Category Archives: conscientious consumption

Two in the Bush

Next month is my condo closing (knock wood), which means that about a week from now I’ll be making my last mortgage payment on the place. Oh, and my last assessment, last tax escrow payment, last PMI payment… all told, that’s $2700/month that I’m paying now but won’t be paying come October. And as annoying as it’s been to be making these payments on a vacant condo, I’m fortunate to have a job that pays well enough for me to make that payment along with all my other bills and expenses.

So the thought of this money coming in is really seeming like quite a windfall, and I’ve been brainstorming fun ways to spend it. It really hits me that it’s a lot of money when I look at what else I could do with this money every month:

  • The nail salon near my home charges $35 for a pedicure. With a 20% tip, that’s $42. With $2700 every month I could get two pedicures a day, every day. A pedicure is the ultimate indulgence for me, so this actually sounds tempting!
  • A flight to Europe even in peak tourist season is under $1000. Add 6 nights in a hotel at $200/night and give me a $500 food/museum budget for the week and that’s a one-week vacation to Europe every month.  Of course, I wouldn’t have a job after a couple of months of doing this, and there goes the $2700.
  • Ever read a shelter magazine, like Martha Stewart Living or Architectural Digest and marvel at the flower arrangements in the rooms that look to comprise about 1000 roses and hydrangeas? I’ll bet $650 would buy a pretty nice flower arrangement every week.
  • How could I forget the “latte factor”? If a soy latte is around $4, let’s be generous and leave a tip for an even $5, I could have 17 lattes a day! (Better make some of those decaf.)

Well, you get the idea. But believe it or not, the point of this post isn’t to brag about how I’m going to be living large in a couple of months. Because, actually, I’m not going to be doing any of that stuff. The point of this post is that fantasizing about spending money is very different from actually having the money in hand and deciding where it will go.

My financial goals are longer-term. What I really would like to do is get my student loan debt paid off, so that I no longer feel locked into my well-paying, but unfulfilling, job. As much as I like the idea of endless flower arrangements, the appeal would wear off every time my student loan statement came in the mail.  So almost all of this “extra” money will go towards aggressively paying down my debt.

But it doesn’t have to be all-or-nothing. What if I set aside a few hundred dollars of the $2700 for smaller versions of the indulgences listed above? If I put $2000 to my student loan debt, I would still have money left over for one pedicure a week, a modest bouquet of fresh flowers every week, a latte a day, and, say, $350 to go in a savings account towards a vacation at the end of the year. And all that would still feel really luxurious, without all the guilt.

There’d still be some guilt, though; $700 is still a decent chunk of change. But it would allow me to pay down my debt quickly (if not as quickly as possible) while still retaining some of that “windfall” feeling. This is all still talk, at this point. We’ll see what I do when I have the bird in the hand.

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“But it was 99% off!” and other personal finance fallacies

My mom was (and still is) a bargain hunter. She made a hobby out of shopping the bargain racks and clearance bins, trying to get the biggest discount she could. Even better if she could then talk the salesperson into taking off an additional 5% for a loose thread or missing product manual.

Like I said, it was a hobby of hers, so in that sense it was cheap entertainment. But it resulted in her bringing home a lot of stuff she really didn’t need. A familiar scene in the house on a Saturday would have her coming home from Sears with a couple bags full of clothes. The best part would be when she’d show my dad a blouse that was $50 originally, marked down to $20, and then she got another 40% off so it was only $12. My dad would say, “I could have saved you $12.”

My mom had fallen into a common trap–the allure of the bargain was so strong that it became irrelevant whether the discounted item was something she really needed or even wanted in the first place. I’ve found myself doing the same thing, contemplating a deal that was too good to be true before I realized that I would be just as happy walking away and spending $0. Stores capitalize on this behavior, which is why you’ll see boxes of facial tissues on an endcap in a store with a big “5 for $10” sign, for example–even if the regular price of the tissues is $1.75/box, when it looks like they’re on sale people will buy them, and will buy them in the suggested quantity.

Some other personal finance fallacies:

  • Failing to consider an item’s useful life. Surprise, surprise: Mom had a habit of buying low-quality goods without thinking about whether this was the best bargain in the long run. I remember that we would go through a $10 toaster every few months. Had she instead paid $50 or even $100 for a high-end toaster, she would have come out ahead financially after a year or two. Buy nice or buy twice!
    • (This also holds true for items that you may tire of. You can buy the $200 wristwatch you really have your heart set on and will gladly keep forever, or settle for the $50 watch that you’ll want to replace because you just don’t like it.)
  • Giving too much weight to sunk costs. If you’ve already paid for something, you are not getting that money back, so there’s no sense going down with the ship. Here’s an example: a few months after I bought a brand-new car (okay, probably not the best choice financially), I got an unexpected job offer in Chicago. I moved, and realized that I didn’t need any kind of car in Chicago, much less a brand-new one that was just going to get dinged up from parking it on the street. But the car was worth far less than what I owed on it. As painful as it was to do, I sold the car, paying several thousand dollars out of pocket for the privilege. My reasoning? I owed the loan balance whether I kept the car or not. By selling the car, I cut my losses.
  • Failing to consider intrinsic value. This is a corollary to the “Look, it was only $12!” fallacy. Something with an artificially high mark-up may not be a bargain even at 75% off. Consider whether it would still look like a bargain if the tag itself said “Regular price: $25.” Keep in mind that brand names don’t always mean quality. Comparison shopping is important here: maybe a travel website is offering its usual $700 air + car + hotel package for only $500 next weekend; that’s a good sign that all travel is discounted and you may be able to put together your own package for less than $500.

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