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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.
There’s a backwards-bragging community on HD. It reminds me of the movie “Metroplitan”, where someone is accused of being a “public transportation snob” — a person who considers taking the bus morally superior to taking taxis.
Here, it rears its head on old cars, and people attempt to one-up each other with their frugality.
No doubt, plenty of people spend an outsized amount on cars, presumably because it’s one of the least-expensive ways to look wealthy.
Here’s my take: driving an old car doesn’t make you worse than someone who drives something new and fancy. But it doesn’t make you better, either.
Awaiting the flames!
But it is kind of fun to compare notes and get new ideas for spending OR saving, or saving to be able to spend …Backwards bragging. I like it. 😀
I think right on! There’s a limit to how old a vehicle I really want to have. My old “not from this millennium”
Subaru had one problem after another, hey I even sewed the drivers seat cover back together. Nuts! I decided to get one of those newfangled gas and electric thingies. I got one that has good mileage and great range and only 3 years old. I took it to Montana to visit relatives last Oct, the first snow came right as my sis had a doctor appointment. Ok, let’s all go in the old new car and… Krunch!
I found it’s not as good a snow car as I had with the old Subaru. It was 2 months old for me.
So, living in Denver with it’s storms, I decided to go ahead and fix the all wheel drive car once again, for those times it is needed. I know, TWO cars!?
I do go on road trips and will visit a rental in Oklahoma and travel south to TexarKAna for the eclipse in April. The 51 mile per gallon car will do grand.
Have thought about getting a new car, but I do feel good about my older Honda Accord whenever any of the following occur:
The annual auto insurance premium notice arrives.
The annual motor vehicle registration renewal arrives.
No monthly loan payment.
I look at my simple dashboard with its minimal distractions.
I read an article about data tracking and security vulnerabilities in newer vehicles.
We can replace certain broken parts relatively inexpensively.
Note that I said I feel good about my car. Don’t view that as being better or worse than someone who drives something “new and fancy”, with the following exception – when the person in the expensive vehicle is driving aggressively, seems to have a well-developed sense of road entitlement, or is otherwise acting like a j*rk. Case in point, two Maserati Quattroportes going over 100 mph, weaving in and out, passing everybody on a busy highway with a 65 mph speed limit? Not impressed.
So we were definitely in the camp of “buy used and drive until the wheels fall off” for many years, but that was mainly because we really didn’t have a lot of extra money and getting good value from our car purchases was an important way for us to manage our budget.
But about seven years ago, my husband changed jobs from the public to the private sector, and my salary started to climb, too. For the first time ever, we had plenty of disposable income, and so in 2018 and 2020 we treated ourselves to two nice brand-new cars, both Audis. His is a convertible and mine is a mini-SUV.
It’s been interesting for us to observe how we feel about our cars and how we think other people might react to them. In his line of work—he’s a tax attorney for a Big Four accounting firm—he does need to have a car that looks like he belongs there. But we feel a bit sheepish when we drive the convertible to, say, church. (I’m a professor and could drive pretty much anything to campus, but I felt less self-conscious about my Audi when I saw a colleague in the parking lot, getting out of her bright red Porsche.)
Was your colleague’s field “income inequality”? After all, you don’t have to be against it!
In a world full of excessive spenders, maybe a little humble braggin’ ain’t so bad!
Absolutely! We all have things we won’t spend extra money on. For us, it’s premium economy or business class seats. Although I always ask my wife, “You do realize that the people at the front of the plane get to the destination first?”
I never drove a beat up car. In fact, I bought only two used cars, the last in 1965.
Sir Richard… Y know, when I was in my growth phase of life, working as a young mam, I was too penny pinching and concerned with dollars. When I was first at a job while in my late teens, I had an internal rule that I wouldn’t start my car, a 66 Impala, unless it was to be used for some kind of gain. I couldn’t use it to buy groceries or other trip for spending. I could go to the bank, or work and that was about it. I had many such “rules”.
