Life After Debt: What It’s Like in the Third Stage of Personal Finance
Published on - August 12th, 2010 (by J.D. Roth) I paid off the last of my debt in 2007, quit my day job in 2008, and have been working to build wealth ever since. As I wrote early last year, I’m in the Third Stage of personal finance: I’ve paid off my debt, built a cash cushion in savings, and am maxing out my retirement accounts. And after doing all of these things, I have money left over to spend on comic books and travel. I’m a lucky man.
For the past year, GRS readers have been asking me to write more about the Third Stage of personal finance. What’s it like there? What choices does a person face? What sorts of things does she do with her money?
Though I’ve wanted to respond to these requests, I haven’t.
- For one thing, I’ve felt like there isn’t a whole lot to say. Mostly, the Third Stage of personal finance is like the earlier stages, but without the debt. I’m still pretty careful with my cash, but instead of saving to pay off past purchases, or saving my emergency fund, I’m now saving for other goals — like travel.
- For another, I’m reluctant to talk about some of my spending. It’s not that I think I’m making poor choices — I’m not — but that taken out of context, some of the numbers look shocking. It’s very difficult to put yourself in another person’s shoes, after all.
Today, though, I’m going to write a little bit about the Third Stage of personal finance. I’m even going to share some actual numbers. All I ask is that when you see these numbers, you understand that I’m making conscious decisions to spend this money, and I’m sacrificing other things in my life to make the purchases I describe.
The cost of fitness
Tonight was Guys’ Night Out. Or Geek Night. Or, as my sister-in-law calls it, Dragon and Troll night. Every month, my band of geeky friends gets together for some sort of activity. It started out as a chance to play Dungeons and Dragons, but it’s morphed into an ever-changing variety of events.
Tonight, for example, we headed into downtown Portland to watch the Portland Timbers take on the Minnesota Stars. The Timbers are the local pro soccer team, for which I bought a pair of season tickets last spring. (I paid $435 for two general admission tickets.) We geeks didn’t watch the game from the stadium, though; instead, we headed next door to the Multnomah Athletic Club. One of our group is a member, and he signed us in so we could watch from the club’s balcony, which overlooks the south end of the stadium.
The Multnomah Athletic Club is amazing. It’s posh — it oozes wealth. It looks like the sort of place where you might have to wear a suit and tie just to jog on the treadmill. Everything is dark wood and brass and wall-to-wall carpeting. The attendants at the door are in suits and ties. It’s not a very J.D. place.
“Wow,” I said to Josh as we waited for the game to start. “This place must be expensive.”
“I knew somebody was going to bring that up,” he said. “It is expensive, but my parents have been members for almost forty years. It only cost them $700 back then.”
“$700 for what?” I asked. “Per month?”
“No, $700 for the initiation fee,” Josh said. “I think the fee is getting close to $10,000 per family now.”
“$10,000?!?!?” I asked. “Just to join?”
“Yeah,” said Josh. “And there’s a waiting list to get in. Plus, once you do join, dues are about $200 a month.”
My mind boggled. I was about to say, “That’s outrageous!” when I realized: I’m paying $200 a month for my gym, too.
Whenever I talk about Crossfit and the amazing things it’s done for my health, I always leave out the cost. Yes, I’ve lost 30 pounds. Yes, I’ve dropped from a size 38 to a size 32. Yes, I’m stronger than I’ve ever been in my life. But this progress has come with a cost: $200 a month, to be precise. You know what? It’s a cost I’m happy to pay, and one I plan to continue paying. If this system is working — and it is — then it’s worth every penny. If I’m not fit, nothing else matters. (But again, taken out of context, this expense would look ludicrous.)
So, I admitted to Josh that I was paying just as much as he was for a gym membership. (But without any initiation fee, of course.) We stopped chatting as the match began.
The cost of fun
We watched the Timbers and Stars play to a 2-2 draw in front of a large crowd. As the game wound down, I used my binoculars to spy my seats for next year. In 2011, the Portland Timbers will join Major League Soccer, and last month I spent $1410 to purchase a pair of tickets on the mid-field line. I’m eager for the season to start, and the current season isn’t even over!
Walking back to my car after the game, I thought about that expense: $1410 for a pair of season tickets for a soccer club. A couple of years ago, I would have thought that was insane. I wouldn’t have been able to view it as a justifiable expense, no matter how much I had in savings, no matter what sorts of sacrifices I made in other parts of my life. I would have condemned it as lifestyle inflation.
Maybe it is lifestyle inflation. But it’s also an example of conscious spending. I love soccer, and I can afford the tickets. I’m meeting all of my financial obligations. When you’ve paid off your debt, saved for emergencies, and set aside money for retirement, whatever’s left over is yours to do with as you please, right? In my case, that means that if I want to buy Portland Timbers tickets, I can. I have no regrets.
These are the sorts of things I think about in the Third Stage of personal finance.
The cost of travel
There are still financial dilemmas in the Third Stage. Being here doesn’t mean I can afford everything I want. In fact, I’m always picking and choosing. (It’s just that the things I’m choosing between are sometimes more expensive than before.)
For example, Kris and I just learned about an opportunity to travel to Africa in February. Our college has put together a package tour for alumni that includes visits to South Africa, Botswana, Zimbabwe, and Namibia. It’s a 19-day tour and it costs $5600 per person.
Well.
