A Smart Solution To Spending More Money Guilt-Free

As a lifelong saver, it has been hard for me to spend more money and live it up. It didn’t matter whether I got a raise or made a profitable investment, the extra money would almost always get reinvested. The Boot is a concept I came up with to help us spend money more freely.

The fear of being trapped in a job I disliked was far greater than the fear of missing out on nice things or experiences. Therefore, it was only rational for me to keep on saving and investing to one day be free. But I’ve discovered that even after extricating myself from Corporate America in 2012, it’s still hard to ball out.

In some ways, the pressure to generate enough passive income is greater today because my wife and I are parents. Since we don’t have day jobs, we don’t receive any company-sponsored healthcare or retirement benefits either. When little ones are depending on you to survive, you can’t lose too much focus.

But consumption smoothing is also important for a better life. There’s no point making money if you’re never going to spend it. If we end up dying with too much money, we will have ultimately wasted time and energy. Instead of grinding away for hours at work or on our business, we could have spent that time on something more enjoyable.

Example Of Using The Boot To Spend More Money

In order to encourage myself to spend more money, I came up with a concept called The Boot. The Boot equals any investment return above its long-term historical average. The larger your Boot, the more you can spend money freely and kick butt.

For example, let’s say your $1 million stock portfolio returned 18% one year. Given the long-term historical average in the S&P 500 is about 10%, your Boot is 8%, or $80,000. If you’ve been itching to spend more money, you now have the option to spend up to $80,000 before taxes on whatever your heart desires.

I struggled for two years to buy myself a new laptop. Even though I probably type more than 99% of people in the world due to Financial Samurai, I refused to replace my six-year-old laptop. Four keys were half broken and sticky, which meant I had to retype words over and over again. In addition, the battery no longer held its charge and the monitor would occasionally flicker out.

The Boot concept helped me realize I could spend $1,500 before tax on a new MacBook Pro 13″ due to my portfolio’s significant outperformance in 2020. But of course, I first researched how much it cost to change the battery ($250) and keyboard ($150) at my local repair shop! And of course, I waited for a sale before finally pulling the trigger. Hooray!

The Boot is also my capital source for revenge spending. After saving even more aggressively during the pandemic, I promised myself I would go a little nuts. However, I’m having a difficult time spending even 1/100th of my Boot. Let me explain.

The Problem With The Boot

Although my stock portfolio outperformed the S&P 500 in 2020 due to tech, my stock portfolio is severely lagging the S&P 500 in 2021 because big tech and growth stocks are sucking wind.

Hence, I have this worry that if I don’t make changes to my portfolio, I will end up losing a lot of my Boot. And if I lose my Boot, then I will regret spending money that I never locked in. Therefore, I end up not spending or not spending nearly as much as possible.

This type of thinking is not uncommon for super-savers and investors. The “what if” mentality is always lingering. However, it is because of this paranoia that many of us have been able to build much greater wealth than the average person.

Therefore, if you are unable to fully embrace The Boot concept, let me share a modified version: The Boot Plus.

“The Boot Plus” For The Super Frugal

In 2020, the S&P 500 returned about 18% after dividends. Therefore, the 8% Boot above the historical average is nothing special in my example above. Everybody who only invested in the S&P 500 returned 18%. Further, people who use the S&P 500 as a net worth growth benchmark also likely grew their net worths by 18% or more. Therefore, let’s calculate The Boot Plus.

The Boot Plus is equal to your portfolio’s performance minus the S&P 500’s performance if the S&P 500 outperforms the historical average. The point of the Boot Plus is to reward extra outperformance. If you’re just performing in-line with what everybody else, even if everybody else has outperformed the historical average, you do not deserve a trophy!

For example, if your $1 million portfolio returned 18% in 2020, your Boot Plus is $0 because 18% is what the S&P 500 returned. You don’t have any extra money to spend beyond your normal spending habits.

However, if your portfolio returned 40% in 2020, your Boot Plus is equal to 40% – 18% (S&P 500 return) = 22%. You’ve made $220,000 more than what the median S&P 500 investor made, who already made $80,000 more than the historical average.

Even if your portfolio is sucking wind the next year, your 22% outperformance of the S&P 500 that year and 30% outperformance of the S&P 500’s historical performance should be enough to let you spend more money than usual.

More Scenarios Of The Boot And The Boot Plus

For clarification, here are more scenarios using a $1 million investment portfolio and the S&P 500, which has historically returned 10%. If your Boot is $0, then your Boot Plus is also $0.

  • The S&P 500 returns 12%, your portfolio returns 15%. Your Boot = $50,000 (15% – 10%). Your Boot Plus = $30,000 (15% – 12%). These are good times, therefore, you should spend more freely.
  • The S&P 500 returns 8%, your portfolio returns 9%. Your Boot = $0 because the S&P 500 and your portfolio underperformed the historical average return of the S&P 500. Although times are still good, rewarding underperformance is not the way of the Financial Samurai.
  • The S&P 500 returns 4%, your portfolio returns 20%. Your Boot = $0 because the S&P 500 underperformed its historical average. There is a growing uncertainty in the economy. Your Boot Plus = $0 even though you crushed it because you’re preparing for future opportunities. Although, with such outperformance, you should feel free to spend at least 10% of your portfolio’s return over the historical average (20% – 10% = 10% or $100,000/10).
  • The S&P 500 returns -15%, your portfolio returns 6%. Your Boot = $0 even though you significantly outperformed. During corrections or bear markets, it’s best not to spend more than your usual if the economy is fraught with uncertainty. In general, you should rather take advantage of downturns and invest more money.

You’ll Likely Never Spend Your Entire Boot

The Boot isn’t an all-or-nothing concept. The goal is to spend more money during good times and when you outperform. After all, you can’t get rich if you don’t outperform the average. You certainly don’t have to spend your entire Boot. If you have a sizable portfolio, it may be impossible to spend that much more money.

For example, let’s say you had a $5 million portfolio that went up 40%. Using the same percentages for 2020, your Boot Plus is a significant $1.1 million. If you’re used to spending only $300,000 a year for a family of four, suddenly spending almost 4X your budget will be extremely difficult.

However, at the very least, your investment gains should enable you to freely buy almost anything you want. And if what you what is relatively inexpensive compared to your Boot, then consider yourself lucky!

Personally, I always like starting small and working my way up towards more spending. For example, I like taking my Boot Plus and dividing it by 100. I look around and see what I can buy with 1% of my Boot Plus. Then, I take my Boot Plus and divide it by 10 to see what I can buy. I continue on until my desires are satiated.

More times than not, you may receive another Boot Plus before you spend your previous Boot Plus. As a result, you will end up building even more wealth while you enjoy your life further.

If you always tether spending to investment performance, you will forever be a disciplined spender. As a result, you will also likely never get into financial trouble either. Here’s to spending responsibly!


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Readers, what do you think of The Boot and The Boot Plus method for spending money more freely? Do you have any smart spending rules that tie into investment or wealth gains? How do you overcome the guilt of spending more money?

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