There is nothing wrong with spending money

[disneysteve]

Now there's an interesting title for a discussion at a site devoted to saving money.

I'm sure many of you have watched Suze Orman. My family watches it together every Saturday nite. Our favorite part is the "Can I Afford It?" segment. Viewers call in and ask Suze if they can afford a purchase they want to make. They list their income, expenses, debt, non-retirement and retirement savings figures. Suze usually asks a couple of questions and then approves or denies their request.

What I think is important to point out is that she doesn't base her decision on what the item is or how much it costs. She has denied callers wanting to spend $200 and approved others wanting to spend $50,000. The calls are virtually all about wants and many are about true luxury items - expensive jewelry, exotic vacations, etc.

Whether or not she approves the spending is based on the caller's financial situation, how well set they are and how well they are managing their money. If they are being good stewards, she tells them to go ahead and do it and enjoy.

There is nothing wrong with spending money in a responsible manner, even if it is for wants and luxuries. The problems arise when people put the wants too high on their priority list and spend money they don't really have to get things they could easily do without.

I think sometimes around here we forget that there must be some reason we are all clipping coupons, shopping at thrift shops, selling stuff on ebay and searching for the best interest rates for our savings. There needs to be a goal for our money. We need to be saving for a purpose, and I don't just mean retirement, though that is certainly one very important goal. We all have different goals and wants and priorities. I might be saving for our next trip to Disney World. Another poster might be saving for a car. Someone else is amassing a down payment for a home. Maybe you have your eye on a new watch or a big screen TV or a cruise.

My point is that I think we need to follow Suze Orman's method a little more. When someone comes here asking if they should buy something or spend X amount for something, we should look at their numbers and say if we think they can afford it, not just whether or not we think they should be buying it in the first place. If you ask me if you should buy a big screen TV, I'd say no, because I have no interest in them and think they cost a ridiculous amount of money, but if you tell me you'd really like to get one but aren't sure if you can afford it, that's a whole different question. I should put aside what I think about the item and focus on the numbers.

I hope that makes sense. It's late and I had a long day.

[maat55]

I hear what your saying. Sometimes there is a fine line between a good answer and a bad one. I believe most times in giving the safest reply and allow the person with the decission to weigh all the aspects.

Your absolutely right, that we do not sacrifice only for retirement.

[LivingAlmostLarge]

You have to live a little in life! Or what's the point of living???

I know I could be more frugal but I like cable. I like having steak, I like eating fish. Darn it, sure I could live again on $25/week for groceries but do I really want to?

Food is a need, but what I eat is a WANT. I do not need organic food or leaner cuts of meat. Actually I don't NEED meat at all, but I like it.

I need a place to live. But I want to own my home, but I only NEED to rent. DH and I could rent a room in a house if they allowed us, that would cover our need, but we want more space.

I need a car to get to work. I want the nice car I drive, but I could drive a complete beater that runs.

As long as you realize that wants and needs are different. There is nothing wrong with wants.

[kork13]

Totally agree. Everyone has their extravagances. That might be a car, or clothing, computer, travel, housing, whatever... If there's something you can enjoy, I'm all for doing it. Most of us (in particular) just need to occasionally swat aside the little shoulder angel saying that you could get by with less, then go for something you enjoy or are happy with. And I think if were all were to look at ourselves and "confess" the ways in our lives we've spent more than necessary, we'd (thankfully) have quite the list together. Underlying theme behind it all though: responsibility in managing those wants and desires vs. real ability to afford it.

Thanks for the reminder, DS... you're probably very right, alot of the strings tend to frown on luxuries, even if not intentionally.

[Broken Arrow]

I hear ya! I feel the same way, even if I don't always come out and say it.

I don't think the problem here lies in people like SAers who typically have good saving and money managing habits. I think the problem lies in people who does NOT have good saving and money managing habits. Ones that typically have to call Suze just to see if they can or can not buy something.

[LivingAlmostLarge]

No but SA have trouble SPENDING sometimes more than savings.

[disneysteve]

Originally Posted by Broken Arrow

I think the problem lies in people who does NOT have good saving and money managing habits. Ones that typically have to call Suze just to see if they can or can not buy something.

