After decades of saving/investing, it’s hard to immediately flip a switch and go into spending mode.

Spending is a skill that you should develop on your way to FI, so that you’re better at it when the time comes to do it.

Here’s what worked for me over the last few years:

Listen Now

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

How to reframe expenses and recalibrate how you value money (e.g. College Calculation, 0.01% Rule, etc.)
Why you should expect inefficiencies/waste as your net worth grows
The benefits of splurge accounts and forced annual-spending targets
Balancing the idea that “everything is free” with the benefits of incremental improvements
The importance of prioritizing “now” over “the future”, while still spending/saving for both
How to give more while increasing the personal benefits of that giving

Show Links

Full Transcript

Mad Fientist: Hey, what’s up everybody? Welcome to the Financial Independence Podcast. I know it’s been a while since I’ve been in touch, but as I mentioned in my last post, things have been busy around here with two small kids, but this episode is a long time coming. I know I’ve been promising this for at least a few years now, and it’s a topic that I’ve been actively focused on since 2019, and it’s getting better at spending money.

And I realize that’s a crazy thing for some of you out there to hear that this is a problem. And I completely admit it’s a great problem to have, but I think it’s a very real problem with people that pursue PHI because we’re so good at saving and we’ve saved all our lives and we’ve built an identity around saving, and then all of a sudden you’re just meant to flip a switch and change over to spending and it’s a lot harder than it sounds. So this is something I’ve been working on since 2019 because that’s when I first asked Ramit Sethi from iwillteachyoutoberich.com to come onto the podcast because I figured he was the ideal person to help me become a better spender.

And he was, it was a great episode. I asked him back onto the podcast in 2023 to catch up again and review my progress and answer a few other questions I had with regards to spending. And both of those episodes are great. So if you haven’t heard those, I’ll link to them in the show notes, but this is something that I’ve been focused on since 2019.

And even though I’ve been making gradual progress, it’s not fast enough because I’m 43 now, and your peak spending years are 40 to 60. So I’m already over 15% of the way through my peak spending years, and I’m still talking about getting better at spending, like it’s some future thing that I need to do and actually I need to do it now.

And this really hit home. Over the last few months, because we sent our 3-year-old off to nursery, which I guess in America is preschool. And it was a shock, and I took it way harder than I expected to. I was just like, oh man, this is the first time that our son’s like doing something without us and starting his own life.

Without us in it. And it was, it was a big eye-opener and made me realize, okay, this time is so precious and there’s not that much of it. Because in 10 years, in a decade, he’s gonna be a teenager and maybe be too cool to hang out with us. So that was a big slap in the face to say, okay, you need to get better at this now, and there’s no point having a ton of money when you’re 60 and the kids are outta the house.

It’s time to get better at this now, and it’s time to do it quickly. So this episode is a compilation of everything I’ve learned over those last six years, the things that have worked best for me. So hopefully it’s useful to you no matter where you are on the five Journey because. The money’s gonna be spent eventually.

And if it’s all given away after you die, that seems like a shame. And as Bill Perkins said, in Die With Zero, “When’s the party?” And that’s also a great interview to listen to if you haven’t heard that one yet. I’ll link to that in the show notes. But yeah, when’s the party and there’s gonna be a party, and when is it?

And that’s what I’m starting to think of now, and I definitely wanna be a part of it. So, to kick things off, I’ll start with something that helps to unwind some of those previous habits that were useful for saving towards FI but have now become less useful when I’m post-FI. And that is less specific tracking.

Pre FI, I had a spreadsheet that broke down all of the spending categories, and I was able to tally ’em up every month and see how they changed and all that sort of thing. And that you can still download that spreadsheet at madfientist.com/spreadsheet. And that was the one that served me well to get to FI. But after FI, I don’t need to or want to track all of those individual categories. It’s a waste of time, mental energy, and it’s actually counterproductive because what gets measured gets managed, and I don’t wanna manage it anymore. I don’t wanna see that I spent over budget on restaurants the month before, and then not go out to a restaurant this month because of it.

I don’t care. It shouldn’t matter, and it doesn’t matter. So the first thing that I had to do was just. Streamline my financial tracking and just track the main thing, which is net worth. And that’s really all that matters at this stage. So if you go to madfientist.com/post, you’ll find my post-FIRE spreadsheet that I created, and that’s what I’ve been using instead ever since I left my job because I just don’t care about the details anymore.

And it’s more a big picture thing. And I’ve actually built some custom software that I’ve been also using. So if you wanna become one of the beta testers for that, make sure you’re on the email list. And if you’re not, you can just go to madfientist.com/advice, and you can sign up to the email list there.

But it’s something that I’m gonna hopefully be releasing next year, and it’s been helping me to not only keep track of my spending at a level that I want to, but also makes it more fun to spend that money and save for specific things. So that was the first big change. And then the second one is trying to recalibrate my brain because I don’t know about you, but my brain is trapped at 20.

I still feel like I’m 20. I still feel like I can do the things. I can do it when I was 20, and I am definitely far from 20. So I still sort of feel like I have the net worth I did at 20. So, for instance, back in college, if I had a friend come up to me and say, do you wanna go out for dinner? And they picked a place that was gonna be over 10 bucks, I’d be thinking twice about it. because I’m like, oh, 10 bucks. That’s a lot. I don’t need to blow 10 bucks on dinner tonight. And it’s crazy. But 10 bucks still feels like a lot of money to me because of that. And that was like sort of my like cutoff number of, all right, this is something I should second guess, or I shouldn’t second guess this.

So, to recalibrate my brain. I took $10 and I divided it by my net worth at the time. And then I’ve multiplied that by my current net worth to find out, alright, what is $10 equivalent to now? And that calculation is mind blowing because it was really the first time that I appreciated that random number in the bank that I’ve been looking at for all these years and it’s, it made it seem like, whoa, okay. I am on a whole different level these days, and these small purchases, or even...