We’ve talked this week about something not worth spending money on, and something maybe worth spending money on. How do you decide what’s actually worth spending your money on? Whether you’re buying a treat or deciding whether a particular necessity really is necessary, there are a number of things to keep in mind to figure out if you should trade your cash for a particular good or service.
The actual dollar amount is important, of course, but really only as a percentage of your income and your savings, or the budget you have allocated for the category your purchase will fit into. For some of us, $20 can be an enormous splurge; for others, it’s just lost in the noise of daily living and regular expenses. Which it is for you, at a specific moment in time, requires some awareness of what your money situation looks like and honesty about how it will look if you actually spend what you’re thinking about. After all, $20 out of a $200 bank account is a lot more than $20 out of a $2,000 budget line, and $20 once a month is a lot different from $20 once a day. And $20 when you make $10 an hour part time is a lot different from making $30 an hour full time. Does just looking at and thinking about those numbers make you a little anxious? I get that, I really do. The only cures for not having that feeling result in money running low is to either hit really big at the lottery or to start getting comfortable with facing those numbers on a regular basis. You need to know what you can afford in actual figures, then figure out what you’re comfortable with affording, keeping in mind everything that you might need to buy in the near and long term. Nobody can tell you a specific amount or percentage that will be; you have to do the math and the emotional labor yourself.
The value of the specific item matters too. Some of that is how much enjoyment you will get out of it, or how much it might improve certain areas of your life that are more or less important to you. Another part of it is how much the up front cost is compared to the cost over time, for things you buy that aren’t a one-shot experience or use. Cost per wear is a familiar concept for clothes shoppers: if you buy a pair of shoes that you will wear every other day for the next two years, $100 is not nearly as painful for a pair of shoes that you will get to wear once, even though it’s the same amount out of your pocket on day one. Remember, though, that your long-term memories or the long-term results of having used that item might be worth as much as or more than the limited number of times it’s actually experienced or used, so figure that into your cost per use too. Also, don’t forget that you’re not the only one who gets a say about how much you get to use the thing or how well it works: the actual thing does as well. Doing your research on whether it will actually do what you need, want, or expect it to do, and how long it will last, are important to figuring out its value.
One part I mention briefly in the last paragraph that bears repeating is thinking about how much you need or want that thing in your life. You can assign dollar values to it, but outside of what you need to physically survive, necessity and desire are slippery and subjective things. We can all remember as a child, how much we’d just die if we didn’t get that super trendy toy, right? How much did it matter to us right then and how happy were we if we got it? And how do we feel today about having gotten it or not gotten it? There isn’t a right answer that is true for everyone and that’s okay. You just have to be honest with yourself, introspective enough to examine and understand what you’re trying to talk yourself into and why. I like boil this entire exercise down to how much I want the thing in an objective dollar amount (“I like this dress $50 much”) then compare it to what it’s being sold for (“$75?? They crazy” or “$25! Where’s my credit card?”). There’s no exact science to it and your valuation of a special treat might be entirely different from someone else’s. It’s just a way of deciding how much you want, even need, a thing that is optional.
Considering the opposite side is also helpful: do you have a good reason not to spend that money and buy that thing? Is the money available in your budget in a way that won’t impact the actual necessities of life like being able to keep a roof over your head? Are you making excuses to not spoil yourself because of some internal pressure or guilt to be more responsible, even though you have a healthy balance in your checking account and an emergency fund besides? For all of the arguments you have with yourself about letting money out of your grasp, do you have arguments to keep it? You very well might! Prioritizing your spending for some areas over others is always significant, and that means saving yourself from spending it in others. Long-term goals are also important, and buying a lot of small things today might prevent you from buying the big thing that you need or want more later. But if all of those things are taken care of, do you still have arguments to keep the money aside and not spend it today?
By the way, like many decisions in life, you can do some of the mulling over on this ahead of time. Instead of having to figure out if you will buy or not buy a thing because it’s on sale right now, start thinking now about what kinds of things you want and how much they’re worth to you. Know the sale price that will make you hit the buy button. Maybe set aside a few dollars here and there into a separate budget line or account that is strictly for guilt-free spending, regardless of what it’s used on, because you’ll already know that that money is available for anything. Me? I’m gonna go run out right now and see what present I got for myself that’s arriving in today’s mail. Because there are a few dollars in my life for the fun of opening up packages. How about you?