I’ve been begging Kris to go to South Africa for a l-o-n-g time. I’ve wanted to visit ever since I read Cry, the Beloved Country. (Jolie Guillebeau doesn’t help by always reminding me that South Africa is her favorite place she’s ever visited.) Kris has always steadfastly refused to consider a trip to South Africa — until now. She actually wants to go on this tour, and so do I.
The problem is that even though we’re in the Third Stage of personal finance, $5600 (per person!) is a lot of money for a trip. Especially considering we’ve already shelled out a lot for our upcoming journey to France and Italy.
Can we afford to take on the expense of traveling to South Africa in February? And if we can, is it something we really want to do? As I drove home from the game tonight, I thought about it.
First, I considered how to come up with the cash. We’ve already funded our trip to Europe, so that’s not an issue. I just need to figure out how to come up with $5600 by February. (Because Kris and I keep separate finances, she has to come up with her own $5600. That’s not really going to be a problem, though. Remember: She’s always been the responsible one, and she has tons of money in savings.)
I considered my options:
- Last week, I canceled my Cycle Oregon registration. Cycle Oregon is a week-long bicycle tour of the state, and I’ve always wanted to do it. But after riding 100 miles in one day last month, I realized I have zero desire to bike 500 miles in one week. I’ll be getting back about $750, which I could immediately set aside to save for Africa.
- I could save up some of the money by going on a comic fast. I give myself a monthly comic-book budget, and if I were to reduce this to zero (or something near zero) for six months, I could accumulate a few hundred dollars.
- I could borrow from my Mini Cooper fund. Yes, I bought a used Mini last year, but since then, I’ve been saving for an eventual replacement. The car is running great at the moment, so it’s probably safe to pull some money from this account.
- Similarly, I could borrow from my tax account. I’m not sure I’ve mentioned it before, but I have a separate savings account in which I save for taxes due in April. (Because I’m self-employed, I’m responsible for setting this money aside myself.) I could borrow a few months of contributions from this account, and then double my savings efforts in the spring.
- And most drastically, I could conceivably borrow from my emergency fund. It sits at $20,000 now, which is more than ample for most short-term needs. If I drew it down to $14,000 or $16,000 or $18,000, odds are I’d be able to replenish it without a problem.
Plus, I could make sacrifices in other areas of my life: I could eat out less often, I could make better use of the public library, and so on. At its heart, this is the same sort of decision I used to make, but on a different scale. Instead of trying to scrounge up $500 per person to spend a week in Victoria, B.C., I’m now trying to find $5,000 per person to spend three weeks in Africa.
Again, is this lifestyle inflation? If so, is it wrong? And do Kris and I really want to spend this much money on a three-week vacation? I don’t know, and I’m not sure how to find an answer.
Life in the third stage
These are the sorts of things I think about in the Third Stage of personal finance. Yes, we’re still growing and canning our own food, still looking for cheap entertainment, still shopping at thrift stores, and still asking for discounts whenever possible. Now, though, these aren’t techniques to help me get out of debt. Instead, they’re the steps that allow me to spend $200 a month for Crossfit, $1410 for soccer season tickets — and maybe $5600 to travel to Africa.
I’d love to hear from other folks who have reached this stage. What sorts of things do you spend on? Do you sometimes think, “Man, ten years ago, I would have thought this was outrageous?” Do you still make sacrifices in order to buy the things you want? Do you still practice frugality? If you’re in the Third Stage of personal finance, what’s life like for you? (And if you’re not there, do you find this sort of spending inspiring? Or is it intimidating? Infuriating?)
Portland Timbers fan photo by Jenny Cestnik.
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I am also in the saving stage and have been there for a long time. My spending adjusts to my income. If I have extra money, I get to do interesting things and travel to Africa. (Go, if you can make it happen! I loved it there.) If I don’t have money, I skip expensive trips and enjoy life in different ways. That attitude has kept me pretty much out of debt except for my mortgage.
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I DEFINITELY think you should go on the trip to Africa. It sounds amazing!
I found this post inspiring. Yes, some of your expenses made me gasp – especially the soccer season tickets! But then I have to think about my own likes – would I pay that much for a trip to Africa? Yes! I love to travel, and if I had six months to save up the money (and was already out of debt), I would do it in a heartbeat.
I often wonder about what life will be like without debt, so I enjoyed hearing about it from someone who is still spending their money wisely on things they love. Thanks, J.D.!
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I believe that I am in the 3rd stage, although, I have never been in debt and do not have a mortgage. My boyfriend and I both have jobs that pay well, but we remain quite frugal. I read a post (#27) that talked about the desire to be financially independent of their jobs. I have to say that this is absolutely true for myself. I battle lifestyle inflation by equating every purchase (be it rent, utilities, food, or luxuries) with the time I would have to sit at my desk at work to earn the money to pay for it. Its not that I hate my job; I actually like my job and the company I work for. But, my 9-5 takes up so much of my time and energy. In reality, my monetary resources are plentiful, but my time and energy are scarce. My job pays me to prioritize the company’s needs and goals above my own. I am young (24), and have a ways to go before I am financially ready to buy a house or retire from my job. But, working has given me a new appreciation for my own free time. At this stage I would rather accept a lower salary if it allowed me more free time to spend with friends and family, and further my own personal goals.