But like someone with an eating disorder, this isn’t healthy. I’ve changed a lot, now in my money garden harvest phase, it’s not about gaining more, but to enjoy the fruit of years of planting and caring.
Now, if I want it, I get it with no qualms. And yes, it’s nice to enjoy the luxury of heated seats!
James, no flames here, LOL. Maybe it is some sort weird snobbery. It’s definitely a choice many HDers (including myself) have made regarding cars. Your final sentence is 100% right on in my opinion.
Thanks for sharing. I can relate to the car-frugality. I still drive the 2000 Tundra I purchased 6/1999. I’m sometimes ribbed by my friends, but knowing I “could” buy that Tesla or Jag, but choose not to, is comforting. Many of the choices I/we’ve made “not to” put us in the fortunate financial position we’re in today. We now have choices we otherwise might not have had. Transitioning to the spending phase and giving ourselves permission to spend on things beyond the necessary has been harder than I thought. I guess that’s normal for lifetime savers/investors. We too have also dialed down the allocations of our accounts, currently 45/55 equity/fixed, a significant downshift from our working and savings years. After recovering from ‘87, ‘00, ‘08-‘09, the Pandemic sell-off, and everything in between, I realized we’d won the game and decided to follow my own advice for once and “not take more risk than necessary to achieve the objective”. Hopefully the angst of spending will start to dissipate with the realization that we’ll never be younger or healthier than we are at this moment. Thanks for all of your musings and advice over the years. And thanks to all the contributors to Humble Dollar.
I’ve got a 2003 Tundra I paid $7,400 for about 10 years ago. Frankly, it’ll probably outlive me. The thing just keeps running. Interestingly I’ve gotten 2 compliments on it over the last year or so; both from young (sub 25 year old) blue collar guys. One was working on our garage door and the other was installing a new water softener. Who says young folks these days don’t appreciate quality and classic lines 🙂
My 2002 Tacoma that I paid $13K and drove for 17 years helped a great deal to reach what sounds like a similar financial situation to yours. BTW I sold it to my brother for a couple of grand and he is still driving it. Can’t kill ‘em! 🛻
I knew HD readers would focus on the beat-up Honda angle of this article! But I admire Dennis’s willingness to spend a bit on himself and his wife. They’ve worked hard and saved diligently – not just to maintain their lives, but to enjoy them. A dinner, a trip, a tech toy are all modest rewards. My wife and I are trying to dial down the perpetual thrift reaction now that our kids are launched and our focus is on ourselves. As other readers regularly note, it’s a challenge to move gradually from savers to spenders.
I’m also intrigued (but not critical) by the turn to a Vanguard advisor to help allocate a basic portfolio. Other similar techniques include the DIY guidelines from Schwab’s models or picking a conservative allocation at a robo-advisor like Wealthfront. The human connection at Vanguard (perhaps for Dennis’s wife down the road, perhaps himself) shows real foresight.
I think a human connection is important wrt having an advisor as we age but at this time I am not happy with Vanguard. The international funds they pushed me to invest in have performed very poorly compared to the market and they pushed a relative of mine very hard to keep her money with them in spite of their anemic performance.
I want to find an independent advisor to do this kind of work, I am willing to pay for independent advice.
tx
Bill
Hey Bill! That’s an interesting comment! Specifically, the fact that vanguard feels that about 35-40% of equity should be involved internationally! I actually followed that advice on my own and like you have not been that impressed! Curiously, if you look at asset allocations at other big investing firms like fidelity and tiro price, they also feel that a significant portion should be given to international equities! I guess it’s the return to the mean formula that guides this! Stuart
I took over my sister’s portfolio from Vanguard PAS, got rid of the foreign bonds, and upped the allocation to US stocks.
Great article Dennis. Our non-addiction to new cars was a major factor getting us to where we wanted to be financially. Now that you’ve made it to your happy place you could treat yourself to an upgrade; those new Civic Si’s are both pretty cool and way under the average price of a new car.
