Rational Rule (for those who don’t want to read the whole article)
Focus on purchasing things that add value to your life. Splurge on small things. Plan out your purchases and stick to those items.
How many times have you walked into a store with a plan to by one thing and ended up walking out with hundreds of dollars worth of stuff you didn’t even know existed 30 minutes prior.
In the age of Amazon and eBay, this temptation is only worse.
The retail experience is designed to make us feel as though we won, even though there really wasn’t any competition to it.
We get the thing, they get our money, regardless of how much, that took hours of our lives to earn.
It’s a manufactured sense of accomplishment that retailers want us to feel.
can things make us happy?
Sure.
For a while.
unless we spend our money on the right things.
My personal temptation is golf clubs. I Looooove buying golf clubs, but they usually only give me a fleeting sense of happiness.
Instead, I’ve been splurging on books and things to make my house cleaner. I have to put in effort to make these things worthwhile, but the payoff is much better.
For spending money, here’s the lens that I’m looking through these days:
Is this purchase an experience that I couldn’t have otherwise?
If you want to try golfing, you’re going to need to at least rent some equipment to do it.
If you really love it and keep doing it, it makes sense to own some golf clubs as continuously renting doesn’t make a lot of financial sense.
Unless you live in a tiny home and are willing to fork over the money
I think back to the sound equipment bought in High School. I purchased a 12 inch subwoofer, amplifier, and the best head unit ALpine offered. I spent my entire summer earnings on that sounds equipment.
Was it awesome?
Yes.
Did i still feel that way a decade letter?
No.
The equipment was a burden and ended up wearing out my alternator.
If I invested that money, I would’ve been able to pay cash for my first car when I got my first job.
Be your best future self and plan ahead.
Is this purchase something that will allow me to create something else?
There are energy givers and takers, and when I buy something I always try to make sure that it is a giver.
It creates more future value than it costs to acquire right now.
A book allows me to acquire knowledge which will serve me well for decades. Skillshare courses allow me to learn on the go and potentially make money in the future. Self improvement is key.
Just about all of the things I buy these days are directly related to personal finance and bettering myself.
So, what kind of things do I avoid?
Utilizing credit, or debt, to purchase something that does not provide some significant time or monetary return.
Not only are we adding something that will take future energy and time to potentially maintain, but we’ll be paying for it with time that we do not yet own.
Debt is simply committing future hours of our lives to acquire something here and now.
We can’t create more freedom if we’re already selling our future freedom for something that doesn’t earn it back.
Things that create monthly financial commitments, in addition to possible maintenance.
Sometimes, monthly payments can make it possible to purchase something that will allow you to earn more money than it costs. This is a wise use of this kind of investment.
A luxury car, for example, costs significantly more per month than a non-luxury car, and costs more to fix.
It creates unnecessary costs and accomplishes very little in addition to getting from one place to another.
Cars in general lose up to 30% the moment they drive off the sales lot.
Buy a cheap car. Future you will thank me.
Things that I haven’t tried yet otherwise.
It can be exciting to buy something new with the expectation that we’ll be awesome at it. If I haven’t tried out the thing by renting or borrowing it, and trying it out first, I avoid it.
It’s too easy to think we’ll want to get into a new hobby, buy some piece of equipment for it, only to realize that it was in fact not the equipment holding us back from learning that thing.
I figured a new DSLR camera would make me a great photographer.
It didn’t.
Then i took a course for $10 and was able to greatly improve my photo taking skills with little effort.
I try to do as much as I can with what I have available, and then buy as needed.
Of course, there are always exceptions.
I don’t feel like there are any hard rules that will always make sense in these decisions.
There will always be a balance with our purchases and expenses.
Make your splurges count and try to spend money on things you can carry with one hand.
Stay Rational
-B&T