Saturday, May 10, 2008

$7640 I am Happy to Spend

Saving money is a good thing, but from my perspective, you can certainly go too far when trying to build your asset base. I draw the line at the things I enjoy, whether or not these things have an economic rationale. Here are some of the big ones:

Cable & Internet - I could probably save about $40 a month by choosing a slower Internet connection and giving up HBO, but I use the Internet a lot and really enjoy my premium channels. That's $480 a year that I am very willing to spend.

Books - in my town we have a great public library and I take my sons there every once in a while, but I enjoying buying books at my local bookstore, and once I am done reading the books go up on the shelf and stay there. For me, it's fun to be surrounded by books. Call that $15 a month or $180 a year well spent.

Video Games - last year I got my son a Wii for his birthday. Since then, about every three months I bought him a new game. Call that about $200 a year spent on one very excited and happy kid. For me, seeing how excited my son gets when I tell him I have a surprise for him is worth every red cent.

Vacations - we are a family of five, and every time we go on vacation that involves flying anywhere, you can bet that it's going to be very expensive. Yes, we do our best to minimize the cost by carefully shopping for flights and by being flexible on when we take those vacations, but there is only so much you can do to reduce the cost when you are traveling by air. We also have family abroad and we make it a point to visit once a year. Call that $6000 a year spent on vacation & travel.

Chocolate - I love, love, love my chocolate. No, not that crappy, waxy brown stuff most Americans content themselves with. I have an expensive chocolate addiction to the tune of... wait for it... about $50 a month or $600 a year. Now that's what I call expensive, but delightful.

Small Items & Treats - if I am out and about and see a small item that I want, I get it. I do this within reason and I am probably talking about $15 a month or so, but there is something to be said for impulse shopping: as long as you do it within reason it's fun.

When you add it all up the total comes to about $7640 a year. That's a big chunk of change. Wouldn't we be better off squirreling it away in our investment portfolio or saving it up for a rainy day? I guess the question comes down to what you mean by better off. We have an emergency fund sufficient to carry us through a full year of unemployment. We are religious about maxing out our 401K's and every month we contribute more money to our brokerage account. We are also 100% debt free - no mortgage, no credit card debt, no student loans or car payments. We live well within our means.

Sure, if we chose to do so we could probably save another $10,000 a year. We could probably save even more if we made some real sacrifices, but that doesn't make a whole lot of sense to me. You see, I am in favor of lifestyle inflation. I hope my lifestyle continues to inflate indefinitely - so long as you are not sacrificing your future to meet your current consumption, what's wrong with that? Bottom line, I consider myself fortunate to be able to afford spending $7640 a year that I do not absolutely need to spend.

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