My husband and I were shopping one Saturday afternoon along with a LOT of other people. He wanted to get to an item in menswear, but a lady was blocking the display with her cart, so he gave up. I encouraged him to politely ask her to move. He said, “I don’t really need it. Why would I buy it just because it’s 20% off?” The store didn’t sell anything we needed and my husband was wise not to spend our money. But what we think we need and how much money we spend on it, is very subjective. How do you know when you have enough? When you can buy a new refrigerator because yours unexpectedly dies? When you can pay for your children’s college tuition? When your retirement is fully funded? In the words of the great philosopher Sheryl Crow, “It’s not having what you want, it’s wanting what you’ve got.”
How much money is enough depends on the cost of food, clothing, and shelter where you live. For example: The median cost of a home in Dayton, OH is $45,000, while the median cost of a home in New York, NY is $662,100 . It also depends on how self-disciplined you are. Respondents to a survey by Charles Schwab said they need a net worth of 1.4 million dollars to live comfortably. Who has that kind of money? The survey acknowledges that most Americans live paycheck to paycheck. In addition, a study by Northwestern Mutual found Americans’ average personal debt in 2018 is over $38,000. Clearly, these people do NOT agree with Sheryl Crow.
Have you heard of the 50-30-20 rule? It suggests you spend 50% of your income on necessities like shelter and food, 30% on non-necessities like vacations and entertainment, and save the other 20%. If you earn enough money to apply this goal to your life, then you might want to create a simple budget to achieve it. Indulge your love affair with spreadsheets. Open one up and list all your expenses. In addition to basics like rent/mortgage, car payments, food, and utilities, remember to include essentials like gas for your car, student loan payments, childcare expenses, prescriptions, etc. If you have trouble remembering all of them, check your bank statement to see your regular payments and their amounts. Once you’ve listed them, add them up and divide by 12. This is roughly the minimum amount of money you need to make every month to live the way you’re currently living. BTW, this figure doesn’t take emergencies into account. If you break your leg, you’ll have hospital bills. If you break your air conditioner, you’ll have HVAC bills, etc. Even if you can’t save 20% of your income, you should put aside at least $1000 for emergencies. It’s tempting to spend the money you’ve so diligently saved, but once you’ve saved it up, try to forget you have it. After you figure out the approximate monthly amount you need to live, determine how much money you make a year. Divide that figure by 12 and compare it to how much you spend. If the amount you make is larger than what you need, put the difference in a savings account THAT YOU DO NOT TOUCH. To find out how much money people in your situation need to live in your area, here’s a living wage calculator.
Let’s say you’re a typical American paying your monthly bills and saving part of your income. You find a non-essential item you want to buy costing $250. Before you purchase, ask yourself: Is it worth my T.E.A.M.? Why do I want it? Do I need to save this money more than I need to spend it? Do I have debt I should put this money toward instead of purchasing this item? It’s a personal decision. There’s no wrong answer. For example: If the item is $250 worth of massages, you might really need it. If the item is $250 worth of bubble gum, you might really not. At the end of the day, buying something you don’t need is not about spending money. It’s about WHY you’re spending money. Why do you want this item? How does it make you feel? What hole are you trying to fill in buying it? Maybe try filling the hole with something else before throwing money down it.
How do you decide whether or not to purchase a pricey non-essential item? Tell me about it here: