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Struggling to find peace with my finances...

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  • Zaphod
    replied




    A major problem that can occur with large increases in income or net worth is the cognitive biases that occur and which can lead to bad investments.

    The increase in expenses is probably only a small part of it.

    When I made 40k on internet stocks, I gave back 80k in the 2000’s. When I made the first 500k in capital gain on property sales, I made mistakes that cost me 1M. Then I had one property that went from 1M to 6M which had a very dizzying effect. It is like a high from gambling when you have a asset appreciate a lot. You may experience this with your startup. A lot of issues can come up : disbelief, fear, excessive confidence, internal conflicts etc. etc.

    Maybe I am more prone to it, but large wins made me more prone to thinking I was a genius and that led to big mistakes, so I would be careful of that.

    The classic is the guy who has a big win and gives it back and kicks himself for it. That is what I would be worried about.

    I would talk to people you can trust about it. When you initially make a lot, you are paranoid about telling people about it. Some people might rip you off and you have to be careful about that, but you are also at risk of of bad investment ideas if you don’t talk to anyone. In some ways you might even be better off putting in place some checks and balances to the way you make decisions so you can’t blow up more than you can cope with later. I guess this applies to everyone though.

    Good luck with it.
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    Its not you it happens to everyone and is hard to avoid.

    Leave a comment:


  • Dont_know_mind
    replied
    A major problem that can occur with large increases in income or net worth is the cognitive biases that occur and which can lead to bad investments.

    The increase in expenses is probably only a small part of it.

    When I made 40k on internet stocks, I gave back 80k in the 2000's. When I made the first 500k in capital gain on property sales, I made mistakes that cost me 1M. Then I had one property that went from 1M to 6M which had a very dizzying effect. It is like a high from gambling when you have a asset appreciate a lot. You may experience this with your startup. A lot of issues can come up : disbelief, fear, excessive confidence, internal conflicts etc. etc.

    Maybe I am more prone to it, but large wins made me more prone to thinking I was a genius and that led to big mistakes, so I would be careful of that.

    The classic is the guy who has a big win and gives it back and kicks himself for it. That is what I would be worried about.

    I would talk to people you can trust about it. When you initially make a lot, you are paranoid about telling people about it. Some people might rip you off and you have to be careful about that, but you are also at risk of of bad investment ideas if you don't talk to anyone. In some ways you might even be better off putting in place some checks and balances to the way you make decisions so you can't blow up more than you can cope with later. I guess this applies to everyone though.

    Good luck with it.

    Leave a comment:


  • FIREshrink
    replied
    Have really enjoyed this thread and appreciate Vesalius posting.

    I have a fraction of your income and net worth but am FI in my mid 40s. Otherwise much of what you wrote, I could have written. The same struggles with wealth, spousal disagreements about goals, the shadow of our parents looking over us.

    In our case we have increased our charitable giving and are beginning to reduce our work hours. Took on some new hobbies. Pursued relationships. Our kids demand a lot of time and money so planning for a life beyond that is important or we'll be aimless.

    It's not kosher to speak of our "discomfort with wealth" but obviously this is a common experience. I never wanted to be that rich doctor. I like being anonymous in my old car and my jeans and my sweatshirt. I like eating out at restaurants on the cheap eats list and backpacking through nearby national park is my favorite vacation. But in a family we have to flexible so there have been many trips to Hawaii, and cruises, and a new vehicle for them to get around town in. It's all good. We are not lavish but we enjoy life and no longer feel a need to call ourselves frugal, which has been a lie for a decade. Now we just say we're reasonable and comfortable.

    Leave a comment:


  • FireBall
    replied






     
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    Once you have paid off the mortgage you will still be worth $12M even if the start up does not give any additional wealth. So the question is

    1. What do you want to do with that $18M. Do you have any heirs to pass it on to? Any charity foundation you want to start? Just leave it to the spouse. Because if you don’t do that it will go to the US Treasury

    2. If the money stops tomorrow can you cut down your spending to $100-200K or whatever is your income from clinical medicine and let the retirement investments and taxable investments grow. If you and your spouse can safely do this then spend the $300K per year now and enjoy the lifestyle.

    You don’t need a psychiatrist. It is normal for frugal supersavers to really live the lifestyle they can afford. I am having a hard time going from a $200K house to one five times that or flying business class even though I can easily afford it. I am trying to take baby steps.
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    You should, totally worth it if you travel internationally. On a recent trip in economy my 8yr old announced that he likes First class and Business class better because the plane did not have a TV in economy. I worry for him.

