This is the third post in the getting started with your finances series.
Having income to spare after you land your first full-time job opens new possibilities. It’s tempting to go out and treat yourself to some shiny new toys. You deserve to reward yourself, don’t you? Absolutely. You got the education, you landed the job, and you earned the money. It’s yours.
But don’t you also deserve a financial future not fraught with excessive consumption leading you into debt and threatening your financial well-being? To witness some bad debt situations, watch a few episodes of Gail Vaz-Oxlade’s Til Debt Do Us Part. Gail’s television show highlights what happens to young people when they are sunk deep into debt, usually due to over-consumption. You don’t want to end up like the cases on Gail’s show.
There’s a lot that can be said about debt, but today I want to consider the aspect of consumption, specifically the buying of things you don’t necessarily need.
First, an admission: If I were to claim in public I don’t buy things that I don’t need, I would certainly be exposed as a fraud! Friends would jump at the opportunity to out me as a technology fanatic. In order to save myself from embarrassment and you from hypocrisy, you won’t find me preaching that you should practice strict self-denial until you become the millionaire next door.
I named my blog Pragmatic Money because pragmatism describes how I approach money: dealing with money sensibly and reasonably, based on practical considerations, and for practical effect. Theory has a place when it can be put into practice and yield results.
When it comes to satisfying your wants vs. setting money aside for the future, I suggest aiming to strike a reasonable balance. Make a habit of setting aside a decent portion of your income each month, as opposed to spending most of what you earn. Stop yourself from becoming a victim of the “impulse buy” and begin to question yourself when you want to buy something.
Here are some questions to ask yourself when you’re thinking about buying something:
- Will this purchase only provide short-term enjoyment, or will it have an enduring contribution to my life? Asking this question can often stop you from making an unnecessary purchase, especially when you think of other things you bought that ended up collecting dust, getting thrown out, or being given away.
- Will I need to go into debt to purchase this item? If you were thinking of buying on credit but would be unable to pay off your balance in full at month’s end, ask yourself instead: Can I make do a while longer while saving the money up? Odds are you can. If you can avoid consumer debt, it’s best avoided. Don’t get into a habit of carrying debt unnecessarily. There are special cases where debt may make sense, and this likely isn’t one of them.
- Is what I’m considering purchasing a high quality item, or is it likely to break, wear out, or become unsupported? I’ve been disappointed by purchases that fell short in the long run, so now I make a point of considering this aspect carefully. What I buy should have demonstrated quality and reliability and come from a company with a track record of supporting its products. Search for trustworthy reviews and recommendations, and do more research when it’s an expensive item. Reduce your odds of making a big mistake that could cost you dearly later.
- Do I need to buy this item brand new? Could I find an older model or a used or refurbished item? When I wanted to switch my main computer to a Mac mini, I avoided the latest model just released. Instead, I searched Apple’s online store over a few weeks. Eventually, a refurbished previous model became available, which only two months before was the current model. I saved a bundle.
- If I am buying this new, can I buy it at a better price? If you’ve decided your finances can handle the purchase and you decide on buying new, consider waiting until the item is on sale. Many things go on sale at least once per year. In addition to reducing your cost, there’s another benefit to waiting for a sale: Sometimes you discover a cheaper alternative, or learn something that changes your purchase decision.
You might have a few questions of your own to add, to help you be mindful when you’re thinking of buying.