April’s post this morning about renting designer purses and other luxury items raised a few eyebrows. Because the focus here at Get Rich Slowly is on frugality, it’s not often that we delve into the world of high fashion.
In the comments, for example, Ami wrote:
I thought this was the Get Rich Slowly site, not the fritter your money on fripperies site. For me, Getting Rich Slowly is about changing your mindset about what’s necessary and important, which reduces your list of financial needs.
I think Ami’s comment is spot-on. Smart personal finance is about changing your mindset about what’s necessary and important, about reducing your list of financial needs. But I’ve learned that part of this is finding a balance so that you aren’t ignoring your Wants entirely. As Ramit at I Will Teach You to Be Rich says, there’s a place in every budget for conscious spending.
The basic law of frugality
Last summer, Kris and I had dinner with some of her old teacher friends. (My wife taught high-school chemistry and physics for eight years. She’s been out of the field now as long as she was in it, but we still get together with her former colleagues several times a year.)
During the conversation, one of the women — Linda, who teaches history — revealed that she doesn’t own a computer. She didn’t even have a functional TV until her siblings bought one for her. She’s never felt the need for these things, and she’d rather spend her money on something more important to her, like world travel.
Which is the “better” way to spend your money: world travel, an expensive handbag, or an HDTV? Or should you simply tuck your money into a high-yield savings account? This will come as no surprise, but I don’t think there’s any one right answer.
We each have things we spend on that others think are crazy. Linda is willing to live without a TV or a computer so she can fly to China and Belize and Nepal. Other folks are willing to cut corners on housing so they can afford four surfboards. I buy comic books, but I don’t spend much for clothes.
Are these things frugal? If your goal is to pinch every penny, then no they’re not. But if your goal is financial balance, spending on the things that make you happy is perfectly fine. To me, the basic law of frugality is: Decide what’s important to you. Give yourself permission to spend on these things. Pinch pennies on everything else.
Sometimes you CAN get what you want
I have no concept of fashion. I don’t care about name-brand watches, purses, shoes, jackets, or jewelry. For better or worse (and some would say it’s worse), my style is thrift-store chic. All I want to do is pay as little as possible for basic clothes. But I’m not about to condemn those folks who do like fashion.
If you can afford it — by which I mean you’re not sacrificing your financial goals — and if you’re spending consciously and if you’re comparison shopping and if you’re buying quality…If you’re doing all of these things, then there’s absolutely nothing wrong with buying an expensive purse, if that’s what’ll make you happy.
Frugality doesn’t have to mean sacrificing quality. And it doesn’t have to mean you never buy anything you want ever again. You can’t always get what you want — but you can sometimes!
GRS is committed to helping our readers save and achieve your financial goals.Savings interest rates may be low, but that’s all the more reason to shop for the best rate.Find the highest savings interest rate from Ally Bank, Capital One 360, Everbank, and more.
This article is about Choices, Frugality
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.
Discover is a paid advertiser of this site. Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.
SEARCH FOR RECENT ARTICLES
Thank you for posting this. I also think it’s important to note that we are all on different stages in our financial journey. If someone is debt free and has made some smart investments, why shouldn’t they occasionally splurge? On the other hand, if you are struggling to make ends meet, buying an expensive purse (or game console, or car, or whatever) isn’t a practical move for you at this time.
loading....
Exactly. I’ve said this before on this site’s comments, frugality is spending money on what you care about, not spending on things that you don’t care about, and generally not spending money that you don’t have.
Yes, some debt is “good debt” (housing, student loans… though some disagree even on those). Yes, you should make sure your basic future needs (saving for emergencies, retirement) are taken care of before spending on wants. But there’s nothing wrong with spending on wants once you’re financially secure. And it’s ok that I spend money on books and fancy food and other people have fancy clothing, as long as we value these purchases. It’s good that we all don’t love the same things– used books would probably be a lot more expensive for me if we did.
loading....
J.D., you’re right. Asceticism is for monks. The rest of us should just find balance.
loading....