I always know there’ll be something familiar from my own life in your articles, Dennis. 😊 Since we’re comparing good value cars, the beat-up, dark grey 2008 Chevy Cobalt parked or being driven on the Brooklyn side of the Verrazano Bridge belongs to my daughter, passed from me after using it for nurse visits throughout NYC and, before that, upstate NY. Its older sib, the 2005 silver Cobalt, is still chugging along down in Cary, NC, driven by a relative who needed a car some years ago and I didn’t. There’s a well-kept red one right here in my little PA village, a daily reminder of what a great car that is, as well as its predecessor, the Chevy Cavalier, of which we also owned two at one time. I’m liking my 2019 Kia Optima now and may keep it until it’s time to permanently give the keys away. But things can change …
The safety features in new cars are the main reason we have one. The number of aggressive drivers has increased significantly in the last few years. If not for yourself, get a newer car to protect your wife.
So true! I never want to be without my backup camera, blind spot warning, adaptive cruse control and etc.
Dennis, Thanks for sharing your thoughts and plans. I especially enjoyed your view on charitable donations. Even small gifts can make a huge difference.
For what it is worth, my Honda Civic was 23 years old when I donated it to our local PBS. I joke that the savings for keeping the Civic put our kids through a couple of semesters of college. Honestly though, it was too mich fun to drive to give it up!
We have donated three vehicles to our local NPR station and all of these donation experiences were positive. I like knowing that the titles were cleanly transferred and the NPR station got a small benefit from what I expect was ultimately the sale of any usable parts when the junkyard bought the vehicles at auction after the towing bill (free to us) was deducted. For anyone doing a car donation expect to mail a clean vehicle title transferring ownership and then waiting a couple of weeks for the vehicle to be picked up and at the time of pickup allowing the tow truck driver to take a picture of your drivers license. There is a tax form that is mailed to you if the auction price (FMV) is above $500 which never occurred with any of my three donations (all of my 10+ year old donated cars had died). If the donated vehicle FMV exceeds $5,000 then a qualified appraisal is required for a tax deduction. Unlike DrLefty’s experience (below comment) I never saw a >=$5K FMV car donation occur in my 40+ years of tax work. You will also likely get a thank you letter from the 501(c)(3) organization for your donation and end up on their annual year end charity request mailing list.
Good article showing frugality in the earlier years and continuing with that through the later years although you didn’t really need to. But your frugal, prudent ways are paving the way for future generations such as your step-son and his heirs, and the people he may touch with your inspiration, as well as an charity causes your money finds it way into. Great job and a financial life worth sharing for all to read.
This is a really remarkable article! Except for the fact that this is a different author I thought that I wrote the article! By that I mean… I grew up in very modest means. My mother was a single parent in the late 1950s! My plan early on was to get married and have a couple of kids… Sadly it did not happen! I I can’t imagine not working and since I thought I would marry I habitually saved! I didn’t really deny myself anything, but just like this author, I drive two rather old cars! My total portfolio value including retirement accounts is very comfortable.. and I still spend very modestly! I’ve never owned a new car lol! Anyhow, my medical school Alma Mater Should do very well at the time of my passing. Keep up the great work on this! Amazing site!
Dennis – I always enjoy your well written and thoughtful articles. I will be 70 this year and similar to you, my wife is 5 years younger than me.
We have been converting traditional IRAs to Roth the past several years at the rate of about $75,000-$100,000 per year. Last year we finished convert all of my wife’s traditional IRA to Roth.
I inherited an IRA from my mother and in 2024 and 2025 (while the TCJA remains in place) we plan to take $40-$50,000 out of the Inherited IRA and have all of it withheld for state and federal tax (93% federal 7% state) and convert $175,000 to $200,000 of my Traditional IRA to Roth. Along with other income the IRMAA surcharge will be applied doubling the part B premium and the Part D premium will also be around $40 or $50 a month. Using the Inherited IRA as a way to pay the income taxes for much of the Roth conversions for the next couple years is a prudent way to utilize the gift of the inherited IRA.
