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I DROPPED OFF OUR Honda Civic at the dealer for routine maintenance. A young Uber driver gave me a ride home in his new Tesla.
I was embarrassed when he picked me up, because I couldn’t figure out how to open the car door. I told the driver I owned a Honda Civic, not a luxury car. “Those Honda Civics are good cars,” he said. “That was the first car I owned.”
Our conversation seemed backward to me. You’d think I’d be the one with the Tesla, instead of an entry-level car. That’s sometimes the way it is when you live well below your means.
We do have a second car, a 2007 Honda Fit with 250,000 miles on it. The paint is badly faded, but it still runs great. My wife showed me an advertising flyer that someone recently stuck on the driver’s side window. It read: “We BUY Used & Junk CARS—Working or Not—Any Condition.” My wife said no other nearby cars got the flyer.
Opening our wallets. We may not be buying new cars, but we have been spending more since we retired.
We’ve devoted a large amount of money to travel over the past few years. I’m too embarrassed to tell you how much. We also spent more than six-figures remodeling our home. We eat at restaurants more often. I bought a new iPhone and even AirPods to go with it. Usually, I wait until my phone is on its last legs before I buy a new one. My wife likes shopping for clothes, but she’s always looking for a good deal, while I’m always encouraging her to buy something, even if it’s not on sale.
What brought about my change in attitude? I’m not getting any younger. I’ll be 73 this year. A few close friends passed away recently. My old high school buddy has been diagnosed with pancreatic cancer. I had a health scare myself that made me feel more mortal.
My 70s might be the last decade when I can do the things I really want to do. More important, I’m no longer interested in always living frugally. I want some of the finer things—a five-star hotel or a fine restaurant once in a while—so my life is more enjoyable and comfortable.
I’m not talking about spending recklessly. But we can afford to spend more, so why not? I used to find joy and comfort in watching my money grow. But I now want our money to make our lives, as well as the lives of others, better.
This year, I’d like to make a donation to my school. I’m not referring to the university I attended. Rather, it’s the elementary school I went to in 1961. It’s located in a working-class neighborhood that could probably use some help. I remember that, when I went there, one of my classmates would help himself to my lunch. He was a nice kid, not a bully. I always assumed he didn’t get enough to eat at home. Maybe my modest donation could help a child in similar circumstances.
Managing our nest egg. We have a significant amount of our money invested with Vanguard Group’s Personal Advisor Select (PAS). Vanguard charges 0.3% of assets each year to manage our investment portfolio. The exchange-traded funds (ETFs) in our portfolio average approximately 0.05% in annual expenses, so our total cost is some 0.35% a year, or 35 cents for every $100 invested. Since the fund industry’s average expense ratio is 0.47% a year, I’m okay with our total expenses.
Our portfolio is plain-vanilla. There’s nothing sophisticated or complicated about it. One reason I like using PAS: My wife will have someone who knows our financial situation and can help her, should something happen to me.
I read recently about how a former White House scientist was scammed out of $655,000. It seems like it happens to people from all walks of life, and it’s something I’m concerned about as we grow older. Using PAS provides another layer of protection. I think our advisor knows my wife and me well enough to know we’d never ask to withdraw large chunks of money.
We have a portfolio of six ETFs, with an asset allocation of 40% stocks, 55% bonds and 5% cash investments. This conservative strategy allows me to sleep at night and, according to Vanguard, will still give us the returns we need to meet our financial goals.
Our stock portfolio is invested in Vanguard Total Stock Market ETF (symbol: VTI) and Vanguard Total International Stock ETF (VXUS), with a split of 60% domestic and 40% international. The bond portion is invested in four index funds that provide not only diversification among short, intermediate and long duration bonds, but also among domestic and international securities.
Our bond holdings took a beating in 2022. But I don’t think it’s time to give up on bonds. The higher yields, especially when they’re reinvested and allowed to compound, should be a plus moving forward. According to Vanguard, “Over time, the majority of returns delivered by bonds are from the interest they pay, not the movement in the share price.”
Our Roth IRAs are 100% invested in stocks because they’ll probably be the last accounts that we’ll tap for spending money. I can’t see us needing those funds, so I’m comfortable with the increased risk. Our regular taxable investment account is 75% invested in stock index funds, with the goal of reducing our taxable income, so we avoid the Medicare premium surcharge known as IRMAA.