When I saw April’s post this morning I knew it would get some negative feedback….That said, I’m glad you posted it, and I’m glad the staff writers are shaking it up a little. I am a daily reader, I have no interest in handbags, and I think that $300 is too much to spend on accessory (personally).
But the post was a good reminder that we all have different priorities, and we’re all figuring out how to combine responsible money management with our values. The blog is great in part because it appeals to a diverse group of people…Again and again posts here have made me rethink my assumptions about money and its role in my life and the lives of people around me…Today’s post was another example of that. Thanks.
loading....
Ah, but that misses the point of the small house almost entirely. I have a small house because I don’t need (or want) a big house, not because I’m trading a big house for other things (besides, the cost of four surfboards would barely be one month’s rent at a fancier place).
loading....
“I buy comic books, but I don’t spend much for clothes.”
I really did not need that mental image, J.D… Please just keep the curtains drawn so you don’t disturb the neighbors.
loading....
Thank you! I’m willing to forgo cable, high-speed internet, and flashy cars for PRETTY gaming consoles, PRETTY purses, snowboarding, and martial arts classes.
loading....
I think April’s post was fantastic, all the more because it’s one that JD never would have written himself. If people have the discretionary income, and fashion is important to them, and don’t overspend in other areas so that they can rent (or buy) the latest bag, then it goes against everything this site is supposed to stand for to criticize people for that decision.
Personally, my Dooney & Burke wallet and purse make me happier than any of my other material possessions. And I don’t think there’s anything wrong with that. I have thought seriously about a Bag, Borrow, or Steal membership, but can’t afford that right now (as April and some of the commenters point out, buying one great bag can be a better deal, and it certainly is for me at the moment).
loading....
Tyler, please elaborate.
You have a small house because, as you said, you don’t want one. So obviously you aren’t willing to pay for it. What does that have to do with things you DO trade for? What does it have to do with people who DO want it?
loading....
Shara:
J.D. said “Other folks are willing to cut corners on housing so they can afford four surfboards.” He was referring to me (unless I’m mistaken, but that’d be quite a coincidence).
I’m not cutting corners on housing. I love my house. Living in my little house does make it easier to afford other things, like the four surfboards I own, but *that’s not why I live here*. It’s a bonus, a nice side benefit, not an intentional compromise.
loading....
Thank you also for posting this update. We are all different in what we value, and there are people who think those who budget, restrain their spending, and hoard their money, are the crazy ones – for not enjoying themselves right now (the “you could be dead tomorrow!” argument). And the “too much to pay for a handbag” is a pretty empty statement – all it says is “I don’t want to spend that”. People who are fans of an item (a handbag, a car, a pram, a location) will always be able to justify the expense. As you’ve all said – it’s about justifying the expense while still having a balanced financial outlook.
loading....
@Tyler (#10)
Yes, that’s an intentional reference to your situation, but I intentionally did not name you specifically so that the example could be general. I didn’t want people to get hung up on a specific instance, but look at the general idea instead.
This was a last-minute edit meant as an inside joke. Don’t let it distract from the point of the post, Tyler. Pretend it doesn’t refer to you, but pays homage to you instead.
loading....
Well, yes, it’s nice to see a diversity of opinions.
But what if everyone else has got it wrong?
loading....
One thing I’ve been thinking about too… sort of on a tangent…
I think it’s really interesting the variety of different methods there are to personal finance. And one of those methods is Dave Ramsey… I LOVE the way he just tells you what to do (especially in TMM). You don’t have choice in his method, you just do what he says in the order he says it until you have a house and that’s paid off along with all your debts and fully funded retirement and emergency accounts. And that works really well for some people. Too much choice can be confusing.
What I’m trying to say is that there’s a ton of choice and a ton of different options. But even for people who don’t want the choice or options… well, there’s an option for that too. And that is really cool.
Personal finance is a lot like parenting– there are a ton of “right” ways to raise a kid or to find financial balance/independence and that is OK.
loading....
The reason I view these items negatively is because of a very clear case of diminishing returns.
I can spend $1,000 for a haircut and it will be the best one I ever had, but for only $15 I can get one that is 98% as good.