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I am not even close to Stage 3, but wanted to comment. I would think that if you were completely debt free, had an emergency fund and were saving for retirement, that it is no one’s business but yours what you do with your money. As I’ve stated in previous posts, travel is very important to us, and we still save for one one vacation a year, even while we’re paying down our debt. Being in our mid-50′s our main goal is to have everything paid by the time we retire, which may be in about ten years. Just recently, we were having a conversation about going to a Barry Manilow concert in Atlantic City this weekend. My husband felt we shouldn’t spend the money because we’re doing other things (going to the mountains in PA over LD weekend). I know he’s right, but I can’t wait until we get to the point where we can do things like that without even thinking about the cost. One day . . .
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Unfortunately, we are not yet out of debt, and still had to spend a large amount on an all natural, organic mattress for our daughter. We went with Savvy Rest. BEST purchase we ever made – you can see my review on their site about how much better her life is because of it. She was actually allergic/intolerant to her “normal” mattress. We paid cash for the mattress from a tax return and, with help from my parents, so fortunately we didn’t incur more debt to get it, but absolutely would have in a case like this. We are now saving up to get one for our son, then us.
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I don’t know if what we are is Third Stage, but it feels like it – maybe 2.5 Stage since we still have our mortgage, lol. We have retirement and regular savings goals that are the #1 priority, then we pay off our monthly expenses and splurges, and we have fun money allowances of $125 a month on top of the Vacation Account we contribute to every month.
I figure that as long as we always hit our goals for the future, then fun money is how to enjoy life currently too.
I hope you do go to Africa and have an excellent once-in-a-lifetime experience. If people can afford (actually afford) fun in their lives, I’d say jump on it like a rabid spider monkey!
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#63 Rahgu-I would sugget that post like these can also be encouragement. As someone who has been at both ends of a financial spectrum, its good for people who are struggling, expecially at the paying of debt level, to see that there is a light at the end of the tunnel. Its also important for people to see that there are still, almost always choices to be made. One thing still gets sacrificed for another thing. Different people find different costs exhorbitant. I expect that for everyone concerned about a post like this, for someone else there may be a “well, he can do it, so can I” moment if you will.
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We have been in Stage 3 for a few years now. (We are 39.) No debt/mortgage and plenty in savings–in fact we could probably consider ourselves FI…I no longer work and my husband continues to work part-time running our business(he could replace himself and the business would continue to run/provide income for us.)
The challenge in Stage 3 is that it forces you to really take a good look at what you want your life to look like; what is really important to you? I can afford all kinds of things/experiences now…what do I choose? How do I spend my time now that 40-60 hours a week are freed up?
In your case, JD, I wouldn’t borrow (from a credit card/HELOC/bank loan/tax account)for the trip, but diverting funds from other discretionary spending (the car/comic book funds)accounts is totally fair ball, in my opinion. The great joy of “Stage 3 finance” is that the choice really is yours.
Good luck and keep us posted on your decision!
~Cheers!
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I just wanted to post as a Thank You to J.D. This is exactly the kind of post I’ve been waiting on from you — the honest side of where you are right now. Its true perhaps, that some people cannot relate just yet. But that doesn’t make this less real and personal and important to us to hear — no matter what stage we are in ourselves.
I guess we are in stage 3, no debt but the mortgage, six month emergency fund, two secure jobs, etc. But I still find myself struggling with the guilt of spending on ‘unnecessary’ items, like a housekeeper, or a designer dress for our wedding. (We are getting married next month — all cash — already paid for.)
Its really refreshing to hear from you about the choices you are making, and being able to spend consciously on things that are you important to the two of you. Take the trip — I know I will.
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I am not a timorous traveler, but I would not consider going to South Africa, or anyplace in Africa, outside a professionally-organized and guided group. If that $5600/person includes airfares, surface transport, lodging, and food for the three weeks – it’s the deal of a lifetime and not to be missed.
As to postponing the Europe trip: J.D. says Kris is not someone to whom foreign travel is a lark. Starting off with a trip to more familiar and intelligible places is a good way for her to overcome some of her discomfort.
Frankly, if it were me and DH, I would be the one with savings and I would just pay his share because I wanted it to be an experience for the two of us. But Kris and J.D. have their own method and it seems to work for them.
As a personal trainer, I am very much in favor of people paying less than $7/day for a gym membership – if they like it and they work out. J.D. does. What kills me is the people who pay $20 – $50/mo for a gym membership and never go.
Season tickets? Hey, DH and I spend $1200/yr on our DISH service. Everybody’s got their thing.
I appreciate that J.D. decided to put some real numbers out there. I’m far from the 3rd Stage myself, but this kind of a discussion is a reminder that there *is* life after debt, and we still need to think about our relationship to money when we get there.
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Of course your money is yours to do with as you please, but as someone entering the third stage in the next month or so, I have to say that I find this rather uninspiring. You’re not doing anything wrong at all, it is your money and you have earned it. But it is also just “average” to spend more as you make more. Yes, it is Lifestyle Inflation (how else do you define lifestyle inflation if not spending more as you make more?)
I would think the third stage would be characterized by investing, continuing to live frugally, and working toward the Fourth stage, FI. Maybe you never want to retire, but you may one day be forced to.
I think the mindset that gets me is “after I pay my bills and save X% for retirement then everything else is fun money.” I think the attitude should be “I have $X of fun money and everything else goes to retirement.” Fun money (including travel, gyms, and comic books) should be the finite amount, even if that amount is more than you might have budgeted in previous stages.
Even in higher stages, I am still interested in frugality, too (esp. your garden project).
I don’t mean to be super critical. Like I said, I don’t think you’re doing anything wrong, and it is your money to spend as you like.
