plus a little savings pretty much indefinitely? What if you end up at a level of security that has been unfathomable and still have money left over? At what point does it get diverted to frivolous spending?

  9. Leigh Says:

    If you don’t need to exercise self-control, should you?
    I feel like our spending hasn’t really increased despite worrying about it much less?

    When your needs and strongest wants are being met, how do you decide what to spend on?
    My husband recently brought home AirPods Pro (the noise cancelling ones) and I, uh, stole his. I previously thought the AirPods were kind of silly but I love the noise canceling ones so much! So then he suggested they should be Christmas presents and we bought a new pair for him. We’re both pretty cautious spenders so we generally just spend money on what we want and if there isn’t budget for something we want, we usually think about it and then increase the budget.

    How do you decide how much to spend on your wants? How do you prioritize your wants? What happens to your spending when you get a big income shock?
    We use % of gross income for some categories (which helps with the income shock piece too): travel, personal spending, and charitable giving. Everything else is just whatever we feel is reasonable. That hasn’t changed all that much, so I’m fine with where we are. We do still try to keep to at least a 50% savings rate though this year that didn’t really happen because blinds, moving, and selling are $$$. (But we did sell our apartment successfully, yay!)

    Do you hide money from yourself?
    We don’t really hide money from ourselves. I feel like the main thing restricting us at the moment is that we can’t pay our new mortgage with just my husband’s salary – we use part of his RSUs for that, which seems sort of blasphemous? I feel like that creates an artificial scarcity in our budget. He can’t get any more than a 5% raise permanently at this company from where he is now, so we’ll have to live with that.

  10. undine Says:

    I deeply hate shopping, so the Christmas season is always really stressful. But hating to shop also means that I’m not looking for things to take up my money, so I tend to save it.

    Also, and not to be a downer, many people live *a really, really, really long time* these days and seem to have dementia for quite a period of that. I am morbidly drawn to those NYTimes articles about “I quit my job to take care of my ailing mother and cashed out my retirement savings to pay for her medical care, and oh, look, she’s 99 and still chugging along and I am doomed.”

    • nicoleandmaggie Says:

      That’s in the back of my mind too. My parents say they’re ok (and have enough saved to get into a nice nursing home) but so do many people who aren’t. On the plus side, my sister has a higher income than I do after her last raise so will be able to help out. (Last January I sat down with her and we fixed her retirement contributions to max out and sold some of her company stock and did backdoor Roth’s. We’re going to do the same this year.)

      My in-laws have pensions and my MIL went through all of this with her mother not so long ago. There’s zero dementia in FIL’s family (men die suddenly of heart attacks, women realize they’re going to die and get all their affairs in order, both at relatively old ages) and MIL has lots of comorbidities and a DNR order. So I tend to trust their plan more (plus one of the SIL is a SAHM and all the other siblings live in the same state, so it’s not all on us).

      • undine Says:

        That sounds good, and when the time gets closer: Power of Attorney (medical & regular). You’re so savvy about the financial parts of all this that there wouldn’t be a problem anyway.

      • nicoleandmaggie Says:

        I don’t know about that. My father is difficult even without a dementia diagnosis and although 10 years ago he said he was going to start moving complicated stock holdings into etfs, not only has that not occurred, his stock picks seem to be getting riskier. Everything is already such a mess—one of the main reasons I only do index funds and etfs is not just because they’re economically optimal according to research but because of the nightmares of dealing with stocks he put in my name back in the 1980s. (PG&E was the main one—it went bankrupt right after he transferred it to me without informing me, meaning I found out in April that I owed taxes I didn’t have on a stock that was worthless that I could have sold to pay DH’s student loans and occasionally eat meat had I known. I did make him give me the dividends I was also paying taxes on that he had pocketed but that took a lot of arguing.). My mom promises to hire a company to untangle it all but if she predeceases him I don’t know what’s going to happen. Thankfully neither my sister nor I need their money as in that scenario I suspect it will all be gone, gambled on risky health stocks, or whatever he decides the new sector is.

  11. undine Says:

    Hmm. Not that this is happening now for you, but for the future: with all the parents, we noticed a loss of executive function or an inability to plan and execute plans that happens several years before actual dementia. Maybe it’s just a thing with old age, but we heard a lot about what they were always going to do, but they never did it. We couldn’t move them along or have them do things because they were always “just about to do it if we would just leave them alone.” I’m sorry to go on and on about this, but this whole process was pretty traumatic–not the illness and death, but the years of trying to work around the barriers they had set up and trying to prepare for the disaster that was looming if they had to go into a nursing home–which they would never have agreed to do. Looking back, I can see that the problems started years before the stubborn refusal to let anyone help with paying bills did.

    • nicoleandmaggie Says:

      Yeah, it’s hard. We saw DH’s mom go through this with his grandma and it’s definitely not easy. (And to a lesser extent one of my uncles with my grandma—my parents were too frail to share physical responsibility in their split level after my sister left for college.)

  12. First Gen American Says:

    When your needs and strongest wants are being met, how do you decide what to spend on? Spending requires time. How much I spend and what I spend it on largely depends on how much free time I have to figure that stuff out. Big spending decisions like vacations usually get decided when I have time off.

    How do you prioritize your wants? Usually a discussion with spouse on whats the next big project or expense. If we both agree it’s usually a good choice. Anything small I end up buying it if it inconveniences me enough times to be annoying. We also discuss physically big purchases no matter what the price. For example, we did discuss the purchase of a rowing machine for my son even though I was getting it for a token amount from the gym I worked at.

    What happens to your spending when you get a big income shock? Do a balance sheet…income vs expenses and adjust accordingly. The last job loss we had, we sold our house early and moved into our fixer upper way before plan. First winter was tough but it would have been tougher paying for 2 houses with one income.

    Do you hide money from yourself? Yes. Anywhere but at my main bank. I am also a big fan of save every paycheck and make it automatic. It adds up fast.

    • nicoleandmaggie Says:

      How do you decide when it’s time for a vacation or how much money you should be spending on a vacation?

      • First Gen American Says:

        We usually do a “big” expensive vacation every other year and a cheaper driving one in the off years. We try to do something over feb or April vacation but not both. I can’t stomach an expensive big vacation every year but we find travel to be important so it’s every other year. Sometimes there are events like weddings that dictate that stuff. I tend to make loose goals like “do something new” “go somewhere we’ve never been before” and that forces some action annually. Over a lifetime it’s a lot of new experiences.


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