The Joy of Spending My Money Guilt-Free

Frugality is hard habit — for some, it’s hard to learn, and for others, it’s hard to break.

A lifetime, or at least a long period, of exercising that restraint muscle can lead to a lot of sometimes unexpected emotional responses when opportunities arise to loosen the purse strings a bit.

Late Starter FIRE argues in today’s post that the string-loosening moment doesn’t necessarily have to wait until you’ve reached financial independence.

Done in moderation, and with thought and consideration, one can strike a balance between an avid pursuit of FIRE and the enjoyment of what life has to offer all along the way, as well.

Yes, this is still a FIRE blog.

I am unashamedly pursuing Financial Independence as a late starter and plan to Retire Early(ish) at 55.

But I’ve also recently enjoyed a not-so-cheap 4-and-a-half-week holiday in the United Kingdom. I absolutely loved spending my money during this holiday without any guilt!

Before Finding FIRE

I was the typical happy-go-lucky person, very laid back about money in my 20s, 30s, and early 40s.

My philosophy then was I earn it, I spend it and I save some of it … to spend later.

As long as I had a job (and in fact I was in a stressful, demanding job) and I could pay my expenses including my mortgage and travel, I was good.

Fortunately, my parents drummed into me the importance of spending within my means. I will forever be grateful to them for this advice. And I’m grateful to Past Me for sticking to this advice.

Finding FIRE

Therefore, it comes as no surprise when one day in my late 40s, I woke up stressed about retiring. I had a lot of things going on in my head – mainly that work is too stressful and that I can’t handle it anymore. I had a suspicion that I hadn’t saved enough for retirement. I was right.

So I googled how much I needed to retire and stumbled onto the FIRE community. And was inspired by much younger people who implemented these strategies to retire at 30!

Well, that boat had well and truly sailed some time ago so the next best thing would be to retire earlier than the traditional age. Mind you, there is no “traditional” retirement age anymore. In Australia, it is illegal to ask anyone to retire – you can literally work until you die.

Most people aim to retire around 67 when they may be eligible for a government pension.

Anyway, I thought that if it took the young ones 10 years to retire early, then why can’t I do the same and retire in 10 years? That would mean I’d retire at 57 instead of 67. That’s a 10-year bonus. So I jumped right in!

After Finding FIRE

The side effect of me pursuing FIRE is that I feel guilty about spending money. On anything.

Because I thought that every dollar should be squirreled away for investing. Every dollar is earmarked for my retirement, right? The quicker I can accumulate my stash, the quicker I can quit my job and live happily ever after.

And if I spend on gifts, travel, and fine dining, I am denying myself early retirement.

After all, I was already starting very late and therefore behind. Time was not on my side – all that compound interest is gone, poof!

The Struggle Between Spending and Saving is Real

I must admit this 180-degree change in how I view spending was very surprising to me. I most identify with being a spender. I honestly cannot relate to being frugal, although I’ve tried.

So this push/pull with spending money is annoying and unsettling.

I agonized over buying a Roomba with free gift cards – I didn’t pay a cent for it and yet I felt guilty. How silly is that? (I wrote about that experience here)

FIRE Intensity

Let’s face it – being on the FIRE path can be very intense, especially if you have a deadline and a constrained time frame. Late starters, anyone?

Every effort is made to save as much as you can, not by societal standards or the general personal finance advice of 10%. No, you must save at least 50% of your income.

Compromises and sacrifices abound – spend $2 per meal only, cycle everywhere, no takeaway meals, etc. And when you’ve reduced as many of your expenses as you can, it’s time for side hustles to increase your income.

I’m writing this tongue in cheek – because it is absolutely critical that we look at our spending and identify areas where we can save. And invest those savings. After all, it’s not fun to retire with no savings at all and rely on the mercy and generosity of the prevailing government.

However, I feel it is just as important to look at our expenses and identify which brings us joy, or which we value, and either not cut those out completely or think of ways to do them less expensively.

Yes, the trade-off may be that it’ll take longer to arrive at FIRE if we can’t free up much money to save and invest.

But the longer I’m on my FIRE journey, the more convinced I am that we need joy in our life NOW. We can’t just wait and defer joy to when we finally achieve FIRE. Ten to fifteen years is a long time to deprive oneself of the things that make us happy.

Of course, what makes us happy may not cost a lot of money. The whole point of FIRE is to discover what it is that fulfills us and makes us happy, and to find the time and money to do those forever.

