# You've become FI before you retire - do you change how you spend?



## janus10 (Nov 7, 2013)

There could be many reasons why, even after achieving FI, you continue to work (perhaps to ensure a fully indexed pension, or to create a larger safety buffer, or work is still enjoyable, kids aren't truly independent, etc.).

Do you continue with the same spending habits as you always have, or do you loosen the purse strings somewhat, treat yourself a bit more, maybe even buy some big ticket items now rather than wait until budget is tighter?


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## 0xCC (Jan 5, 2012)

Personally my plan is to get to FI and then take 2-3 years to see if we can actually live just off the investment income. This will allow us to bank the regular income to create a very nice cash cushion (aka cash wedge but I don't totally understand that concept at a cash flow level) and also do some big ticket spending on longer-term things (some renovations, maybe replace the car). That will mean cash requirements in the first 8-10 years of retirement will be much lower and in our case there my wife's DB pension will kick in at 65 that will basically make any (unlikely) cash flow restrictions as we approach 65 disappear.

The current plan is to be FI around 45 and probably retire by around 48 but maybe sooner, I'm 43 in the fall this year and I am sort of expecting that my employer isn't going to be producing the things that I work on for more than 3 more years...

If I found myself in the situation where I was still working (and mostly enjoying it) and I had all the other things covers (cash cushion, major spending for the next 10-15 years done) I would probably look at splurging a little on things that would maybe not be possible with the predicted cash flows in retirement. I would make sure those things wouldn't have cash flow impacts in retirement, things like a higher end car even if paid with cash could still have higher maintenance bill and insurance costs for the whole time the vehicle was owned. Things like nicer trips or possibly service help around the house to allow more free time (like lawn mowing, maybe house cleaning, stuff like that) while still working but that wouldn't be too hard to stop spending on when finally retired.


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## rikk (May 28, 2012)

I worked past FI, my spending philosophy did not change during that time, my savings philosophy went up a notch though ... e.g., I didn't want a new to me vehicle then, but maybe later ... I traveled enough with the work, but maybe later ...


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## OnlyMyOpinion (Sep 1, 2013)

We found it difficult to declare financial independence with 100% certainty (i.e. that enough has been saved to provide income for 2 until death). It is built on a set of assumptions that may or may not end up being correct (inflation, taxes, longevity, etc.). So continuing to save as much as possible to build up a 'buffer' and higher level of certainty made sense to us. 
That said, we did not scrimp on vacations with the kids, visits with family through the years, etc. Getting long-term home renos out of the way, getting an economic and reliable (poss. new) vehicle makes sense, although they could be built into your future plans.


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## cainvest (May 1, 2013)

My short answer ... keep doing what you've been doing and continue to save, at least for a while.

I don't see becoming FI as a definitive line, after all there are a number of assumptions one makes in calculating the amount needed to get there. As we know, future expenses and investment returns are variables so having some extra cash or a bigger safety buffer as you put it is a good idea IMO. After that it would depend on what your goals in life and retirement are, maybe you'll want to start trying a few new hobbies while you're still working, lay out plans to start your own business or just get some things you've always wanted to buy. Becoming FI gives you more options and when you decide to follow one of them instead of the status quo is a judgement call everyone will have to make on their own.


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## gibor365 (Apr 1, 2011)

> in our case there my wife's DB pension will kick in at 65


 We just got my wife's DB pension statement ... so if she stop working , she can leave money with company pension plan and start getting pension from 55 , obviously amount will be much less if she start getting it at 55 than at 65, but it should give some flexibility....if income will be sufficient , DB pension can start later if not - at 55.... I just not clear when you should give notice to company plan that you want to start getting pension. :upset:

As per spendings.... on one hand it will be less .... probably we won't need 2 cars and public transit spendings, on vacation we can go not when kids on break, but off-season when prices are cheaper, now we don't have much time and buying a lot of groceries once per week and after about 20% throwing into garbage ... 
On the other hand, when retired we won't have medical benefits and should pay full cost of medications and dental....


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## Eclectic12 (Oct 20, 2010)

gibor said:


> .... I just not clear when you should give notice to company plan that you want to start getting pension. :upset:


Get her to ask her HR department.

The recent retiree's at my company say the HR department requires something like three month's lead time before the payments will start showing up in one's bank account.

I expect this likely will vary by company/plan.


Cheers


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## avrex (Nov 14, 2010)

janus10 said:


> Do you continue with the same spending habits as you always have, or do you loosen the purse strings somewhat, treat yourself a bit more, maybe even buy some big ticket items now rather than wait until budget is tighter?


I would say, yes, you can loosen the purse strings.

If you've been disciplined in your spending/saving habits throughout most of your life, then I think you can trust yourself in this regard.


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## lightcycle (Mar 24, 2012)

Depends on what the "big ticket items" are. Is it a true one-time cost, or will it incur additional ongoing expenses?

Like a big 8-cylinder SUV is going to cost more in maintenance, insurance and gas above and beyond the purchase price.


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## houska (Feb 6, 2010)

I would phrase it slightly differently. "Being FI" is a consequence of how your current wealth and future spend match up (along with assumptions about growth, inflation etc). So I *feel* FI based on how much we plan to spend and when, both regular expenses and a few specific major one-offs. If the equation continues to balance with spending more, that's great. If not, you're not as FI as you thought....and either need to scale back your expenses or work with a bit more focus on earning income to get back into balance.


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