This year, I’ll start required minimum distributions (RMDs). I’ll probably take my first RMD at the end of the year, so the money can grow tax-deferred for as long as possible. To limit the amount of my RMD that’s taxable, we plan to make donations to our favorite causes using qualified charitable distributions. My wife will start taking her RMD in six years. At that point, the additional income could put us in IRMAA territory.
Even with our increased spending, our portfolio is projected to hold up well over time. Instead, at this juncture, the big unknown isn’t our finances, but our health. But we have a long-term care plan and we should be okay.
What about the money we don’t spend? As I’ve mentioned in earlier articles, I’m fond of my stepson. Our plan is to leave him what might be our two most valuable assets: our Roth IRAs and our home.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on X (Twitter) @DMFrie.
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Looks are deceiving. I’d bet the Uber guy has a big car loan he’s got to pay on every month, while you own your car free and clear. What the Uber guy pays is certainly money you don’t have to pay. How you spend your money is no one’s business but your own. If you decide to spend a little more now after a long period of spending a little less, go for it.
Great article, thank you. With respect to older vs newer cars, I believe it’s great for some, but a poor decision for others.
Old cars have old parts – often weather-beaten from summer heat or winter’s cold. Unexpectedly getting stuck on the way to a doctor’s appointment or other urgent errand is frustrating and if you’re a senior, woman or both stranded in a bad area, it’s scary. AAA has taken hours to arrive.
I’m not able to do repairs myself and live in a COL where every mechanic visit costs a small fortune. Even independent mechanics.
I’ve tried keeping old cars as long as I could – and the worry, cost and stress weren’t worth it.
Now it’s 10 years or 100,000 miles – whichever comes first.
When you’ve been traveling, have you tried first class plane tickets? The first on first off and bigger seats are well worth the cost.
I’m an old vehicle user too, currently driving a Chevy Lumina minivan. It had 66k miles when I bought it and now 309k. It was the most aerodynamic vehicle GM made in 96 and still looks good. I call it my George Jetson Van. It has a plastic composite body that can’t rust which is a big plus here in Milwaukee with the amount of salt dumped on the roads. It still gets the same gas mileage as when I bought it although I did have to replace both head gaskets myself last year. I attend both the Chicago and Milwaukee auto shows each year and after checking out all the different vehicles I still love my van with its huge windshield, low window lines and large interior. I can actually back it up just by looking out the windows. They just don’t make vehicles like that anymore.
You mentioned faded paint, if you can keep a vehicle garaged or protected from the sun somehow it makes a big difference.
I clipped a LOT of coupons, shopped a lot of clearance racks, and tried to be smart with our finances over the years. We retired, bought a huge RV (not so thrifty) and have had some AWESOME trips across country (Alaska!) and have plans for more RV trips for as long as we can manage the RV. This spring we are also doing two months in Europe. I just got back from Goodwill where I bought several pieces that will be perfect for the trip! Some habits are enjoyable and I’ll keep right on thrifting! My sweetie had knee replacement a year ago, still needs the other knee done…so we are doing as much as we can, while we can. (Your car complainer should go read Mr. Money Mustache. He thinks almost ALL cars are wasteful and rides a bicycle. There are extremes, and then there are extremes!)
Although Mr Money Mustache now drives a Tesla😉
https://www.mrmoneymustache.com/the-model-y-experiment/#:~:text=In%20May%20of%202023%2C%20after,production%2C%20the%20Tesla%20Model%20Y.
Dennis is not trying to prove he is better than anyone else by driving older cars, he generously shares his life stories & financial advice. His articles are full of wisdom & financial advice & many of us have benefitted from them, he writes them for no pay. Dennis, thanks for sharing the details of your portfolio today, very helpful. Keep writing for HumbleDollar, we love to hear from you.
I could readily identify with your story. We spend years denying ourselves in order to save for retirement, only to discover when we arrive at that golden moment that the time we have remaining is much less than what we have been able to save for. That said, its still hard to change the habits of a lifetime and begin to enjoy what we worked so hard to accumulate. One decision my wife and I have agreed on is to help our son while we are still living, instead of having to wait 20+ years for whatever may be left.