It is the same thing with purses, bicycles, watches, etc. The purses get even more heat because unlike other intricate mechanical and technological devices they are just a bag to hold stuff.
loading....
What was most interesting to me was that in the comments some justified spending money on *their* wants, but dismiss others’ wants as frivolous.
At the end of the day, it doesn’t matter what our wants are, so long as we’re spending responsibly. One person’s isn’t more justifiable than another’s. Both are wants, not needs.
loading....
Alright, sorry J.D., I guess I misinterpreted the reference. Somewhat unrelated, but I feel kind of stupid realizing I spent half the afternoon participating in a debate about how much money is reasonable to spend on a purse — if you can afford it, do whatever you like.
loading....
But Adam (#15) — if you have a ton of money, the $985 difference may be worth the 2%, because of the diminishing marginal return of money itself. On the haircut quality/money chart, the tradeoff is different depending on how much money we have. The tradeoff is probably not that great for most people, but who are we to judge… some people have the means and really value hair over anything else they could get with $985.
This diminishing returns to money is the same argument for marginal income tax increases– $1 is worth more to my students than to me and more to me than to Bill Gates, so we get less disutility from giving the same amount of money in tax. That’s why I pay a higher percentage tax on my last dollar than most of my students, and hopefully a lower percentage tax than Gates.
loading....
“What was most interesting to me was that in the comments some justified spending money on *their* wants, but dismiss others’ wants as frivolous. ”
This is the part that bothered me. It’s ok to drop a lot of money on a certain car or tool (and this is why some of us think that some commenters think stuff for men is ok, but stuff for women is stooopid), but if someone wants to spend *their* money on something else, it’s wrong.
loading....
@ Adam (#15) – I also forgo expensive haircuts. My mother cuts my hair for love and affection.
loading....
First for full disclosure I am a financial planner and hold a MS in Financial Planning. 90% of my work is with the working poor but I occasionally provide financial coaching services for high net worth individuals. The reason articles like the one April posted (and frankly, the reason that this blog is the only financial blog I read with any consistency) is that it addresses the true issue behind what we do with our money. Many authors from Joe Dominguez and Vicki Robin (Your Money or Your Life) to Brad and Ted Klontz (Wired for Wealth) have presented us with models for understanding our brain as it relates to money. Deprivation and “financial knowledge” alone are insufficient to create behavior change. It is important to determine what matters most to you and align your financial resources with your life goals. The benefit of working with a professional (a good one) is that we look at EVERYTHING. In financial planning we recognize that every dollar you make (from whatever source) affects your ENTIRE life. So, when you say “yes” to something you are saying “no” to something else…are you satifised with the choices you are making and are they getting you what you want? If so, great (even if it is a rented luxury) if not, what steps do you want to take to do something different? It is all a matter of choices.
loading....
well, i am on the advanced dave ramsey baby steps. I have a lot of luxuries.
i am sooo cheap on certain things, haircuts and jeans from walmart, for example, but i do not cheap out on purses and shoes. i have a coach purse and pliner shoes. birkenstocks for work.
loading....
…oh yeah, and J.D. you are correct; the right answer in financial planning is ALWAYS “it depends…”
loading....
We have this problem a lot with friends – they can’t understand why we don’t have cable (don’t want it) or even own a television (what’s the point?). They’ve offered to buy us a television and pay for cable… but we’re happier without it. So they’ve gone back to mocking us for being “too cheap to buy cable.”
I bite my tongue and try not to make remarks when it happens. Who am I to judge? Maybe television is a REALLY important part of their lives, but does it need to be part of ours? You’re free to do what you want with *your* money, and I’ll do what I want. Stop judging, people.
loading....
@ Meg
I can KINDA see where they come from. Not because they are necessarily right, but more of the financially irresponsible people I know are women. And the women I know are more likely to make a financial decision based on emotion. Those are by no means hard and fast rules, but I have a sympathy for the stereotype.
loading....
I always get a kick out of those who display enthusaism because of what they don’t do, or don’t need, or don’t want.
