Learning to spend

the_cat · 20 October 2019 at 1:01PM

After years of saving and planning, OH retires in two weeksat the age of 57
The figures stack up nicely but irrational thoughts of 'not being able to afford' it still linger. I think this is stemming from the need to change our mindset to it being 'OK' to use savings to live on after a lifetime of accumulation.
Any tips from those who have already taken the plunge?

cfw1994 · 20 October 2019 at 1:19PM

Good luck!
I'm in the position of strongly considering the same move in the next 6-9 months.
The move from accumulation to decumulation is, I feel, the hardest mental step to take.....so watching with interest!

I suspect in my part it will be focussing far to closely on finances for the first 6-12 months....but that can't be bad, right? I think tracking spending closely (to start at least) will be important to me, to try to get a sense of the sums working out as I hope!

Sea_Shell · 20 October 2019 at 1:26PM

We've recently done it!! (I have a thread!! - shameless plug)

It's early days, so we're still in the mildly cautious stage.

We've been monitoring our spending closely for approx 3 years, and we don't anticipate any major changes just yet.

When you've "squirrelled away your nuts" for years, it takes a change of mindset to start digging them up!!!

Brilley · 20 October 2019 at 2:19PM

...similar situation when we went early a couple of years ago. Did lots of spreadsheet analysis and "what if's but still struggling with the concept of spending rather than saving, and since "finishing"our overall "pot" has gone up!

Even my "worst case" projection shows we could probably spend at least 60% more in retirement than we did when we were working..... Completely daft as we have no debt and nobody to leave it to either.
It's very hard to get out of the "saving" mode, however I think the best thing to do is set up a spreadsheet with your current balance and projected incomes, then decide how much you can "afford" to spend, and then spend it! (Which is exactly what we have now done, but still find it difficult!).
Good luck, and I look forward to hearing any pother comments!

Linton · 20 October 2019 at 2:31PM

Been there and done it. My solution is:
- create a year by year spreadsheet based on actual capital, assumed investment returns, inflation and annual drawdown amount.
- adjust the drawdown until you are left with a moderate sized pot at say 95.
- Regard the assumed drawdown as a target to be achieved. If you find you cannot achieve sufficient expenditure to use up your drawdown allocation spend some of your capital on a significant one-off item such as a holiday, new kitchen, gift to family, or a charitable donation.
- update the spreadsheet annually adjusting the numbers in the light of reality

I have found that despite varying actual investment returns over the years the drawdown stays pretty constant. If it doesnt your portfolio is too risky.

tigerspill · 20 October 2019 at 2:55PM

I am in this situation.
I have retired (53) six months at the end of October and OH has 20 months to go.
My earnings were by far the majority - an this "tap" has turned off.

I have lots of spreadsheets - all positive. The last six months shows I am OK in the war that have changed as expected.

I have build a lot if contingency in and I dont need to have anything left at the "end" so prefer ro run my assets down to zero utilmately.

Everything says I am in really good financial shape - but yet I still can't spend money that way I think I can and should.

This is really hard!

waveydavey48 · 20 October 2019 at 3:44PM

Very interesting thread - thank you. I'm in the same position as OP and just can't shake the, frankly bizarre, mindset that spending the money we have saved over the last 40 years is just wrong. Watching with interest.

cfw1994 · 20 October 2019 at 3:52PM

Linton wrote: »

Been there and done it. My solution is:
- create a year by year spreadsheet based on actual capital, assumed investment returns, inflation and annual drawdown amount.
- adjust the drawdown until you are left with a moderate sized pot at say 95.
- Regard the assumed drawdown as a target to be achieved. If you find you cannot achieve sufficient expenditure to use up your drawdown allocation spend some of your capital on a significant one-off item such as a holiday, new kitchen, gift to family, or a charitable donation.
- update the spreadsheet annually adjusting the numbers in the light of reality

I have found that despite varying actual investment returns over the years the drawdown stays pretty constant. If it doesn't your portfolio is too risky.

Do you have an example perhaps 'sanitised' copy you could perhaps share in a pm?

I've been working on one for some time, but I don't yet feel it is cohesively tying spending to the investment performance: perhaps I am focussing too much on modelling investment performance & not enough on "what the spend goes on"!

Very happy to share back (to anyone who wants to pm me!), I'd welcome feedback!

Mnd · 20 October 2019 at 4:18PM

I am prepared to lease you my wife who will have no reservations at call about spending your money :T

Alice_Holt · 20 October 2019 at 4:21PM

tigerspill wrote: »

I am in this situation...

Everything says I am in really good financial shape - but yet I still can't spend money that way I think I can and should.

This is really hard!

And me.

Even telling myself that purchases now come with a 40% saving, (less money subject to IHT), hasn't really done the trick.

Decades of critically assessing spending in order to build the funds for future eventualities, is a difficult habit to change. Plus I don't enjoy (perceived) extravagance, and feel much happier with a sense of having achieved value for money.

One thing I found I have been able to quite happily spend money on, is gifting . This could be -
a) Funding saving schemes / SIPP's for my nieces (particularly as it involves investing for the future !);
b) Gifts to favoured charities; and
c) Gifts / treats as a thank-you to friends who have been important in my life.

NeilCr · 20 October 2019 at 4:33PM

Alice_Holt wrote: »

And me.

Even telling myself that purchases now come with a 40% saving, (less money subject to IHT), hasn't really done the trick.

Decades of critically assessing spending in order to build the funds for future eventualities, is a difficult habit to change. Plus I don't enjoy (perceived) extravagance, and feel much happier with a sense of having achieved value for money.

One thing I found I have been able to quite happily spend money on, is gifting . This could be -
a) Funding saving schemes / SIPP's for my nieces (particularly as it involves investing for the future !);
b) Gifts to favoured charities; and
c) Gifts / treats as a thank-you to friends who have been important in my life.

And me, too!

I think it's seeing your savings dwindle a bit and knowing that you probably won't be able to replace them.

I am in a very lucky position in that I am "comfortable" and am, also, about to receive a considerable inheritance. Even with this I struggle with spending money. In a way it's hard as I don't really need anything. I rarely drive and have an old car which suits my needs. I love my house so have no need to upgrade and I am not a holiday person - inhibited with this, too, because of a very needy and cranky cat

My lovely partner and my friends urge me to spend and not worry but, even though I know that is right, I still hesitate

One thing I do do is to get the best tickets and stay in top hotels when we go out and about. And I have a cleaner (one of the best things I have ever done) and don't fret about food and drink shopping and eating out

I am glad I am not alone. My partner thinks I am mad. She would definitely be out and about spending it!

Learning to spend

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