I don’t want to arrive at FIRE a shell of who I am and desperately in need of healing and a long rest because I’ve hustled so hard to get there.

I want to arrive at FIRE, raring to go, with lots of plans underway. I’m up for a short rest, of course, doing absolutely nothing.

I also don’t want to arrive at FIRE, scared to spend my hard-earned money, and worried that my money will run out. It will be difficult as it is to switch from an accumulation mentality to spending the dividends or drawing down my shares portfolio.

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Guilt-Free Spending

In my humble opinion, the way to still have joy in our lives now while pursuing FIRE is to have money set aside for guilt-free spending.

This is for spending on things that you won’t give up, or find really hard to give up, and that bring you joy, and that you’d be miserable without it. Some describe it as fun money.

But there were so many competing priorities when I started my FIRE journey. Do I build my nonexistent emergency fund? Should I invest? What should I invest in? Salary sacrifice into superannuation (retirement account)?

I had read The Barefoot Investor by Scott Pape and was aware of having a splurge account – money set aside for guilt-free spending.

But I never set up this account because my priority was investing in my superannuation and then investing in my shares portfolio outside of superannuation.

There was only so much in the kitty.

All my spending was therefore lumped under living expenses. Except for travel.

My Travel Fund

Travel was in its own category.

And I’ve realized that this is my one true guilt-free spending money account.

I don’t care about massages, spa treatments, Friday night drinks, trendy clothes, and the like. What really depresses me is if I didn’t have any money for travel.

After reading Ramit Sethi’s I Will Teach You to be Rich, I renamed one of my sinking funds to Invest in Self. But when money is tight, I stop contributing to it.

By contrast, it is very rare when I don’t contribute to my travel fund. It only happened recently when I needed to build up my bills account to be one month ahead. I felt the sacrifice keenly but knew I’d feel more secure if my bills account was one month ahead. So it was worth the sacrifice.

At one stage, the travel fund was larger than my emergency fund, at which point, I switched them around and swapped names. In fact, that was how my emergency fund was fully funded the first time.

I contributed all through the years the pandemic closed borders when I had nowhere to go. I did use some funds to buy online courses and programs in 2020 and 2021. But even so, the fund had a healthy balance by the time I booked my flights in February.

Heck, even when I was on holiday, I was contributing to the fund.

This is easy to do because my contributions are automatic. I set up automatic transfers from my weekly pay so I don’t have to think about it. Every week, a predetermined amount is automatically deposited into my travel fund. It is in a savings account that earns bonus interest if a minimum of $300 per month is deposited with no withdrawals. So I always make sure to deposit the minimum to get the bonus interest.

How I Spent Guilt-Free on my Holiday

I accessed this account before I traveled, to pay for flight taxes and airport charges, attractions, train tickets, car hire deposit, travel insurance, and so on. I used Qantas frequent flyer points for return premium economy seats on the flights.

At the start of my holidays, I transferred an amount that I thought I’d need for the duration of the holiday into my global everyday account that can accommodate 5 different currencies. As I was traveling to the UK, I would need pounds (£) to pay for everything.

And that was my budget, an amount that I was happy to spend. There was money left in the travel fund because I didn’t want to spend all of it. There is always more travel ahead!

I did not break it down to what I’m allowed to spend on entertainment, food, transport, and the like. It was just a lump sum that I could spend however I liked.

At the end of the holiday, I transferred what hadn’t been converted to British pounds back into my travel fund.

In the past, even though my head knew that it was ok to spend this sum that I’d saved diligently for the last 3 years, I’d still feel a degree of guilt.

I’m not sure if it’s because I haven’t traveled for 3 years but this time I felt totally guilt-free about spending my allocated budget.

I think it’s knowing that I still have money in my travel fund for another trip. And I hadn’t sacrificed investing for my future.

To be honest, it felt really, really good, and so freeing, not having to think about each expense.

Final Thoughts

Don’t get me wrong – I have no desire to go back to my pre-FIRE days when I spent money without care or much thought.

And I’m not advocating that you spend money you don’t have (in the form of accruing credit card debt, for example) or spend money on fun things at the expense (pun not intended) of saving for retirement.

But I do want to strike the right balance between spending intentionally on the things I love now and saving as much as I possibly can to reach FIRE faster.

I want to do both – to have some money for the things that bring me joy (travel) now AND invest for my imminent retirement, early or otherwise.

This pendulum will swing differently in various seasons of my life, but the key is to find the right balance.

You can find more posts from Late Starter FIRE here.

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