9 Dec 2012, 6:35 AM
What is the right way to think of money --...
What is the right way to think of money -- saving, spending? When I spend a lot of money on a single thing, I feel like I have to be extremely deserving of it and I fall into spending guilt. I am not sure how to deal with it, and how to think of it (i.e. am i being frivolous, or am I doing the "right" thing?)
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9 Dec 2012, 8:30 AM
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- Electrical engineer
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Hello and welcome. Money can be quite a philosophical thing when you start to think about it. Spending guilt is not a bad thing but it can limit you if it start to look like hoarding (not wanting to let go the money). It is good to keep some money aside in case of some accidents but remember that the money you work for start deprecating with inflation at the second you worked for it. I personally stopped to buy anything that do not better my life in the long term. I buy things only if they save me time or increase my security. Cable TV for example is out of my home, the internet is a superior media at a lower cost. Separate your money pile in 3 piles. Pile 1 is your saving, the money you need in case something goes wrong. Your tolerance to risk and the amount of things to possibly replace decide of it's size. Pile 2 is your body need: food, shelter, health etc... That one is decided by the amount of luxury you want to have and can afford in your life. Pile 3 is the project money. In this, the money is used for bettering you life. It can be for time saver or for money making business or education. That money will allow you to increase the amount in the pile 1 or to increase the luxury amount of the pile 2. The most dangerous thing in managing your money are essentially coming from two sources. Source 1: The Marketing. Companies and peer pressure from the society (also driven by marketing) want you to want things. You need to decide by yourself what you want to do in life and buy things that will let you achieve those goals. Do not let others decide of what you want. Source 2: Crap quality and manufacturing. Too many things are allowed on the market that should not be. You need to learn about quality and efficiency in the things you buy and stay away from crap. Putting lot of money into something that don't work anymore some months later is not something i like. For both source 1 and 2, patience is a good asset. Always think some week before buying something to prevent impulse buying. Always research well the things you buy with review, test in store, renting first. Don't think that the newest thing is always the best, many time something manufactured 20 years ago still beat a new tool. Don't fear to buy on the used market as it is cheaper and easier to test things before buying them.
9 Dec 2012, 11:00 AM
Thanks for your answer. To specify my situation a bit more, I am in my mid 20's, make about 53K a year, had very little money all my life, but have been able to save about 20K in the last year. I tend to save more and more because I'm young and don't know want to do with my life, maybe travel, maybe go back to school.. who knows. and so I use my money as a safety net. That doesn't mean i don't spend though. I purchase food and coffee everyday, buy little goods here and there. But hardly ever large purchases. Recently, I decided to buy a new macbook (because my old one was practically on its death bed), and that was already a tough decision. Because of my poor upbringing, I feel that buying a $2,000 is frivolous. But as you said, i knew that it was quality and EXACTLY what I wanted. Now i am in a similar situation, with a similar product. I purchased an iPhone last February (my first smartphone), and it was stolen yesterday. Naturally, I want to buy the same one, but that means cashing out another $500. For a stupid phone. Of course, I need a phone, I need a smart phone. But i ask myself, "Why an iPhone?" I figure most of it has to do with habit and comfort. its what I'm used to, its user friendly to me. But even this sort of rationale seems entitled to me. On the other hand, I HAVE the money, and considering what I make, and the fact that I do't really have future expenses, and the ones that I do have right now uses up less than half of my salary, it doesn't seem worth the stress. But again, I like to protect myself, and have sufficient funding "just in case" for the future. I know its not black and white, but where is that lining? How do I know how much is too little or two much? Since everyone's situation varies, is there a way to go about figuring out how to indulge and financially protect yourself equally?
9 Dec 2012, 7:47 PM
If the 53K is before tax and the 20K after tax, then it is a lot considering your age. 10K would be enough. If you want to "feel" a better security cushion do some of those things: Buy a house. Grow a garden to make as much of your own food as possible. Try to become a jack of all trade to depend less on help of professionals (plumbing, mechanics etc...). As for the things you buy, don't see them as money unit but as time unit. Does the time lost in earning the phone is compensated by the time the phone will save you over the entire life of the product? You said it yourself: "and don't know want to do with my life". Money to make money is pointless. Making money to accomplish project is the reason why money was invented in the first place. Find what you want to do by going onto frivolous adventure, idea will come to you that way. Also think of your kid dreams, even if they seem frivolous and impossible those are the one that have the best chance to make you happy. The current marketing that is hammering us with consumerism value of buying into entertainment instead of accomplishing something is the disease of our era. Try to have projects that make sense in bettering your life or the life of those around you. Remember that you are still very young, you have the right to make errors, you have plenty of time to amend them.
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