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@105 Apparently in some states you can get a break on sales tax on a natural mattress if you go in with a doctor’s note. Or you can avoid sales tax by buying out of state and delivering to where you live, which is what we did (though we were in the other state on a trip so we went to their showroom). They were having a free shipping special too and ended up being less expensive than our local option for the same mattresses and somewhat nicer frames.
Ours are delivered tomorrow– I have high hopes! I have to say that this mattress purchase was a lot less nerve racking than our first mattress purchase, back when we were at the first stage of finances, or even our guest bed purchase when we had liquidated our savings to buy a house. There is a lot to be said for getting out of debt and having a healthy savings account. You will get there.
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Another thing we’re doing with our money that keeps us from getting to stage 4 post-haste: We’re partly paying for college for one of DH’s relatives whose parents had her when they were 16, and will for her sister too (parents were 18) if she graduates from high school. If we weren’t doing that we would be donating more to charity, probably the scholarship fund of the private school my sister went to. That will be about 10K/year, including what we’ve put away in their 529s.
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As I’ve matured financially my priorities have shifted so much from the typical frugally-minded GRS reader that I find it hard to identify with many people on here at this point. I do largely agree with J.D. — I’ve been diligent and saved a lot of money (more than most of the people that are criticizing the way I choose to spend it), I can choose to spend it however I like — even if that means renaming my “Mini Cooper Fund” and calling it the “Africa Fund”.
So far this year I’ve put $22,000 into a house down-payment fund, several thousand dollars into a 401k, $5,000 into a travel fund, etc. I have assets available to me worth about $95,000 now. If I want to spend 5% of that chartering a sailboat in the Greek islands, I’m entitled. In fact, that’s where the “travel” fund is going — I just reserved my boat for a week at the beginning of the fall.
It sometimes seems difficult for other people to recognize that my priorities are *mine* and I get to set them. I could decide tomorrow that I really don’t want to buy a house, and so I could rename my “down payment” fund my “africa fund” or my “mini cooper fund”. It’s entirely my prerogative. This would not be me “spending money I don’t have”, it would be a shuffling of my priorities. There’s no inherit reason I should care more about, say, a Mini-Cooper than a trip to Africa, or even buying a house. This is part of the advantage of having large savings accounts — you get to be flexible on short notice to take advantage of opportunities that would otherwise pass you by.
To answer J.D.’s questions:
Despite the anti-physical-object/minimalism trend, I still buy some “stuff”. In terms of sheer number of things, I don’t buy very many, but I tend to buy nice things. This year I’ve bought a camera and a couple lenses for it, the total for that was probably around $3,000. I’ve also bought two surfboards, which is another $1,500 or so. I give myself a “toy” allowance for these sorts of things, but I also used some extra money I hadn’t expected for the camera. That’s pretty much it for “stuff” — just a couple of nice things per year. I don’t really count things like clothes in here, those just need to be replaced once in a while and I buy pretty utilitarian clothing.
I also buy experiences (but I’m getting sick of that terminology). A couple years ago I paid something like $7,000 for sailing lessons. I still haven’t taken all the lessons I’ve purchased (in fact, I’ve scheduled the next level of classes for a few weeks from now — I figured it’d be good practice before the Greece trip). That was expensive, but I think the experience has been worth it. It’s also sort of nice being able to take the remaining classes now for free. The membership doesn’t expire, so I can take the remaining lessons whenever I want in the future.
I’ve gone on several trips in the last few years. Costa Rica, the Bahamas, Mexico, India, Germany, Chicago, New York, Seattle, L.A., a road trip around the southwest US. Sure, I could have stayed home and saved money, but I’m better off financially every year than I was the year before, so I don’t feel like I’ve overspent at all. If my situation keeps improving, even slightly, I’m doing fine.
What’s funny is that 10 years ago, I would have found some of this spending outrageous, but not others. I would have bought the camera, for instance, and charged it, and thought it was awesome and I’ll pay it back later, but the trips out of the country? They would have seemed like the sort of things “rich people” do, and I would have figured they were out of my league. I was comfortable being a consumer of electronic gadgets, but “world traveler” wasn’t really where I saw myself. It seemed to grandiose.
As far as J.D.’s question: “Do you still practice frugality?”
No. Not really. I set goals for myself. I wanted to save $30,000 in my house down payment fund this year, and I wanted to go on two vacations (southwest road trip and Greece, as it turned out). I’m on track to meet these goals. I set reasonable enough goals that I figure I can probably meet them without stressing out about it too much, and I’d qualify much of what people do in the name of frugality as belonging to the “stressing out about it” category. Sure, I could have set my savings goal for the house at $40,000, and I probably could have met it with some serious focus on frugality. But why do that? Is saving $30k this year not enough? I think that’s pretty good.
I saved a bunch of money, I didn’t have to worry about whether my groceries were too expensive, and I still got to buy my “toys”. Sure, I could save more and worry about frugality, but it really is a marginal improvement in my savings account in exchange for an overall reduced quality of life, in my opinion. It’s not worth it. As long as my overall savings increase every year, I have no good reason to worry about frugality. I can buy nice cameras and shop at the fancy natural foods store as long as I can afford it. I’ll worry about frugality again if my income drops. I still remember how to do it if I need to.
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It doesn’t make sense to me that someone would pay $200 to go somewhere and workout when they can spend less than the cost for 1 month, buy a few things,and workout at home. A ball, some free weights, some bands and you are in business. Or go the the old fashioned way-get out and walk, do some push ups and sit ups.
