This story shows that frugality isn't just a habit; it's a strategic choice for high-achievers like her who focus on long-term goals. She does't fall into the consumerist lifestyle, not out of necessity, but as a calculated move to secure an early retirement and a comfortable future. However, the irony in Chrissy’s financial life is that her inheritance could actually enable her to spend more freely without jeopardizing her future financial independence. I think she might be unnecessarily missing out on life's smaller joys.
You are right, and she may feel one way today, and another way in five years. "As of today," a baseline plan can be assembled and no family or interest in one is in Chrissy's lens. If she is on the fence today, then setting aside some funds makes sense and it is easy to play what-if by looking at how a living standard changes when savings amounts move higher and higher.
I think Chrissy needs to decide what her future plans are when it comes to when and if she wants to start a family. Whether or not she wants to have a family at some point will be the single greatest tell on if her living standard will increase with this trust. If she wants children she would probably continue to save and put the extra money towards their education, child care services if she doesn't want to retire after having children, giving them experiences like trips or clubs, and possibly even leaving them a trust when she's gone.
One thing that I believe needs to be taken more into consideration is whether and when she wants to start a family. This would very much affect her need to save more as opposed to investing. Unless these investments would yield quick results.
I agree, raising children can be very expensive and she will need to plan for that. I think given her incoming inheritance if she chooses not to start a family she can start to spend slightly more freely, as I don't think she is currently maximizing the life she could live.
Considering that Chrissy's main focus is saving, how may her financial stability be affected in the event of unforeseen circumstances (like health issues or unemployment)?
Health insurance addresses health issues and a high-deductible health insurance plan with a health savings account should be considered. Unemployment risk, by choice, accident, or bad luck, needs to be managed, too. It is reasonable to consider having a portion of financial assets allocated toward such a prospect.
The analysis raises the question of how Chrissy could balance her current frugal lifestyle with her future financial security, especially considering her significant potential inheritance. It prompts curiosity about how she might strategically use her current assets and future to not only secure her retirement but also potentially increase her quality of life in the present without compromising her long-term financial goals.
Yes, Chrissy needs to find her best sustainable life-long living standard, and that is produced by her modeling. To your point, we know Chrissy values retirement. The plan where she maximizes her 401k contributions while working is good for taxes and, under current assumptions about inflation and investment returns, produces a positive real rate of return. Her annual, sustainable lifetime living standard is better with a heavier 401k contribution. Modeling Chrissy's investment risk and return, needs to be done as a follow-up.
Would it make sense for Chrissy to contribute some of her change in spending to college funds or future inheritance? Even though she does not have plans to get married and have children yet, I think it would be a good idea to prepare in advance. You never what changes will happen in life. Is this a possible alternative?
If she wants to....the expression of a preference should be captured. In Chrissy's base case, there is no additional information about marriage or hopes for children. If, upon seeing her baseline plan, Chrissy, says "oh, yeah, I am saving money for a home," then that should be modeled and the plan re-run. It is easy to do given it is a quick addition to her existing model.
This story shows that frugality isn't just a habit; it's a strategic choice for high-achievers like her who focus on long-term goals. She does't fall into the consumerist lifestyle, not out of necessity, but as a calculated move to secure an early retirement and a comfortable future. However, the irony in Chrissy’s financial life is that her inheritance could actually enable her to spend more freely without jeopardizing her future financial independence. I think she might be unnecessarily missing out on life's smaller joys.
You are right, and she may feel one way today, and another way in five years. "As of today," a baseline plan can be assembled and no family or interest in one is in Chrissy's lens. If she is on the fence today, then setting aside some funds makes sense and it is easy to play what-if by looking at how a living standard changes when savings amounts move higher and higher.
I think Chrissy needs to decide what her future plans are when it comes to when and if she wants to start a family. Whether or not she wants to have a family at some point will be the single greatest tell on if her living standard will increase with this trust. If she wants children she would probably continue to save and put the extra money towards their education, child care services if she doesn't want to retire after having children, giving them experiences like trips or clubs, and possibly even leaving them a trust when she's gone.
One thing that I believe needs to be taken more into consideration is whether and when she wants to start a family. This would very much affect her need to save more as opposed to investing. Unless these investments would yield quick results.
I agree, raising children can be very expensive and she will need to plan for that. I think given her incoming inheritance if she chooses not to start a family she can start to spend slightly more freely, as I don't think she is currently maximizing the life she could live.
You are right. and Chrissy's preferences are best know up front. If life changes for Chrissy, any financial effects should feed an updated plan.
Considering that Chrissy's main focus is saving, how may her financial stability be affected in the event of unforeseen circumstances (like health issues or unemployment)?
Health insurance addresses health issues and a high-deductible health insurance plan with a health savings account should be considered. Unemployment risk, by choice, accident, or bad luck, needs to be managed, too. It is reasonable to consider having a portion of financial assets allocated toward such a prospect.
What about using her change in spending to pump more into investing like her grandparents?
Of course. If that is what she desires. At the moment, she has $120k of financial assets. Why, and how those are invested needs a discussion.
It's fascinating to see how her upbringing and the surprise inheritance play such pivotal roles in shaping her financial strategies and life choices.
The analysis raises the question of how Chrissy could balance her current frugal lifestyle with her future financial security, especially considering her significant potential inheritance. It prompts curiosity about how she might strategically use her current assets and future to not only secure her retirement but also potentially increase her quality of life in the present without compromising her long-term financial goals.
Yes, Chrissy needs to find her best sustainable life-long living standard, and that is produced by her modeling. To your point, we know Chrissy values retirement. The plan where she maximizes her 401k contributions while working is good for taxes and, under current assumptions about inflation and investment returns, produces a positive real rate of return. Her annual, sustainable lifetime living standard is better with a heavier 401k contribution. Modeling Chrissy's investment risk and return, needs to be done as a follow-up.
Would it make sense for Chrissy to contribute some of her change in spending to college funds or future inheritance? Even though she does not have plans to get married and have children yet, I think it would be a good idea to prepare in advance. You never what changes will happen in life. Is this a possible alternative?
If she wants to....the expression of a preference should be captured. In Chrissy's base case, there is no additional information about marriage or hopes for children. If, upon seeing her baseline plan, Chrissy, says "oh, yeah, I am saving money for a home," then that should be modeled and the plan re-run. It is easy to do given it is a quick addition to her existing model.
It will take a bite out of her living standard..." Ah, those gators.
John, you are a reliable reader. Thank you.