If you watch Suze, you'll see a fair number of people call in who absolutely can afford what they are asking about. They make good incomes, have great savings, minimal if any debt and I think just want to hear from someone else that yes, it is okay to go out and spend some of that money on something you really want.

[Exile]

I think that there's another factor to consider in deciding when, how much, and whether to spend: The source of your income. Very few jobs are guaranteed for life, and if you're a working person or even a professional who depends on your wages/salary to cover your living expenses, becoming unemployed could be catastrophic to your finances. Even if you have an emergency fund, that could disappear before you find a new position.

If on the other hand you have a sure source of income, such as social security or an annuity, this might give you a little more wiggle room in planning your budget and making that occasional extravagant purchase.

[disneysteve]

Originally Posted by Exile

I think that there's another factor to consider in deciding when, how much, and whether to spend: The source of your income. Very few jobs are guaranteed for life, and if you're a working person or even a professional who depends on your wages/salary to cover your living expenses, becoming unemployed could be catastrophic to your finances. Even if you have an emergency fund, that could disappear before you find a new position.

If on the other hand you have a sure source of income, such as social security or an annuity, this might give you a little more wiggle room in planning your budget and making that occasional extravagant purchase.

I think that is more true when you are just starting out and probably don't have much in savings. As you get older, though, if you consistently live below your means and save diligently, you will have a much larger cushion to carry you through any rough spots.

My wife and I are both 44. We have savings equal to over 3 times our annual income (and probably 5 times our annual expenses). I certainly wouldn't want to burn through a lot of that money if I became unemployed, but it would be there if absolutely necessary. I certainly couldn't say the same thing 15 years ago when I was just starting out.

[feh]

Originally Posted by disneysteve

There is nothing wrong with spending money in a responsible manner, even if it is for wants and luxuries.

I see your point, but I disagree with this statement, depending on what you mean by "responsible". The older I get, the more repulsed I become by our consumerism culture. It's so widespread and just accepted that most people don't even realize they're constantly being marketed to.

Let's take the Howell's (of Giligan's Island) for example. They've got money to burn - they can afford anything they want. Does that make it ok to spend $20K on jewelry? Is it ok to spend $100K for an exotic sports car.

In my opinion, it's not ok. That kind of spending is pure indulgence.

[LivingAlmostLarge]

Feh why is it an indulgence to pay that much? Why is it wrong?

I see nothing wrong if you can afford it. BUT remember cash does not equal affordability, though many people who use cash would argue otherwise.

[disneysteve]

Originally Posted by feh

I see your point, but I disagree with this statement, depending on what you mean by "responsible". The older I get, the more repulsed I become by our consumerism culture. It's so widespread and just accepted that most people don't even realized they're constantly being marketed to.

Let's take the Howell's (of Giligan's Island) for example. They've got money to burn - they can afford anything they want. Does that make it ok to spend $20K on jewelry? Is it ok to spend $100K for an exotic sports car.

In my opinion, it's not ok. That kind of spending is pure indulgence.

That's an interesting point. How much is too much to spend, no matter how much you earn or how well set you are financially? I don't know the answer (or if there is an answer) but I agree with your thinking. I've often said that no matter how much I earned, I couldn't see myself ever paying more than 30K or so for a car. Even if I was a billionaire, I don't think I would be comfortable going out and spending 100K for a car. But then what do you do with all that money? I guess you could just give more to charity, and that is certainly a good option, but if you've worked hard and been successful, I'm not sure it is anyone's place to say you can't enjoy the fruits of your labor or that you are obligated to give away your money.

I don't know that it is "wrong" for someone to do it, though. I've often said that as long as all of our financial needs are being met and we are saving adequately for retirement and college, as well as supporting charitable causes that we care about, how the remainder of the money gets spent doesn't really matter. Of course, I'm not talking about the level of spending that you referred to. I'm talking about going out for the $100 dinner instead of the $25 dinner.

[GREENBACK]

I think if you want a luxury item and can afford it and you've thought it through before the purchase then why not buy it. I'd be curious to see if some of the purchases I've made would have been approved. I did the math before purchasing though and I approved myself and don't regret the occasional splurges I've made. My bills get paid on time, My debt is non-existent and my savings are in good shape so If I want or need something and can truly afford it I get it.