Like from “office space”
“What would you do if you had a million dollars”
“I would do nothing”
“nothing?”
yep, nothing”
“you don’t need a million dollars to do nothing, man”
Same with not doing, needing, or wanting.
Not spending alot of money on a house. So what. Lots of people don’t spend alot of money on a house. And lot’s of people have small houses.
No credit card debt. So what. lots of people don’t have CC debt either
My 5 year old doesn’t have any debt, or a house payment for that matter.
What is impressive is what you do want. What you have accomplished, what you do need.
When you have nice things, and a nice life, and you don’t have to make tradeoffs. That is an accomplishment.
Understanding the purpose for your money is nice, and understanding what is important is nice, but understanding that the purpose for your money isn’t that important is the nicest.
It is not in prioritizing that matters, but when you find you don’t need to.
loading....
“When you have nice things, and a nice life, and you don’t have to make tradeoffs.”
Wealth is being happy with what you have. You might think someone is making trade-offs, but that person might truly be content.
This constant need for better purses, bicycles, and the like is the reason why lifestyle inflation is so rampant in our society, and why more people are not rich.
loading....
“Decide what’s important to you. Give yourself permission to spend on these things. Pinch pennies on everything else.”
This is an incredibly important point. I used to buy nothing for myself, ever. At one point, I gave myself permission to buy things for myself, and immediately went crazy. I made all kinds of unimportant purchases that I later regretted. And then I found balance.
Now, I am willing to spend $200 on a pair of shoes for dancing tango. Some people think I am crazy, but I dance tango 8-10 hours a week and need solid shoes for it. I save in other areas of my life that are less important to me. It took me a long time to find that balance, but now that I have my priorities straight it makes sense—and makes each purchase a considered decision rather than a rationalization.
loading....
LOL, great post. I love the thrift-store chic comment. Some people get carried away with materialistic BS, but if it makes them happy all the power to them. I think they are likely in over their heads though.
Decide what’s important to you. Give yourself permission to spend on these things. Pinch pennies on everything else – this about more than just frugality; it’s about maximizing your Utility for lack of a better word.
loading....
@Adam 27
On the other hand lifestyle inflation has made a great deal of people rich. No consumerism for all = no jobs for many = still not rich.
loading....
April #16 wrote:
“What was most interesting to me was that in the comments some justified spending money on *their* wants, but dismiss others’ wants as frivolous.”
I totally agree. Pot meet kettle.
loading....
“If you can afford it — by which I mean you’re not sacrificing your financial goals — and if you’re spending consciously …”
Well said JD. I use slightly different words (spend your money with purpose) but the point is the same. Spend money on the things that you value, but make sure that such spending does not compromise your higher financial goals. [For me these goals are quite simple: retirement savings, elimination of all debt, and giving a portion of my income to charity.]
Being frugal is definitely not *just* about denial, although there is a certain element of sacrifice. But since you’re sacrificing so that you are spending on the things *you* truly value, on balance you should be content.
JS
loading....
JD –
I think what you’re saying here in response to the comments to April’s post is “You can have anything you want, but not everything you want.” GRS is about learning to make those decisions/sacrifices for what we want most.
loading....
Thank you chiefcaba #30… you said exactly what I was thinking
loading....
That whole thread reminded me why I stay away from a lot of personal finance blogs these days: it makes it hard to enjoy the money that I do earn, save, and yes, spend. It doesn’t matter that I HAVE succeeded in getting rich slowly by being frugal so that I CAN buy something I enjoy. Apparently, people are willing to ass-u-me all sorts of things simply because they don’t understand why someone would buy a particular luxury item. I used to be like Rachel (#28), never buying anything nice for myself, wearing clothes and shoes until they had holes in them (even for work), etc. The negative comments remind me of the negative comments I used to tell myself whenever I wanted to loosen the purse strings even a bit, and it still feels like crap. Naomi Eve (#11) nailed it.
loading....
@#6 Dar said it well. I hope J.D. isn’t as bad as my husband, who was pissed that I threw out his jeans with the entire crotch a giant hole. The back pockets were still okay, you know.
I don’t care what label is on your clothes, as long as your business is covered up. :p
loading....