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J.D. I hope you, and your other writers, do continue writing about Stage 3. Maybe you can have one of those warnings on it like when you have guest writers. Something like – this post is about stage 3 personal finances, read at your own risk if you are still paying off your credit cards. Althought, I think reading about stage 3 when we were deep in debt would have provided motivation.
I find stage 3 difficult, so I hope you keep posting about it.
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WOW! Lots of comments on this one JD!!!
I also travel with my significant other, who is also a little more cautious about where she desires to travel. Russia will be a bit out of both our comfort zones but I think it will be a great experience and likely open our minds to more extensive, off-the-beaten-path-type travel.
We’ve done the Caribbean about as much as we’d like (though islands ARE nice). Its time to expand our range a little. This year we’ve been to Iceland and I spent a week in Germany and took a day trip by train to Luxembourg. We took a cruise this past January and visited Belize, Mexico, Honduras, Grand Cayman. We spent 2 weeks in Hawaii and a couple of weeks after getting home we were in Florida.
If there is one thing that I think money ought to be spent on, its travel. So, from my point of view, two “major” vacations in one year could never be enough and I know you’ll be able to enjoy them both just as much whether you took them one year apart or one month.
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Des (110) re: I think the mindset that gets me is “after I pay my bills and save X% for retirement then everything else is fun money.” I think the attitude should be “I have $X of fun money and everything else goes to retirement.” Fun money (including travel, gyms, and comic books) should be the finite amount, even if that amount is more than you might have budgeted in previous stages.
It doesn’t need to be either/or. It’s a psychological game. Different things work for different people.
I have a set minimum amount I save evey month, and certain fun (usually small, see: I Have Trouble Spending Money, above) expenses I let myself indulge in regularly. If I have money left over, I split it between fun things and responsible, long-term things. Usually this means I split additional monthly savings between a travel savigns account and index funds.
The fact that I get to use 50% of whatever extra I save for travel is an incentive to save more. The fact that 50% of whatever extra I save goes to long-term savings means I am taking my medicine, too. If I took your approach, and every extra dollar I saved went to investing, I suspect my balances would be lower in the end because –oops!– I would unintentionally create a situation where there was little “extra.” For me, the idea of investing 100% of whatever I save does not provide nearly the same incentive that travel does. Maybe this says something about a lack of discpline on my part, but I prefer to think of it as having a wealth of self-knowledge.
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@tb (#114)
Like I said, spending $200 on a gym wouldn’t have made sense to me a few years ago, either. But I have a ball, some bands, and some weights here at home, and I don’t use them. Maybe I’ll get there some day, but a $50 solution that doesn’t actually work is a waste of money. A $200/month solution that does work is a bargain.
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Preach it, JD, on your comment #118. Health is important.
I have a friend who only exercises if she has scheduled appointments with a personal trainer. When she quits the personal trainer, she soon quits exercising altogether. She can afford the personal trainer, so I think this is money well spent.
I HATE exercising with an audience, so no club or trainer for me. But I have a $2000 treadmill and a set of weights in the basement, and I use them 6 days a week. We have perfectly nice sidewalks in our neighborhood, but I wasn’t using them because I don’t have time to exercise until late at night. Doesn’t matter if the sidewalks are free, if I don’t use them. The $2000 means I exercise, and it’s completely worth it.
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JD-
If you get to see water buffalo fighting lions fighting alligators, the $5600 will be well worth it
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That’s awesome for you! That’s where I want to be.
Trouble is, I used to love reading these things and hearing about people’s success. It was a motivator, but after 2-3 years paying debt down, having a baby and watching it go back up, and faltering a few other times…I feel like the end is no longer possible. It’s something I can shake off, I’m just frustrated and I find testimonials less inspiring and more envy-invoking. Feels like I’m treading water despite my best efforts…and it’s getting old.
Still, I’ll be where you’re at one day, and it’s going to be sweet!
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Nice kettlebell swings in that photo, JD! CrossFit and gym memberships, in my mind, are enablers in this life. It’s something that helps you become the person and live the life that you want. If you use them, of course.
I’m kind of sad about how judgmental so many people are, but not really surprised. Whenever we make a big decision in life, and especially financial, I suppose we all spend a lot of time convincing ourselves that this is the “best” or “smartest” decision, period. If you decide to live on 1/3 of your income, you’re going to want to convince yourself that this is the best decision. If you like to spend more, you’ll need to justify it to yourself. I don’t think this requires us to convince everybody else to make the same decisions, though.
Is it, in any way, my business how everybody else spends their money? Do foreclosures from over spending drag down my retirement investments? Does somebody else’s debt impact my credit card rates? As far as I know, it doesn’t, so why do I need to judge how somebody else spends their money?
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We kind of started out in Stage 3 – no debts til we bought our house, and that will be paid off before our son turns 18. So I’m glad to see this kind of talk.
That said: JD, you’re looking at each account individually, trying to find whittle room. What if you assume spending on the Africa trip, and then do next year’s budget with that chunk of cash taken out of your savings/whatever – does it work? Is it short? Is it resilient enough to cover a few unexpected disasters, like illness or car accident or investment/income loss? Does the trip look like a good idea then?
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That South Africa trip sounds rather expensive. Do you really want to visit all of those places, or are you buying more than you actually want? Have you priced a trip to South Africa only?
