Once upon a time, I was very, very frivolous (read: irresponsible) with money.
Other peers settled down. Saved up for houses in the suburbs. Started retirement savings plans. Bought a home. Learned how to sweep gutters and change air filters. Grew up. Became responsible. We partied on. We shopped on. We frivolity-ed on.
Look up hedonism in wikipedia and find my youthful face staring at you, careful high and low lights in my trendy-cut hair, skin glowing from the most recent facial, nails and hands good enough for an ad, and shirt fashionable and flattering (best rec by the Nordstrom's personal shopper) (also free of any spitup or food stains).
I frequently bought knock-offs, clearance rack items, shopped outlets and otherwise tried to stretch my dollar as far as it would go. That I shouldn't have been spending that dollar at all didn't occur to me...and that was my trouble, as well as being caught in the "I want it and it's a great deal" trap.
Spend, spend, spend. Party, have fun, want it, get it. We spoiled ourselves rotten.
One day we realized we couldn't keep up that lifestyle much longer. We felt ready to settle down, and grow up.
That's when we finally understood that life, and finances, don't manage themselves very well.
So we reformed our evil ways. We studied finance, met with an advisor, and Glory Be, Praise Economics, we were saved.
Not in a flash, it is an ongoing effort.
As part of that ongoing effort to be able to afford to live as we believe we need to (which doesn't account for how we want to---a goal we keep ahead of us like a rabbit before a dog at the racetrack) I will click and read practically anything that promises to help me find a way to live fiscally responsibly or that guarantees ways to squeeze a dollar from a penny.
(That, by the way, is a real news story. Just google "value of copper pennies" and start reading. For example, see this news story, "US Mint has made it illegal to melt or export US coins in bulk, since the value of their constituent metals — in the case of pennies and nickels — now exceeds their face value.")
Most recently, I discovered a blog called I Will Teach You to Be Rich.
Money is on my mind every single day. I've read good and bad, and you never know what nuggets you might find (like the penny thing--don't think I'm not looking for scrap metal companies).
I read Rich Dad, Poor Dad (yeah, didn't work and did someone say Amway?). I read Dave Ramsey. I listen to the money show on the radio, and have used Clark Howard's Web site to successfully solve woes. I've begun searching MySpace for fiscally conservative accountants to add to my friends' list much as my friends and I once searched bars for hot boys.
I've even read Milton and Rose Freeman. I know, shoot me now.
It's brainwashing. Somehow I got the impression that only really conservative people can be smart about money. I'm working to correct that erroneous stereotype, and believe it or not, a Stanford-educated 20-something with more money that I've earned three years running and friends who spend over 20K to Go Out and over 5K on shoes annually had a helpful nugget towards that.
When I followed the link, I found a post about Conscious spending: How my friend spends $21,000/year on going out.
The author, Ramit Sethi, wrote about the wiggle room between frivolous spending and fiscal responsibility. If you earn enough, you have enough with which to be frivolous after you do all the responsible things you should do with your money. And it seems the people he knows earn plenty, all well over six figures. (Must be nice.)
The topic came to him when a friend hesitated to tell him about a trip he wanted to take. Ramit realized that his self-titled nickname of personal finance guy had earned him the rep of "the guy who tells me I can't do stuff because it costs too much money."
Nothing could be further from the truth. Now, I will call your ass out when you're being stupid about money. But I'm not the finger-wagging parent who tells you not to spend money on lattes. Instead of taking a simplistic "don't spend money on expensive things!!!" view, I believe there's a nuanced approach to spending. Today, I'm going to tell you about 3 friends who are spending lots and lots of money on things you might consider frivolous--like shoes and going out--but I'm going to tell you exactly why I think they're perfectly justified.
Sethi then brings up the idea of frugality (my daily mantra) and says:
I think you can have lots of fun debating the minutiae about which grain of rice is cheaper, but it doesn't really get you much further towards your goals. . .frugality alone doesn't get you to your goals. It's a helpful but not sufficient condition. So I take another approach of trying to write about money holistically, while urging you to make your own decisions about what's important enough to spend a lot on, and what's not.