I’m not sure what Congress will do in a couple of years when the TCJA is due to sunset. But, given I am five year older than my wife, the actuarial odds are she has a decent chance of outliving me by perhaps for 7-10 years.
It seems clear to me that wether the TCJA is re-upped or it sunsets, we will still have a progressive income tax system where the tax brackets for single taxpayers are about half what they are for married taxpayers. Same with IRMAA.
By taking perhaps 2/3s of my Inherited IRA over the next three years before I have to start RMDs on my traditional IRA and withholding all of the Inherited IRA for income taxes, we should be able to significantly reduce my traditional IRA so that the RMDs from that along with my pension and our Social Security will be helpful in keeping our Taxable Income in what is currently the 12% bracket (so the qualified dividends paid in our joint brokerage account are taxed at 0%) and we have no IRMAA to worry about while we are both alive.
Clearly, we have been blessed with extremely good fortune. Having to plan for how to minimize future income tax brackets and IRMAA surcharges are entirely different situations and fade away to nothing compared to worrying about if you’ll have enough income to make it to when the next Social Security check is deposited.
Bottom line: we couldn’t be more blessed than to have good health, two well launched “kids”, 3-year old twin granddaughters, and thinking about how much of a Roth conversion should we do this year and next.
LOL, we got one of those flyers on our old car about ten years ago. It was parked in front of our house while I was away on an eight-day work trip. I took a bit of umbrage but then I looked more objectively at the car and could see the point. That said, I kept driving it until 2018 when I finally upgraded my ride. I had the car spruced up and gifted it to one of our daughters, who is still driving it. It’s a 2005 Mazda 3, great little car that I enjoyed driving. When I handed it off to my daughter in 2018, it still only had about 65K miles and we’d had zero mechanical problems with it.
We had one of those beat-up Honda Civics, too. It was our younger daughter’s first car. We ended up donating it to a charity that takes car donations in 2020, and to our astonishment, we got notified that the car sold at auction for $5300. The low blue book on the car was around $1500. That was during the worst of COVID when people were looking for low-cost used cars to avoid public transportation and dealers were having supply-chain problems. Anyway, the charity got a nice donation, and I got a nice tax deduction.
thank you for the article.
my first and second cars were Honda civics. The first I owned for 13 years and the second for 15 more. Great cars.
also thank you for the description of your investments during retirement.
I drive a 2001 Toyota Avalon. I call it my gold-digger repellent.
That’s not original, I think I heard it from Charlie Munger.
According to consumer reports reliability ratings, Honda is one of the best manufacturers, and Tesla is one of the worst. I’d take the old Honda any day.
I hear you Dennis and can relate to much of what you say. Connie and I are looking over our shoulders at the 70s so I urge you to go with your plan to spend prudently.
We spent well into six figures remodeling our vacation home, just last night Connie asked if I was serious we could remodel our condo kitchen – I was. I was awake part of the night working out a plan in my head for where the money would come from. My logic for the upgrades is that someday our children will benefit from the increased value of the properties.
I still don’t want to see our portfolio decline though. My primary goal remains leaving as much as possible to our four children and 11 grandchildren.
Like you, the majority of our lifelong friends are gone or suffer dementia. It really makes you think.
We use QCDs, but with no hope of avoiding IRMAA which doesn’t actually bother me.
As I said Dennis, go for it, times a wasting. Get a new car too.
Great article, but one point jumped out at me. You spent “more than 6 figures” remodelling your house ! More than 6 figures means you spent at least 7 figures: minimum $1,000,000 on a remodel !!! It might just be me, but if I was spending that much on a remodel, I’d step up to a Honda Accord notwithstanding that the Civic is definitely a great car.
I assume your comment is tongue in cheek. Dennis, of course, means he spent more than $100,000.
I read it the same way as Steve and thought more than 6 figures is indeed 7 figures.