[disneysteve]

Greenback, I agree, but I've certainly heard something on TV about some item selling at auction for millions of dollars and thought to myself, "What a waste. Think of how much good could have been done with that money." I think feh's point might be about what things people place enormous value on, and what things they don't.

I'm very active with my synagogue and we struggle every day to find the money to fund the programs we want and need to have. When you see that some painting sold for $10 million or some pro athlete signed a multi-million dollar contract, you can't help but wonder if there aren't some misplaced priorities.

[feh]

Originally Posted by LivingAlmostLarge

Feh why is it an indulgence to pay that much? Why is it wrong?

I never said it was wrong - I won't go so far as to say something is "right" or "wrong".

Such purchases seem like such a complete waste to me. They bring the purchaser some happiness for a short time, but that money could be put to so many other good uses. Just a couple ideas off the top of my head:

- save the money and retire a little earlier
- save the money and pass it on to your kids
- donate it to a charitable cause
- start a scholarship fund
- use it do some other good in your community

It's the American (and spreading to other countries) need to possess things that really turns me off. It just strikes me as selfish...taking the $20K jewelry for example - that could fund the local food bank in my community for a year. Compare that to the purchaser having some more bling on his/her body, and it's a no-brainer (to me).

[disneysteve]

Originally Posted by feh

It's the American (and spreading to other countries) need to possess things that really turns me off. It just strikes me as selfish...taking the $20K jewelry for example - that could fund the local food bank in my community for a year. Compare that to the purchaser having some more bling on his/her body, and it's a no-brainer (to me).

Again, I see your point, but where do you draw the line? You could also say that spending $2,000 for an engagement ring could have funded the food bank for a couple of months. Or that instead of spending 20K on a car, you could buy a 10K car instead and fund the food bank for 6 months.

The bottom line is that anything you spend money on beyond food, clothing, shelter, medical care and education could be considered extravagant by someone. If we spend $4,000 for a cruise, that's really no different than someone else spending 20K for a diamond necklace.

[feh]

Originally Posted by disneysteve

Again, I see your point, but where do you draw the line? You could also say that spending $2,000 for an engagement ring could have funded the food bank for a couple of months. Or that instead of spending 20K on a car, you could buy a 10K car instead and fund the food bank for 6 months.

The bottom line is that anything you spend money on beyond food, clothing, shelter, medical care and education could be considered extravagant by someone. If we spend $4,000 for a cruise, that's really no different than someone else spending 20K for a diamond necklace.

I agree with you. There is much grey area here.

I'm not suggesting we all live as monks and give every spare penny to the United Way. We all draw the line in a different spot.

But I will stand by my original examples - spending tens of thousands of dollars on items that are clearly wants, not needs, is pure indulgence, IMO.

[Broken Arrow]

Since this is brought up, I do think what is considered as "acceptable spending" will vary for each individual household. Perhaps it would be easier to look at it in terms of % rather than absolute dollar values, and whether or not it is within budget....

[GREENBACK]

I see everyone's point. I would never buy something that was obviously a ridiculous purchase even if I had the money for it. From my perspective, I've spent money on fun things that were practical for me and are not things that are just for short term happiness. I do believe strongly that if your needs are truly being taken care of then it's ok to responsibly satisfy some of your wants. Just be sure it's really a want and not a whim. There is obviously a frugal mindset here that views 100k cars and multi million dollar paintings as a waste and I couldn't agree more. Priorities are different for everyone and even the rich sometimes learn the hard lesson that you can't buy everything that thrills you at the moment

[disneysteve]

Originally Posted by Broken Arrow

Since this is brought up, I do think what is considered as "acceptable spending" will vary for each individual household. Perhaps it would be easier to look at it in terms of % rather than absolute dollar values, and whether or not it is within budget....

I agree. That line of what is acceptable spending is going to move with income.

I may think spending 50K on a car is ridiculous, but if I earned $5 million/year, that would actually represent a far smaller portion of my income than if I currently went out and spent 20K on a car.