As with most advisors, his point seems to be that "going cheap" isn't the sole answer to being wise with money. In fact, most advisors say that if you get too focused on "buying cheap-on sale-or off-season" you might blow your budget, or discover you have trouble making one.
The key is to have a budget that figures out what you need. You first and foremost allocate money that direction, and then decide what to do with the rest. The point is to have a plan, and stick to it.
Sethi's free-spending friends are allowed to be "frivolous" on their favorite habits because that is left over money. They planned that frivolous money; they aren't stealing it from elsewhere in their budget (or worse, spending with no plan), instead that money has its own line item in the financial spreadsheet. He smartly advocates for this idea.
In fact, Sethi put out a call to name 2007 the year of Conscious Spending:
That's why 2007 is the year of conscious spending, in which I want you to consciously decide what you're going to spend on. . . Conscious spending means you decide exactly where you're going to spend your money--for going out, for saving, for investing, for rent--and you free yourself from feeling guilty about your spending. Along with making you feel comfortable with your spending, a plan lets you continue growing towards your goals instead of just treading water.
That's a truly solid principle. In fact, it's pretty much the secret of success to any sort of budget endeavor or really, any endeavor at all. For example, members of Weight Watchers...isn't this also the secret to diet success?
I wish Sethi had been around when I was back in my salad days. I might have listened. I hope I would have. His idea isn't new but the medium and the presentation have, I think, an increased chance of reaching and succeeding with people who need good financial advice.
As interesting as the blog post was, the comments were even more interesting.
Do you remember earlier when I wrote that I was once very frivolous (read: irresponsible) with money?
I think those two concepts are intermarried in our minds. Reader comments support this. The idea of "fiscal responsibility" which really means "good personal financial decisions to best support YOU" morphed into the concept of "societal responsibility" which really means what I think of as The Robin Hood Principle:
"To those who receive much, much is expected."
Say you allocate 5% of personal income to charitable sources. Say you then have a fair amount of remaining disposable income. Say you then decide to allocate a budget of $5000 annually to Manolo Blahnik shoes. You love shoes, you love these shoes, and it's your fun weekend blow off steam hobby.
Have you then crossed over from fiscally responsible with a justifiable frivolous habit to socially irresponsible?
Should you allocate a greater percentage to charity?
A number of readers thought so. (I've italicized the points they make that I think are worth pondering.)
The judgment comes from the fact that they're spending so mcu and so *selfishly*. $21,000 a year on parties?? $5,000 a year on shoes?! Gimme a fucking break. Why not give a little to the local homeless shelter instead? And to fight malaria in Africa, and feed starving children in India? And if you're already giving to those causes, give some more, or find something else worthwhile to do with your money. As it is you're just frittering it away on shallow hedonism. . .Look, we're human, and not everyone is going to live like a monk or nun, so most people will treat themselves to needless frivolties on occassion. Or the $3 morning latte, or whatever. But this can easily reach a point where the spending becomes obscene, and your friends have long since crossed that threshold. People are bothered by this for the same reason they were bothered by Kozlowski's $6,000 shower curtain. I'm not concerned for their bank accounts; I'm concerned for their souls.
I admit it; I'm troubled by those Sweet 16 birthday parties and $500,000 Bridezilla weddings.
I think the reason why these purchases / costs outrage people is really more that most people consider this kind of spending wasteful. It isn't really about how much money it is or what percentage of income it is. There are all kinds of emotions attached to money, and to many people it's just out and out wrong to spend money in this way. It doesn't matter if you're lighting cigarettes with $100 bills or buying $300 shoes - many people consider that morally wrong.