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When I first saw the figures for your Africa trip, I wondered why you do not do your arrangements, then remembered the beautiful trip my husband and I just took to Kruger park with a tour guide. It cost more than half of what we would have spent had we done the trip on our own, but it was worth it. It was a 7 hour drive from our home and the guide told us about various places, the history, plants, animals and several other things. As foreigners, we would not have had much of an experience if we had not had a guide. Another bonus was not having to worry about where to go, how to get there or what to do because he did all that (plus the driving) for us. I would say go for it JD and I hope you will have tour guides on your trip.
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@Joel (#120)
I just re-watched the “Battle at Kruger” video for the first time in about a year. Wow. I forgot how amazing it is. It’s drama in real life! It’s like a Hollywood action movie, but with wild animals. Good stuff.
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Holy smokes, what a lot of comments! I guess this piques a lot of interest!
First of all: from my perspective you’re doing great. If you can book the safari, I’ve heard they really are the trip of a lifetime. You’ll probably have to add ~1400 per person for airfare though. If it’s included at that price, then it’s an insanely good deal (and isn’t bad as it is, per the small amount of research I’ve done on safari expenses).
I think I’m at stage 2.5: I paid off the last of my debt in April but I definitely don’t feel like I’ve arrived, so to speak. I’ve been saving for retirement all along but otherwise still feel pretty much broke – partly because I siphon the majority of my income out of my spending accounts as soon as it hits, but also because it’s pretty easy for me to spend more than I earn, or close to it!
I imagine/hope it takes a couple of years post-debt repayment to actually feel like you’re in a new stage in this financial journey.
At any rate, I hope most of the comments above are positive. And do the safari if you can possibly swing it!
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@Tami (#124)
I do want to see all those places. And actually, I want to see more. I’d love to visit the hill regions described in Cry, the Beloved Country. Kris and I are seeing Jolie tonight, tomorrow, and maybe Sunday, so I’ll be picking her brain about South Africa. I think our conversation with her will go a long way to deciding whether we do this.
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Re: What is included in the trip
The $5600 per person does include airfare, lodging, transportation, all tours, and most meals. We’d be on the hook for a few lunches and a handful of dinners. Plus incidentals and souvenirs.
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I don’t think the trip sounds overly expensive, at all, actually. I think the deal here is that you possibly *could* save up the money for the vacation by February if you really worked at it. However, being a travel agent in a former life, I realize that you have to pay for the trip now (or fairly soon) in order to travel in February.
If this is something you really and truly want to do and have your wife experience it with you, and this is the circumstance in which she will entertain the idea that will get her to go with you, then go for it!
Is it an emergency? No. Is it possibly a once in a lifetime opportunity? …maybe. I agree with the suggestion to see if this particular destination is something the alumni may do again in a few years.
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I guess I’m in the “3rd stage.” I’ve never had any debt, but now I save the max for retirement and put away a lot in taxable accounts as well. That said, I will spend about $5K on furniture this year, am contemplating buying a shearling coat and went on one international trip. In my opinion, travel is always worth it to spend on.
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Having lived in southern Africa for a year-and-a-half, I say do the safari!!! You will not regret it! Yes, that is expensive, but I know people that have spent much more than that. Trust me, you will regret it if you don’t do it. I have been back in the US for 4 years, and have been trying to get back to southern Africa for vacation to see the parts I missed while I lived there. Go for it!
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I’m not sure I understand that “stage” thing. I mean, you say stage 3 is when you’re done paying your debt… What if you’ve never have debt to begin with?
We earn a bit under CAD 3,000 a month, which isn’t terrible but isn’t great either. I don’t see myself at a stage where I can stop stressing out about money, or have enough aside to do things I really want to rather than put it all in savings.
So is stage 3 when you pay for all your needs, pay for all your various savings, and then have money left? Is that what it is? If so, wouldn’t someone who saves less end up in stage 3 faster, but for wrong reasons?
Either way, I do think you should spend money on what matters to you. You have earned it and you’re not spending yourself into a hole, so enjoy! That’s what we’re all doing it for, isn’t it? Being able to spend on what makes us happy without having to worry about the rest because we have taken care of it already.
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You’ve got moxie for posting what you intend to do with your money. I hate talking about money with anyone because money is so personal to everyone & others judge a person for how they use their money. That’s why money is such a taboo topic in our society.
I think you need to take your own advice and “do what works for you.” I think the trip to South Africa sounds great and if you can raise the money in time you should have fun with your wife while you are young.
I realize its important to put money in savings and retirement, but honestly dude given that you are doing really great right now, its okay to take some money out and travel especially when you are young.
Don’t be one of those people who saves and saves and doesn’t appreciate some of their money until they’re too old to enjoy it. Saving is important but so is living in the present. You can always get back from your trips and be economical again.
You know what JD do what you think is right. Its your money and your life, who cares what anyone thinks. A lot of people get jealous whenever someone gets out of debt, and is able to enjoy life. I don’t think this is considered lifestyle inflation, but then again is lifestyle inflation so horrible, what if you have lifestyle inflation but not debt, can pay your bills, have savings and savings for retirement.
At that point your perspective might change and its okay to spend money to enjoy yourself. Money isn’t evil. If you do go, I hope you and your wife have a wonderful time and don’t feel bad about spending that money.
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Nope, downsizing your emergency fund because of a need is not the way to manage the third stage of personal finance. It sounds terribly like “I can still spend 500 with this credit card, I can pay it back later.”
February perhaps not the best time to visit Southern Africa.
