I’m cheap – let’s just get it out there. The politically correct term is frugal. I’m fine with either label. Saving money is a game for me, I love the feeling of having money in the bank. It makes me happy.
I recently posted an article about why we run our cars into the ground.
One of the comments I received was from the DebtFreeGuys who run a very popular personal finance blog (much more amazing than mine). His comment was:
“This is too funny. We are in the throws of getting a new car. I have been saving for 18 months now and have the $$, but I am so frugal I keep thinking I can get another year out of the existing car, that I really don’t like but just sits in a parking lot all day. :P”
I started laughing because I’m in the same boat – on a much smaller level.
When I married Aaron he had a dog, then when Abby moved home, she brought her two cats with her. Two cats and a dog are going to cause a bit of wear and tear on a home – especially couches.
Unfortunately, our dog recently passed away and Abby moved out, so we are pet free.
Over the last few months, I’ve been putting aside money in anticipation of this day. I want to have my home professionally cleaned, paint my downstairs and most importantly I want new couches.
Now that the time is finally here, I’m having a hard time actually spending the money. Please tell me I’m not the only one whose frugal mindset gets in the way of legitimate purchases?
Over the years, I’ve informally followed my own set of guidelines for large dollar discretionary purchases.
These guidelines are for purchases that I consider wants not needs and are outside my normal budgeting process. You can read more about how I make this determination in Want or a Need: How To Control Your Spending.
Prior to making large financial purchases, I go through the following process:
- Is this a want or a need?
- When do I need this item?
- How much money will I need for my purchase?
- Research, research, research (Steps 3 & 4 are usually done concurrently)
So what does this look like in real life?
1. Is this a want or a need?
This should be obvious, but determining wants and needs can be really difficult. Needs can be different at different time periods.
For example, when I was in college, a washing machine was a want, not a need. Now, I consider a washing machine a need. However, if I were in deep debt, a washing machine would most likely be considered a want depending on the circumstances.
Everyone has different criteria for determining their wants and needs. I would just say, be honest with yourself. If you don’t have the money outside your normal budget then you need to wait on the purchase.
This article is purely looking at discretionary spending. If you A/C goes out in Phoenix during the summer then your emergency fund is the best thing in the world.
2. When do I need this item?
In the case of the couches, I knew that I had 6-8 months to save. Most of the time with discretionary spending you have a general time-frame to work with. It is always best if you can give yourself enough time to save without stressing your existing budget. The longer you have to save the more money you will have, so plan things out as far in advance as possible.
3. Set an appropriate budget
When I originally started saving for my big living room revamp, I didn’t have a set saving amount in mind. In this case, I just kind of knew that if I had $3,000 to $4,000 I would be fine. I’m planning to purchase couches and then do as much cleaning, painting and redecorating as I can afford.
Normally I would do a bit more research and have a specific price point in mind, which makes setting a budget easier. If I have 6 months to save and planned to spend $2,400 then I’ll be saving $400 per month.
The goal is to have a general idea of what your item will cost and then adjust your budget based on the cost and timeframe.
I know it is super dorky, but I love using forms like this to track my savings goals.
4. When the time comes do your research and get the best deal possible.
Aaron and I have been visiting home furnishing stores for the last 3-4 weeks. It is a good thing I have him because he measured everything out and has nice little diagrams on how a sectional versus regular couches will fit in our living room.
I’m great at getting good deals, but wouldn’t have thought about the logistics of actually finding the perfect fit for our home.
Typically when waiting for a larger purchase, it is easier to find good deals. Once I know the product I want, I will search the internet to get the best deal. Also remember that if shopping locally, you can often get discounts by paying with cash.
There is a fifth step I didn’t mention above.
The 5th step is to spend the money without guilt or doubts
Even though I know I can spend the money without guilt it is hard to let go of my frugal mindset. I’m still struggling to actually spend the money.
I’ve been doing the frugal thing for so long that spending large chunks of money for household stuff is really hard (I can do it for vacation and outdoor gear – go figure).
When you have saved towards a specific goal and have the funds set aside, it is okay to spend your money on wants instead of just needs. It is all about why you are spending the money, rather than the amount you are spending.
I have plenty of money put aside for this project. I don’t need to skimp and after six years in our house, these are legitimate needs.
When is it okay to spend money
I love having money in my accounts more than I love spending money. It is an issue at times. Every situation is different, but for the frugal nerds like me learning to spend money is all about setting guidelines for spending.
If you have a large dollar purchase coming up try out my 4 steps and see if they work for you. Hopefully, you won’t need the 5th step in my process. If you are the frugal type who needs step 5 remember it is there for a reason. There is nothing wrong with spending money on legitimate needs.