The reason why those parties and weddings trouble me---despite plenty of people telling me "Hey if they've got it, who cares how they spend it?"---is because it does seem somehow morally wrong to me. Probably because I can't fathom having that much money, but more probably because even if I did have that much, I'm sure I'd find a way to do something that I thought looked just as nice for half the price. Then I shake off Old Mentality and remind myself, "Hey, girlfriend, you know? Even as a huge bargain, is that really necessary? What value does it add to life? Is it a choice worth making, regardless of whether it crimps your financial goal?"
Further, I recently watched a sort of "modern lifestyles of the rich and almost-famous but rub noses with the famous."
One featured man (boy?) displayed his collection of cars. He had imported this and limited edition that, all told about 8 cars, almost all of which were valued in excess of $300,000 each.
Seeing that amount of money on the screen was like a punch to the gut.
A quick mental calculation revealed that, if I had that $330,000, I could: pay off my mortgage (my only debt), remodel my house a la my dreams, beef up retirement savings significantly, and pad the kids' college funds.
We'd go from struggling and working hard to live on the very edge (but within our means) to very comfortable.
I hardly think I'm entitled to anything. This isn't my point. It was simply very emotional for me to realize that one of this guy's eight cars would sustain my family for years and years and years.
And I'm the least of the needy, in many ways.
As reader Susan wrote:
How does someone who makes six figures justify drinking $12/glass drinks to the tune of a person's entire salary for a year while there are people in this country who can't afford to feed their children? It doesn't matter if they're already giving to charity. If they've got enough left over for this, I guarantee they aren't giving enough. I'll say it again: Whole families in this country are living on the amount that person spends on entertainment every year. Families. Not individuals. And not just in areas where the cost of living is low.
Another reader politely told Susan to stuff it. This reader said he worked hard to earn his money, he gave what he felt was a morally correct amount and felt he deserved to spend the rest enjoyably, on himself.
I found myself (to some degree) agreeing with both the points and the counterpoints.
Both financial and physical healthy habit lessons have taught me that an austere existence---one full of denial and little indulgence or luxury---is a fast track to over-indulgence. In fact, last week my Weight Watchers leader told us to plan an indulgence. Yesterday I went all out. I had three donut holes and a margarita (not together, for the record, at opposite ends of the day). I think we need to build this sort of thing into all of our healthy plans, be they financial or health oriented. Frivolous is important.
We should enjoy what we can. That might mean a $12 drink here and a nice $200 blazer there.
I think my visceral reaction came when it wasn’t a little indulgence here or there, but rather a regular, expensive habit that was perhaps more indicative of a materialistic priority than a healthy enjoying of a planned affordable luxury.
As reader Jonathan wrote:
1. If your finances are in order and you have money to spend on 'silly' things you enjoy, that's not really a bad thing.
2. However, even if I was a billionaire, I would not buy $1,000 shoes and all that other nonsense. I don't enjoy having useless material possessions.
Despite my past, these days, I'm just not that into keeping up with the Joneses in that way. For one, I can't afford it.
But more importantly, I'm just not that into making sure people know how cool I am by what I wear or where I live or the things I do and clubs I belong to. I'm not sure how or when that got to be important to me, but it did. I'm also not sure how or when it struck me that it could no longer be important to me, but it did.
For me, it becomes a matter of finite time and resources (physical, mental and emotional) but more so, a matter of priorities and motivation.
Where do your thoughts fall on the moral imperative to share the wealth?
What about the line of "enough," "comfortable," and "more than is necessary?"
What do you think about this concept of okay frivolous spending?
What's your stance on finance?
P.S. A little funny? My most innocuous frugal tip is this: the more time I spend reading about financial responsibility, the less time I have to go out and spend. Plus, the Internet is free. If your spouse criticizes you for amount of time surfing blogs and other sites, simply remind him/her that, "Hey, I could be spending $21,000 annually on Going Out, instead." My husband was just thrilled.
copyright 2007 Julie Pippert
Tags: conscious spending, finances spending, saving, planning, frivolous spending, tithe and tithing, charitable donation, money