I received a comment from “Clear Minded” yesterday on my post about what smart phone I should consider purchasing that is well worth pointing out and discussing further. Here is the comment:
“Your blog is confusing to me. You’re thinking about purchasing an extra home, getting an ATV, you’d rather take your car to the expensive dealership for service, and now you’ve decided to get a suped-up cell phone?
What gives? Are you joking? It may seem like each decision is seperate and distinct with well thought out, lucid, and sensible reasoning but aren’t you really just spending? Consuming without *justifiable* cause? Isn’t that exactly what you started this blog to eradicate as much as possible?
Take a look back and see what you’re blog centers around . . . (hint: it’s spending).
Sheese . . .”
Clear Minded makes a great point that has been in the back of my mind lately. I’ve been spending money and not just pocket change. I’ve tried to make the point when discussing each of these purchases that I recognized them as “wants” and also realized I didn’t “need” any of these things. What I probably haven’t done a good enough job of is pointing out that I’ve considered these purchases only after meeting my financial goals for today and the future. The reality is that we are maxing out both my wife’s and my 401K’s, contributing to ROTH ira’s and also investing monthly in a 529 plan for our daughter, who is in kindergarten this year. We have also amassed a comfortable emergency fund (although we continue to increase it each month because I’m not sure it ever feels like you can max out an emergency fund). The only debt that we carry in our household is our primary home’s mortage. We have no car payments, no credit card debt, no home equity lines of credit etc. What I’m saying here is that we are living well within our means at this point. Another data point worth mentioning is that we keep our total monthly expenditures for recurring bills (food, heat, house payment, gas, etc) at less than 50% of our take home pay. So, even after reducing our take home pay by our large 401K contributions each month, we still only live on less than 50% of our income.
I guess the big question is, could we spend even less and save even more? Yep. Should we? Clear Minded makes the point that: “Consuming without *justifiable* cause? Isn’t that exactly what you started this blog to eradicate as much as possible?” My question is, what does justifiable cause really mean? I would estimate that justifiable cause is different for each person. What I’ve learned over the years is that it’s more about balance for me. While I don’t want to spend all the money we make each month (which we don’t), I also don’t want to save every penny we make either because I want to find that balance.
This whole subject of how much to save and how much to spend is probably the single biggest thing I struggle with in the personal finance arena. There just isn’t a good answer. I think the fundamental principals that my wife and I try to live by are: Spend less than you earn, save for the future, carry no debt other than a home mortgage and pay cash for everything, including vehicles. Overall, this has worked pretty well for us.
Bottom line is that, Clear Minded is right that I’ve been spending more money lately. Each of the purchases I’ve made have been after months of evaluating what I want, looking far and wide for the best value and ultimately paying cash for each item. I would have never made any of these purchases if they derailed us from our short and long term goals, or impacted our ability to follow our fundamental personal finance rules.
I really appreciate the comment that Clear Minded left. It caused me to pause and think hard about what I’ve been spending. I’d be interested to hear more people’s points of views on this. If you have any input, please leave a comment!