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URL:  http://boards.fool.com/thought-provoking-post-hocus-im-gonna-dive-12370156.aspx

Subject:  Re: Ten Mental Exercises Leading To Freedom Date:  4/9/2000  6:34 PM
Author:  TheFreep Number:  7670 of 740233

Thought provoking post, Hocus. I'm gonna dive right in here with the codicil that I have only read the thread in response to your post. I have not read most of the 7000+ posts on this board, though I have popped in from time to time. I came upon your post in the Foolish Week in Review report (thanks Cheeze!), and felt compelled to respond. So, if some of my points have been made already, I do apologize.

This will all sound negative, but let me say up front that I do agree with the basic thrust of your message: think before you spend. That said. . .

Let's take your $15 pizza example. You calculate that you can save $2,000 a year by avoiding this indulgence (which I believe you mean is 2K spent on similar food indulgences, not just pizza). This becomes 133 episodes, a large amount, but easily believable. Still, let's say you do NOT indulge at all. Well, you still have to eat -- and even at your remarkable rate of 1 buck each for you and your wife, your savings only become $13 dollars for the meal. So, instead of $2000 in savings, you have $1734, a nice amount but not as much as you imply. I would make the same argument on the "work meals out" and gourmet coffee. (NOTE: at $1,000 for coffee that works out to 250 grande lattes and 15 or so pounds of ground coffee at the nearby Starbucks. I'm a coffee addict, but that exceeds my habit greatly.)

As for the vacation example, well, my only regrets in life are trips not taken, so I might be biased on this issue. Travel fills me with new ideas, bonds me to my family (constant companions), and refreshes me: money so well spent, I cannot even figure the returns. That said, I don't spend $3,000 every year (or even most years) on travel, so even if I cut out a trip a year, I would not save $3,000. You seem to view this vacation expense as an annual event, and for those that it is, I would argue that they are like me, and need and want the travel experiences.

Still, unless you are implying that people never take a bonus vacation (cuz I assume everyone takes a trip of lesser expense each year), I would argue that $3,000 a year is an unrealistic savings. Figuring that you only take a 3K vacation every third year, by cutting that out you'd only save 1K a year, on average. I think for most, that is closer to the real annual savings.

Now, I know that this is minor quibbling, but since you argue that every dollar saved matters, I would argue that your analysis overstates, setting an unrealizable goal, forgetting about replacement costs and, maybe overestimating the original expenses. My guess is that the $8,000 savings in foodstuffs and vacation you posited is closer to $5,400 and therefore overstates the savings by almost 50%, a rather tidy sum. True, you are simply using examples to prove a point, and the principle does work, but I think you overstate vastly.

Finally, however, comes my biggest problem with your post. Your example that by saving $8,000 annually, your retirement savings must be less leads me to ask you one major question: why are you retiring early in the first place? Since you've removed meals out and travel from my annual budget (saying that I won't need to replicate those costs), you've made it so that in retirement I cannot eat out OR travel. (Not only that, but I potentially cannot develop a new hobby that costs additional dollars, though that's probably covered in my initial planning.). I would argue that the only reason to retire early is to do something with your time -- in many cases that means additional travel to see relatives or new places, the pursuit of hobbies, or at least the right to relax and not have to cook every single meal.

My point, again, is simply that removing the costs you talk about from your present life does not take into consideration what you expect in retirement. Do you really wish to retire and have the only change in your life be that you don't go to work every day? Or do you wish to retire and enjoy those years with the freedom to do what you want to do? For me, and I imagine most, the answer would be the latter.

Sorry to ramble on and on. And as I said, I do agree with the thought behind your post. I just think you need to analyze your conclusions a little bit more.

thanks again for provoking thought,

the freep
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