The day after Thanksgiving, “Black Friday,” is traditionally a big spending day, a buying bonanza for shoppers. Likewise it is also an extremely important day for retailers. Apparently some retailers make over 50% of their sales between Thanksgiving Day and New Years Day. I just heard on the radio that this year “Black Friday” is more like “Grave Friday” given the depressing economic conditions that retailers have been facing. Charitable donations to organizations like the Salvation Army are down 20% while need is almost double its normal levels.
Shopping during the holiday season is second nature for many. Cost conscious buyers line up in front of their chosen stores on Thanksgiving Day to wait in line and get the best deals retailers have to offer. Get what you want and save money while doing it, what could be better? Personally, I’ve never waited on a line for those outrageous deals retailers offer around this time of year, but I’m sure it’s enticing enough for some. It’s easier not to think about those things right now since I don’t have excess cash to spend anyways.
My philosophy on spending is simple: I buy needs from what I have and wants from excess. Needs for me are food, shelter and basic clothing. Everything else falls into the wants category. Items like a new computer, DVD, book, electronic gadget etc. are all things that I’d like to have but don’t necessarily need. Categorizing things makes it easier to curb how I spend my money. If I tell myself that I’m not going to spend any money on wants then it makes it harder for me to buy even something small like a DVD or a book. Breaking a principle on a small item yields the same guilty feeling as it does with a larger item.
Buying excess means buying from the extra cash or savings you have after you’ve paid your credit card bills, loan payments, rent and after putting away money for savings. Ideally buying from excess means that you would spend on wants only after you’ve paid off all existing debts and have set up a small savings and investment fund, but sometimes you really want to buy something and waiting for ten years to pay off your college debt is too dismal to think about.
Most of the finance tips I’ve read in books and personal finance blogs stress spending less and saving more, which is the most universally sound advice for anyone trying to pay down debt and ensure their future financial security; there’s also the other option of making more money, but that I will save for another post. For now the challenge is to save money by spending less.
The hardest challenge, especially for young people, when it comes to spending money is that it is socially motivated. We buy because we want to impress our friends, significant others, random people on the street, and mostly, ourselves. If no one (including you) cared whether or not you had a new pair of shoes or jeans, would you really buy it? Probably not. There would be no reason. But the reality is, people do care, and probably you more than anyone else.
If buying and spending are socially motivated, then the solution would be to remove the social motivation from them. But that’s also not a realistic solution. It’s not realistic for most people to suddenly realize that having new clothes isn’t that important, just as it is unrealistic to expect a twenty year old male to not to care about driving a cool looking car. He may not have the money to buy a cool looking car, but that doesn’t mean he doesn’t want it. The key isn’t to eliminate the desire, but to curb it. The best way I’ve found to curb wants is by motivating purchases with the principle: buy wants only from excess.
If you’re a recent college graduate or someone who has a hefty amount of debt piled up, then the most feasible solution would be to set aside a small amount of money every month for “wants.” Depending on your level of debt and monthly income, this could be anywhere from $5 a month to $100. Anything over that and you’re probably spending too much and would be better off putting more cash into paying off your debt.
Putting away $50 a month will give you approximately $600 of spending money in a year. You can then put this money towards a bigger ticket purchase, like a computer or Ipod, or a few smaller purchases. If you purchase at a heavily discounted time such as Black Friday you’ll be able to make your dollar stretch even further.
The most important thing to remember is to never spend more than you’ve saved up for “wants” purchases. Because once you go over it’s a slippery slope to consumer debt.
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