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I’m really interested in this stage and hope you write more about it. I’m in the process of paying off my student loans and having a hard time imagining what it will be like afterward.
More information on savings and how to save would be good too.
I hope you do go to South Africa and have lots of fun!
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Kestra (#4), you asked how other people decide when it’s worth it to buy something, even if it might delay retirement. The point of retirement is to make me happy so that I don’t have to work for money if I don’t want to. And I’m pretty sure I can think of more fun things for me to do than my boss can. And the point of buying stuff is also to make me happy (and to provide for basic needs). Retiring early will make me quite happy, so I try not to buy things that don’t also make me quite happy. For example, air conditioning lets me do stuff instead of be paralyzed in a melted blob, so I buy that. Buying a milkshake instead of water at a restaurant usually would make me only a little happier, partly because my meal by itself will usually fill me up and partly because I know I can make a milkshake almost just as yummy at home later when I am hungrier and it will be a lot cheaper and a bit healthier.
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I’d say moving into the third stage has led to two big differences. First and most obviously, I have more money, so I have more options.
But second, the journey has changed me. It has inspired me to be creative, look outside the box and do more research.
There are several cheaper alternatives I’ve tried that I now prefer. For example, my pancakes, chocolate cake and spaghetti taste better to me than most restaurant versions and are also much healthier if for no other reason than because I use whole grains. I actually prefer water over soda now most of the time. I bought a small house thinking I’d move up when I got married, but now I’m attached to my low utility bills and low property taxes and I sure don’t want to be increasing my mopping square footage.
I’m also more patient–I’ve learned that in the time between when I first decide I want something and the time I actually get it, additional research and observation often leads me to a better choice than my original goal. For example, recently I was looking in stores at options for a better container to collect our recyclables than a cardboard box (trash cans, ice buckets, etc.) when one thing I saw made me realize that one of the crates we were emptying by selling off old records (aka ‘vinyl’) would be better than anything I had seen so far.
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Note to those saying that the third stage is the time for charity: as soon as I had a real job, I started making regular contributions. I started off at some small percentage of my income (3% I think) and slowly worked my way up to where I wanted to be. Now I contribute 10% of my net income to important causes such as reducing poverty, torture, abuse, pain, and negative environmental impacts and 1% to causes of interest to me personally such as PBS and the local wildflower center.
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One other note: even though it is a high priority, I cannot afford to “max out” my retirement vehicles. $15,000 403(b) + $5,000 IRA not to mention $2,700 required pension and $3,200 social security would leave me with $16,500 or $12,800 after taxes minus mortgage payments leaves me $2,144 per year for utilities, food, fun, etc. Uh, no thanks.
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I disagree a bit with your disclaimer of “I’m a lucky man.” You stick to your principles. You work hard. You didn’t fall into the position you are in now. Sure, there is luck (randomness) in everything. There is the birth lottery and who got momentum in personal finance first and all that. But you can’t just have luck. If you didn’t provide useful, insightful content and a valuable community forum for sharing ideas, you wouldn’t be where you are.
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$5600 includes the airfare? OMG I want to be an alum of your school. I would do that in a heartbeat if I were in your shoes.
Here’s what I think:
If your car were totaled today, and you could get by without it, then that Mini fund just became a Safari fund.
Secondly, I think that there should be a distinction between lifestyle inflation, and lifestyle expansion.
Lifestyle inflation, to me, is committing to ongoing expenses like a big mortgage on a large house that you don’t really need.
Lifestyle expansion is committing to one-time expenses (no matter how large) that won’t leave you on an ongoing payment treadmill.
I’m all about lifestyle expansion if the other bases are covered!
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We spent 4 wonderful years in the 3rd Stage, while living overseas in Japan. We had no debt of any kind, I had an excellent salary, my employer covered room/board/utilities. During that time, we saved furiously within these categories:
1. Future 1st Home Down Payment
2. Kids’ College Funds
3. Retirement
4. Vehicle Fund
As a result, we covered more than 20% of the money we needed for our first home purchase when we returned to America. Our kids’ college funds were in awesome shape at the end of that four year stint. I put away about $20k towards retirement and “long term” savings/investing. And we bought a $16k lightly used vehicle in cash when we got back to America.
Now that we’re back in the States and own a home, we can’t save nearly as much as while we were overseas. We do alright, but we just don’t feel as motivated, now that we have a mortgage looming over us and our monthly expenses have increased. I don’t consider us in the 3rd stage anymore, because of the house debt – once that’s paid off, we’ll be able to feel more comfortable again.
In the meantime, I’m furiously looking for another gig overseas with my employer. I have potential for a spot in Europe, which would be a dream job and would allow us to rent out our current place (have a tenant pay our mortgage) while we live like we did in Japan. It’d also allow us to focus on paying down the mortgage much quicker, so we can reach financial independence sooner than later. And, as a side benefit, we’d also be able to experience life abroad through living, instead of by visiting.
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For me, travel is worth every penny, and the better deals are the best. Studying abroad, taking cruises, and just taking a trip now and again have all been my concessions to my love for travel. I could condone any amount, as long as I know I’m getting a good deal.
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It sounsd like you have a quilty conscince to be hoenst. I see nothing wrong with your decision to go to Africa, I would LOVE to have those opportunities. Lifestyle inflation… maybe, but that’s a good thing in this context.