    Leave a comment:


  • Kamban
    replied




    Regarding more personal details: I don’t want to say too much more about personal details. It is nice to have this forum where one can anonymously discuss finances, which is quite taboo to discuss in normal polite social circles.
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    , but I am a bit more of a saver and my spouse is a bit more of a spender. I greatly enjoy outdoor activities that often don’t cost much of anything. My better half enjoys the luxury of a special hotel, and I also enjoy it vicariously. We have found our peace somewhere in the middle ground of spending, and we do make collaborative decisions about the big stuff.
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    Once you have paid off the mortgage you will still be worth $12M even if the start up does not give any additional wealth. So the question is

    1. What do you want to do with that $18M. Do you have any heirs to pass it on to? Any charity foundation you want to start? Just leave it to the spouse. Because if you don't do that it a good chunk will go to the US Treasury

    2. If the money stops tomorrow can you cut down your spending to $100-200K or whatever is your income from clinical medicine and let the retirement investments and taxable investments grow. If you and your spouse can safely do this then spend the $300K per year now and enjoy the lifestyle.

    You don't need a psychiatrist. It is normal for frugal supersavers to not really live the lifestyle they can afford. I am having a hard time going from a $200K house to one five times that or flying business class even though I can easily afford it. I am trying to take baby steps.

    Leave a comment:


  • I Find This Humerus
    replied




    I am a struggling physician, but not in the usual sense of the word struggling.  I am struggling to have comfort with my financial success.

    For much of my career I was a typical physician, annual income in the 200’s for the first decade and in the 300’s for the second decade.  Then I got involved with creating a startup and my income increased, actually increased quite a lot, like moving over with an extra comma in there.

    We have expanded our spending to a degree to go along with this new level of income, but that hasn’t been an easy adjustment for me.  In the past we lived a nice life but we always balanced relatively careful spending with saving and investing.  These days we are living the extreme high life, spending roughly 300k per year, but that ends up being only about 15% of current gross income.  We live in a high tax state and pay a bit over 40% of income in taxes, and we invest a similar amount.  Right now we have a fairly impressive, steadily growing net worth for a physician family of around 18 million.

    The extreme success somehow makes me uncomfortable.  We have increased our charitable giving, and we have increased our spending on travel, gifts, housing, entertainment, household help and more.  I should feel financially quite secure, but the high annual spend nevertheless still makes me very uncomfortable.  My spouse enjoys the lifestyle, but I have not found peace with spending so much each year.  I carry a somewhat irrational fear that the financial success could evaporate at any moment and we would be stuck in an expensive house with all the surrounding accoutrements that would take time to unwind.

    So much of finance is psychological and I am struggling with my irrational fears.  Has anyone out there dealt with these types of feelings?  Does anyone have any pearls of wisdom to offer?  Are there any psychiatrists or psychologists hanging out on this forum?  It feels unsettling to have achieved this level of success and yet not feel at peace.
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    Well what are you spending 300k a year on?

    Leave a comment:


  • FireBall
    replied






    Click to expand…


    LOL, 200K a year, thrifty you ain’t.
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    I am realizing that now. Always under the impression most of our expenses are kids and mortgage as we dont spend much other than that. We dont eat out much or buy things a lot. I drive a car with 150K miles on it that I bought 15+ yrs ago. It looks like we have lot of mini rec-curing expenses that are ballooning our monthly expenses. Have to figure out what they are and try to cut down some of them.

    Leave a comment:


  • fatlittlepig
    replied




    Vesalius, Congratulations on what you achieved so far. Your thread got me thinking. I am roughly about your age and in the beginning stages of accumulation having just paid off business loans and still have mortgage to pay. We are about to cross 1M mark in income this year and I never really took stock on expenses. We consider ourselves thrifty and neither of us really spend much on anything but our kids. So I spent the last hour or so going through the bank transactions figuring out our monthly expenses for the last 6 months. I realized we are on pace this year to spend 200k (I was under the wrong impression it may be like $125K ) with almost 35% being spent on kids (private school and extra curricular activities). I have similar fears that business income will dry up.

    One thing that should comfort you is your ability to realize the expenses that can and should be cut if the gravy train stops. Your type A personality and risk taking ability (hopefully measured) that created the wealth to start with is still there. As others have mentioned, may be diversify your holdings and breathe easy that you are not really destroying your wealth with your spending.
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    LOL, 200K a year, thrifty you ain’t.

    Leave a comment:


  • FireBall
    replied
    Vesalius, Congratulations on what you achieved so far. Your thread got me thinking. I am roughly about your age and in the beginning stages of accumulation having just paid off business loans and still have mortgage to pay. We are about to cross 1M mark in income this year and I never really took stock on expenses. We consider ourselves thrifty and neither of us really spend much on anything but our kids. So I spent the last hour or so going through the bank transactions figuring out our monthly expenses for the last 6 months. I realized we are on pace this year to spend 200k (I was under the wrong impression it may be like $125K ) with almost 35% being spent on kids (private school and extra curricular activities). I have similar fears that business income will dry up.

    One thing that should comfort you is your ability to realize the expenses that can and should be cut if the gravy train stops. Your type A personality and risk taking ability (hopefully measured) that created the wealth to start with is still there. As others have mentioned, may be diversify your holdings and breathe easy that you are not really destroying your wealth with your spending.

