I have a friend who occasionally comments about how things are expensive and how she is working to pay off her credit cards. This friend also has a tendency to drop $20 on “whatever” around five days a week. In my opinion (and the opinion of some of our other friends), this is a stupid and irresponsible practice. If she would limit her “whatever spending” to once a week (or less!) she could save a significant amount of money. I don’t think she even realizes how much she’s spending, because it’s “only $20.”
This got me to thinking. Blowing through money when you’re in debt and don’t have much savings is clearly irresponsible. But what if my friend were doing quite well for herself? Let’s say she’s planning properly for retirement, owns her house and her car, has an emergency fund, and has a solid amount of savings. Now what about her tendency to drop at least $100 a week on things like books and knick knacks and coffee and other such things? Is it still irresponsible?
I go back and forth on this, primarily because of how I was raised. I have always believed that no matter whether you have the money or not, you should think about your purchase before you make it. Sure, you can afford those five books at the bookstore. But do you really need them? Do you need them all right now? Can you wait, or buy them online later for less money? Would you be just as happy with two books? If you decide yes, that you want all five right now, fine. But at least you thought about it.
Half of the time I see my grandfather, he’s wearing clothes he’s had for years, like a shirt from the tee ball team I played on almost 20 years ago or a pair of socks that originally belonged to my other grandfather, who passed away over 23 years ago. Admittedly, the t-shirts have seen better days, but if he’s just out doing yard work, who cares what he’s wearing, right? He could absolutely afford to buy new shirts and socks. He could buy a truckload of new clothes. But it’s not something he needs. I wouldn’t say he’s excessively frugal – he just thinks about how he spends his money before he does it. He and my grandmother still go on fancy vacations and eat at nice restaurants and go out for ice cream.
I wonder if that’s why I think that even if my friend were wealthy, her frivolous spending would still be fairly irresponsible. I tend to feel like her purchases are often wasteful, and I think of all the other things she could do with that money. Even if you’re financially well off, even if $100 is just a drop in the bucket, I still think that money shouldn’t just be frittered away. It could be saved for larger purchases or gifted to family or donated to charity or randomly handed out to panhandlers on the street.
Of course, I’m not in a position to tell my friend what she should do with her money, and given her spending, I don’t think she’ll ever get herself to a point where she will actually have an extra $100 to throw around. But it’s something to think about.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.