A Spending Philosophy For Your New Life Overseas
“I had a friend,” writes Retirement Planning Correspondent Paul Terhorst, “who, during the boom years, told me, ‘Paul, if your income falls short of what you need to keep up your lifestyle, you borrow.’
“My friend was serious. He had just taken out a second mortgage on his beach house, so he could continue to live it up.
“I’d never go that far. But I think the point is well taken. Our daily expenditures make our lives better. After all, we live day-to-day. Our lives themselves are simply accumulations of days. What we do–and, in this context, what we spend–each day makes up our lives. I’d hate to cut back on life to meet a budget.
“Call it a spending philosophy. I’d argue that what we spend day-to-day–dinners out, gas for the car, parties with friends, ice cream cones, gifts, conferences–makes every day better. I’d argue that what we spend on housing, cars, and taxes makes much less of a difference.
“Yet on average we spend roughly 85% of our incomes on just that–housing, cars, and taxes.
“In my mind, that 85% represents a place to cut. Why not live in a place–Thailand, India, Nicaragua, Colombia–with reasonable housing costs? Or structure your life so that your tax liabilities are limited or eliminated? You can live it up, with plenty of money for what’s important.
“Refuse to cut back on day-to-day spending, on what matters most to you. Instead cut into the 85%, that whale in our budget that tends to swim out without anyone looking at it.”