Good post, JD, with a good point. I have to say I thought Ami’s comment a little ridiculous. What makes her the police of what’s frittering away money and what is not? For someone like myself, the idea of renting bags might seem silly – as April says, you can soon make up the cost in a few months. BUT if you are someone who loves fashion and bags and wants to be able to have multiple different bags in a year then it could be great.
And who knows – maybe that person got into debt by buying too many bags which she then didn’t use? In that case April’s post was a great one for frugality!
I think it’s ridiculous to judge people for liking this sort of thing. We all have different passions and different things that we love to spend money on. Our money isn’t just for saving so you can have a nice retirement someday (which might never come) it is also about enjoying some things now. Like comic books. Or purses. Or meals at really good restaurants.
loading....
Adam said “The reason I view these items negatively is because of a very clear case of diminishing returns.
I can spend $1,000 for a haircut and it will be the best one I ever had, but for only $15 I can get one that is 98% as good.
It is the same thing with purses, bicycles, watches, etc. The purses get even more heat because unlike other intricate mechanical and technological devices they are just a bag to hold stuff.”
But don’t you see this is the case with ANY luxury? The only reason you’re ok with it for “highly technical” devices is because that is something YOU personally value. Why do you think everyone should value exactly what you do?
A $15 painting may be 98% as good as a $1,000 painting (after all, they both just hang on the wall), but to someone who values and appreciates fine art it is worth the extra $985 for the 2%.
A $2,000 beater will do 98% of what a $20,000 car will do, but to many it is worth the extra $18,000 for the 2%.
A $100k house will do 98% of what a $250k house will do, but many are willing to pay the extra $150k (plus interest and taxes) for that 2%.
The whole point is not that 2% is never worth it, but that you have to prioritize your own values. I will never buy a luxury car, but I would rent a nice dress for a formal occasion. I will keep my $18,000 and pay the $50 for the evening in the nice dress.
loading....
I have to say I have some weird priorities. LOL. I am a horse person, and as such have an very expensive hobby. I pay $500 a month for board for my horse, and another $360 for lessons for myself every month. That doesn’t include all the other things like occassional vet bills, blankets, supplements, shoes, etc that inevitably come up when owning a horse. I have a horse budget each month, and I keep an eye on it. We have enough passive income coming in to pay for the horse stuff, and I worked very hard to get that money coming in. I didn’t own a horse for several years, or do much of anything but work full time, to save and invest for that right to have my horse. Since my hobby of choice is very physically demanding, I found it prudent to partake in it while I was young enough to still have hips and knees capable of the demands of riding. So when it comes to a time in my life where I can’t do that anymore, my horse budget will go down and I will find a new hobby. I really had to struggle with balance, and still am tempted to buy all kinds of horse stuff I don’t need but would be nice to have. That’s where it is handy to have a non-horsey husband to set me back on track. Got to love that man. LOL.
loading....
Everyone deserve to have fun some kind of fun. If you not treating yourself in any kind of way then you are out of your mind. However, It is only a treat if you really can afford it. Buying a $300 bag on credit card just to keep up with the jones is nuts. I became a fan of Sue Orman because of her segment ‘Can I afford it?’. Now show me the money people
loading....
Des Says:
“But don’t you see this is the case with ANY luxury? The only reason you’re ok with it for “highly technical” devices is because that is something YOU personally value.”
Please note from my post:
“It is the same thing with purses, bicycles, watches, etc.”
I am not “ok” with any of those things. I’m unsure why you are trying to put words in my mouth.
loading....
@Adam – I’m not trying to put words in your mouth. I was referring to what you said after that: “The purses get even more heat because unlike other intricate mechanical and technological devices they are just a bag to hold stuff.”
I apologize if I inferred too much from that comment. May I assume that you are “ok” with $15 haircuts? If so, we can run the same analogy there: A $0 home hair cut will get the job done – your hair will be shorter. But, if my assumption is correct, you are willing to pay the extra $15 to look a bit nicer. That serves the same purpose as a nice handbag: you look a bit better, feel a bit better, and don’t look out of place. It is an unnecessary expense in the name of vanity.
loading....
