Have you ever bought something only to discover that this one purchase led to another? And another? And another? I have, and it's frustrating.
Andrew thinks this sort of problem is frustrating, too, and he recently wrote to ask for advice on handling situations like this. What do you do when one expense leads to another? How do you put a stop to it? How do you predict problems like this so they don't happen in the future? (Or so that you can mitigate them?)
Here's his question:
Where do you stop when one purchase leads to another, and then another, and do on?
I recently decided to buy a new bed, as I was tired of the platform bed I'd been using for years. I also upgraded from a full to a queen size, which meant I had to buy new bedding as well. However, I wasn't anticipating that the bed would be too high for my dog to jump up on, so rather than put up with the pacing and pleading eyes, I went out and bought a sturdy set of dog steps.
I was considering buying a deep freezer, so that I could take advantage of economies of scale with meats, vegetables etc. But then the thought hit me: what if the power goes out and I lose all that good? Should I also buy a generator?
I'd like to ask the readers for examples of how one well-intentioned purchase spirals out of control!
I think this is a great question. In my life, I've had tons of expenses that kept leading to more expenses. (In a way, this is like shopping momentum, the psychological trap that occurs when you buy one thing, which increases the likelihood you'll buy others.)
Buying a house, I think, is the classic example of this situation. Nearly every homeowner has experienced that shocking spiral of spending that happens when you move in. There's a reason for the common rule of thumb: Budget one percent of your home's value for repairs every year. But it goes beyond simple home maintenance. When you move into a new place, it seems like there's a host of new things you need: power tools, window treatments, household goods, and more. Even if you already owned a house, the new house demands specific stuff, you know? And it's expensive!
But there are other examples, too.
It used to be when I bought a computer, for instance, I had to buy all sorts of accessories to go with it. When I bought my Nintendo Wii, I had to buy extra games and controllers and so on. (Obviously, I didn't have to buy these things, but I chose to do so. One expense led to another.) When I buy a car, I have to buy floormats and jumper cables and an ice scraper and so on. And although I carry a naked cell phone, when most people I know buy a new one, they buy a host of gadgets to go with it.
So, where do you stop when one purchase leads to another?
First, I think it's important to be realistic about the things you buy. For instance, when Andrew bought a new bed of a different size, he should have realized he'd need to buy new bedding. If I buy a new bicycle, I need to understand that I'm going to want gadgets and gear to go with it. When you buy something, think carefully about whether that purchase is going to lead to others as well.
But some expenses can't be predicted, of course. That's often the case when buying a new home or car. For cases like this, when you can't predict or prevent the expenses, I think it's still possible to budget for the unexpected. This is where it's useful to have some sort of slush fund in a savings account. This isn't necessarily an emergency fund, but something similar — a fund for coping with surprise costs that aren't actually emergencies. (You're not going to die if your new car doesn't have floormats, right?)
What about you? Do you have any examples of when one expense led to another, snowballing out of control? How did you decide when to stop spending? Do you have a plan for dealing with the unexpected in the future?
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.