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Both of these sites linked below give details on when to visit South Africa. You will likely spend $7,000 each with additional expenses and souvenirs, etc. I would make sure that trip will has a good chance to meet your expectations. You are not likely to see an encounter of animals in February as was shown on the video. Water is readily available and animals don’t tend to congregate at the ponds in this month. Do you like traveling with a larger group who have similar interests? But there are trade-offs when you consider the size of the group, time of the year, etc. There is not a one time or kind of trip that is better. Some times of the years have more favorable odds for certain activities. I was amazed by the beauty of South Africa by my brief exposure and I am sure that you would be as well.
I think that some readers feel that you are losing your initial zeal that you had as your worked your way of of debt. I have no problem with your taking this trip. However, you will continue having to work to relate to the new reader who is overwhelmed with debt and can’t even fathom taking such a vacation. You might even find it advantageous to start a second blog that deals with finances at the third level.
http://www.southafricaholiday.co.uk/when-to-visit-south-africa.html
http://www.frommers.com/destinations/southafrica/0239020006.html
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Oh, I do love your posts on The Third Stage! We’re somewhere in the murky depths of Late Stage Two, as instead of topping out our retirement fund we invested in two rental properties. So…quite a bit of mortgage debt right now, but if we sold the two rental properties we could buy our own home outright. Otherwise, we’re debt-free. /
There is a lot of emotional turmoil the closer we get to Stage Three, I find. What’s the point of it all? What’s our larger purpose? What do we REALLY want out of life? There aren’t any easy answers, so for now we plug along our fiscally responsible way until inspiration strikes. We’re in a bit of limbo at the moment, because DH just found out he has inherited the estate of an aunt. How much he gets is yet to be determined, but it could catapult us into Stage Three Proper. Unexpectedly, this has filled us with anxiety instead of joy. We *really* don’t want to screw this up.
As for the trip to Africa, do it, my boy, do it. My sister and her husband saved and scrimped their whole lives for a modestly prosperous retirement, and one year in she was diagnosed with an illness that has left her in chronic pain. All their plans for travel and adventure have been tossed by the wayside. You just never know what’s around the corner, so enjoy life while you can.
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For my husband it would be golf. We lived in Monterey CA recently and knew we wouldn’t be back for a long while. Before we left he wanted to play all the good courses and probably shelled out around $1000 for four courses (including Pebble Beach) that he wanted to play. It is a lot of money, but when you’re responsible you can make choices that no longer affect if you can save for retirement. This is our extra money to do with as we please. Being in the military, I also like to go visit friends occassionally which usually runs around $1000 for me and our two girls to go across the country. This is on top of our spending to travel home; it is for pure joy. It helps me maintain those friendships and it is money well-spent!
PS Are you and Kris paying extra to your mortgage as part of your retirement plan?
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My wife and I are definitely not at this stage but I can certainly imagine it! We’ve still got a long ways to go though.
That being said, J.D. I think it is perfectly acceptable if you want to spend that money on a vacation. Would I do it right now? No, because I could pay off my car loan with that. But would I in 20 years (more soon I hope) when my debt is all paid off? Heck yeah.
Also, others have mentioned it but I’ll say it again. You are paying for EXPERIENCES which is not the same as Stuff. The research has showed experiences mean a lot more in the long run than stuff.
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I agree – do what you want with your money. Have great experiences and enjoy it.
The only thing that annoys me is that even mentioning the emergency fund (even though you claim its at the bottom of you list of sources) comes off blantantly as “Do as I say, not as I do.”
From your own article on emergency funds, and their purpose:
“What is an emergency fund?
An emergency fund is an easily accessible stash of money for use only in case of emergency. It is not to be used to buy a new car. It is not to be used to buy a new Playstation. It is not to be used to remodel your bathroom. It is for use only in case of emergency.”
http://www.getrichslowly.org/blog/2006/09/08/how-to-start-an-emergency-fund/
To bluntly say one thing, and suggest that you’ll do another makes your advice seem inauthentic
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I would jump on this chance to travel if I were you. If you have the cash to do it I would ALWAYS encourage folks to travel! Hence the reason I am traveling solo with my 2 and 3 yr old to West Africa this fall
That being said, I might try to piece the trip together myself if it would save me significant money.
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Two things about this post and the comments:
1 – To everyone who says that going to Africa will “change your life” because it shows you people living in poverty and makes you appreciate your own good fortune, stop. Just stop. You don’t need to spend $5,600 on a luxury trip to learn about poverty – take a drive around your own city if you want to find out how others live in relative poverty. Every city has pockets of poverty. And be compassionate. Africans do not exist to make those of us in First World countries feel lucky, fortunate, and smug. Sheesh.
2 – J.D., while you’re free to make your own choices about discretionary spending in “Stage 3″ of personal finance, I have to say that it still bothers the crap out of me that you’ve admitted time and time again that you don’t give money to charity or to the less fortunate. It’s such a cop-out for you to say that you don’t really have the time or know-how to pick a good charity to give money to, but here you are agonizing over spending thousands of dollars on soccer tickets, gym memberships, and luxury vacations.
My advice? Don’t go on the Africa trip – another one will come along. Instead of dipping into your various targeted accounts, please make it a GRS “project” to finally get serious about giving some of your hard-earned wealth to those less fortunate than yourself. And if this sounds like a guilt trip, it is. People making much, much less money than you still manage to give some of it to good causes, because that’s the price we pay (or should pay) for living in a world where many people need help to have clean water, ample food, an education and a roof over their head. Pay it forward.
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