    Leave a comment:


  • Hatton
    replied
    I think this forum is a great outlet for situations like this.  It really does help to understand that you are not alone.  The drive that many of us have even after FI may have some basis in our childhoods I think.  Always worrying about do I have enough is pretty common also.  I choose to not consider myself wealthy just FI.  I spend lots of time with people who have significantly less money which helps check my spending.

    Leave a comment:


  • Vesalius
    replied




    If you think spending 300k/yr is the extreme high life (you need to get out more) ...
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    Thanks for sharing your perspective ZZZ.     Please don’t feel offended if I defer introducing you to my spouse!

    Leave a comment:


  • Zaphod
    replied







    In reading your post, it struck me that you seem to feel almost compelled to increase your lifestyle because you have reached a level of success you had not planned on. You need to know that there is a purpose to a life of living large and you’re not feeling it right now.

    I think you may be lacking clarity and context about your wealth, how it fits into your value system and what it all means. True financial planning (not “investment management”) could help give you that.
    Click to expand…


    Our lifestyle choices come to me as one half of a partnership, not as a solo decision maker.  And maybe that is where some of my angst arises.

    Like many couples, our spending habits are not the same.  We are fortunate to share somewhat similar goals, but I am a bit more of a saver and my spouse is a bit more of a spender.  I greatly enjoy outdoor activities that often don’t cost much of anything.  My better half enjoys the luxury of a special hotel, and I also enjoy it vicariously.  We have found our peace somewhere in the middle ground of spending, and we do make collaborative decisions about the big stuff.

    Most recently, we have agreed to meet my conservative financial bent.  We will reduce monthly expenses by paying off our last real estate related mortgage in the coming months.  That was my first choice for our excess funds in the coming months.  My spouse took on an expensive home related project, but agreed not to take on any more major home projects until that final mortgage is paid off.  I feel that my personal comfort level will increase once we reach our zero debt goal.

    As far as values, I want to use my creativity and financial means to leave the world a better place.  That is something that will have much more meaning to me than a plusher lifestyle.
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    There is a recent thread all about this. The TLDR version is this, we will almost always regard someone spending money on things we wouldnt or dont value as wasteful, and not care about our own things. However, in the context of it not being reckless (which in your case its not), just recognize its just a human irrationality and if it makes your spouse happy, thats great. You can slowly try to get them to think about being more mindful about things, which may help but in my experience just changes the things they buy not the amounts.

    If it isnt putting you in danger and its causing happiness, its not really a problem. Pick a number or goals first like you have, and allow that amount to be spent willy nilly and free from judgement. You'll be happier.

    Leave a comment:


  • Vesalius
    replied




    In reading your post, it struck me that you seem to feel almost compelled to increase your lifestyle because you have reached a level of success you had not planned on. You need to know that there is a purpose to a life of living large and you’re not feeling it right now.

    I think you may be lacking clarity and context about your wealth, how it fits into your value system and what it all means. True financial planning (not “investment management”) could help give you that.
    Click to expand...


    Our lifestyle choices come to me as one half of a partnership, not as a solo decision maker.  And maybe that is where some of my angst arises.

    Like many couples, our spending habits are not the same.  We are fortunate to share somewhat similar goals, but I am a bit more of a saver and my spouse is a bit more of a spender.  I greatly enjoy outdoor activities that often don't cost much of anything.  My better half enjoys the luxury of a special hotel, and I also enjoy it vicariously.  We have found our peace somewhere in the middle ground of spending, and we do make collaborative decisions about the big stuff.

    Most recently, we have agreed to meet my conservative financial bent.  We will reduce monthly expenses by paying off our last real estate related mortgage in the coming months.  That was my first choice for our excess funds in the coming months.  My spouse took on an expensive home related project, but agreed not to take on any more major home projects until that final mortgage is paid off.  I feel that my personal comfort level will increase once we reach our zero debt goal.

    As far as values, I want to use my creativity and financial means to leave the world a better place.  That is something that will have much more meaning to me than a plusher lifestyle.

    Leave a comment:


  • SValleyMD
    replied
    To quote an ex-NBA player that is broke in 3 years after earning 30-40 million...

    “You don’t go broke buying Ferrari’s. You go broke with bad investments.”

    So the spending probably doesn’t jeopardize much imo (unless you start getting creative)

    My father in law takes home 5-10 million a year. I guess he spends 600k-800k a year

    I do think it gets to a point where it truly is ridiculous and not healthy for anyone involved. At least you recognize it unlike my in laws..

    I guess the easy answer is to cut back a bit and see if that helps but I can kind of relate only because it makes me sick to my stomach to see the in laws burning cash even though they can “afford it”

    Leave a comment:


  • jfoxcpacfp
    replied
    In reading your post, it struck me that you seem to feel almost compelled to increase your lifestyle because you have reached a level of success you had not planned on. You need to know that there is a purpose to a life of living large and you're not feeling it right now.

    I think you may be lacking clarity and context about your wealth, how it fits into your value system and what it all means. True financial planning (not "investment management") could help give you that.

    Leave a comment:

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