I think the real issue with Adam’s argument is that the diminishing returns is his perception of the item. For me, my $200 wallet is NOT an item of diminishing returns. Yes, I could get a wallet at, say, Goodwill, for 2% of the cost of that wallet, but I would not be 98% as happy with it. Actually, I would be actively UNhappy. So if I am reaching all my other financial goals slowly but surely, why should I be unhappy about not having something I can easily afford?
I think that for those items where (for me) diminishing returns are reached rather quickly, then those are the items that I don’t need to splurge on and can save my money (which is JD’s point). However, for items where I do not reach that point of diminishing returns and only the very best will do, then if I can afford it I should go ahead and make myself happy. Just because it’s something different than what would make someone else happy doesn’t mean it’s some sort of financial heresy.
loading....
@43 Honey
Technically you’re still diminishing returns, but not as fast a rate. Adam’s assuming you’re on the flat of the curve (Y axis is happiness, X is quality of item, curve slopes up and flattens out over X), but you may very well still be on the steep part. You’re still getting more pleasure, but at a decreasing rate.
In his earlier argument, I was assuming the 98% was some objective quality measure (and then you put that number in your utility function to calculate your subjective happiness), but you’re absolutely right that it could be a measure of your subjective happiness, in which case it’s totally true that Adam’s 2% better will probably not be 2% for you.
Each one of us has a different set of these curves, each one of us has a different total consumption constraint.
loading....
Great point. We want to buy what is really important to us. It is so easy to get sucked into Gucci consumerism and forget things that actually create value in our lives.
By the way, amazing how popular the handbag post is. Already has hundreds of comments.
loading....
I think the main difference between a lot of the items you listed and super expensive purses, is that the primary purpose of these purses is so people can show off their wealth and feel like they are better than others–whereas a sports car provides an exhilarating drive, a nice entertainment system provides a nice movie-watching experience, or a nice bicycle provides a better ride. These items provide an improved experience/function while a purse does not.
loading....
You know, the idea of exquisitely fine handbags reminds me of my hobby. I play classical music. Over time, I have gotten relentlessly pickier over what is satisfying. It takes a lot more to make me happy with what I hear. Most people could not tell much of a difference at all between different orchestras that I might listen to. However, I derive significantly more pleasure from listening to a more talented orchestra or more talented musicians. This is a tangible example. The people who buy the nice purses may like their workmanship or their fabrics and may notice it more than “98%” of people out there, and thus value it more or appreciate it more. Their curve has shifted.
Vice versa, the people who think these purses are frivolities I’m sure have areas where they notice the difference between fine and average… maybe cooking/food, maybe a truly amazing vacation/a roadtrip to a state away, maybe *gasp* bottled water/tap water. It doesn’t really matter in the long run. It’s simply a difference in perception, with neither being superior to the other.
loading....
@Will
Sports car’s aren’t for people to show off their wealth and feel like they are better than others? hmmm…
And that entertainment system, that wouldn’t be one of those with resolution beyond what the human ear is capable of differentiating, would it?
And the bike…I don’t know how many racers are out there, but most of the people I know who ride bikes couldn’t tell the difference between a $500 and $5000 bike. They only know because a salesman pointed out all of the feature differences and they remember writing the check. And only a handful of bike racers actually notice the difference. In fact most of the amateur bike racers I know often prefer their older and cheaper bikes.
You can’t discern the difference, but some people can. And the designer purse does provide an improved “experience/function” by doing what it does better: making the user look good.
loading....
Des, you failed to mention that a monkey has 98% of the genes of a human…
loading....
I’m with Rachael #28. It took me a while to learn that it really is okay to spend money on some things that are worth it to me. I get the $200 haircut, the $28 mascara, and the $50 tinted moisturizer. I have tried cheaper alternatives, and they just make me miserable. As long as I’m not paying for these on credit, what does it matter to anyone else?
OTOH, my laptop is a POS that I can barely use. My boyfriend wants me to upgrade it, but I don’t see the point. I’d rather spend my money on my priorities.
loading....