Every purchase is a trade-off

While I was digging out of debt, I cut back on my comic book habit. I'd been spending a mind-boggling $250 every month on comics — most of which I bought in the form of hard-bound compilations — but for a few of years, I slashed that to less than $50 a month. I also cut my book spending from $100 per month to $50 per month.

In other words, I made trade-offs. I decided repaying my debt was more important, so I put off buying books and comics until later.

Here's the thing: Every purchase is a trade-off. Maybe it's more obvious with discretionary expenses, such as books and gym memberships and cable television. But you're making trade-offs even when you buy the things you need. When you buy food for your family, you're giving up other things you might really want, like new furniture or a car repair. And if you choose to go into debt, you're trading your future income in order to have the things you want today.

When you spend money on one thing, you're choosing not to spend it on another. This is a key tenet of the Get Rich Slowly philosophy: You can have anything you want, but you can't have everything you want. When spending, we have to make choices.

Sometimes these choices are conscious, as when I decided to pay off debt instead of spending my money on comics. Often, though, the decisions are quiet and subtle. At times, you're not even aware you're making them. You don't realize you've made a trade-off until after the fact.

Note: In economics terms, these trade-offs are opportunity costs. When you choose to spend on one thing instead of another, the opportunity cost consists of the benefits you could have received by spending on something else.

This Not That

My brother is doing the couch to 5k training program this summer in an attempt to lose weight and get fit. He's also watching his diet. One of his tools is a clever book that compares common junk-food indulgences to healthy foods using photographs. For instance, one photo might show a plate with a pack of Twinkies next to a plate stacked with six cups of carrots.

The message here is simple: Whether you choose two Twinkies or six cups of carrots, you're still consuming 300 calories. But one choice is substantially healthier and more filling. If you choose the Twinkies, you're also choosing not to eat the carrots. But if you choose the healthy carrots, you're giving up the pleasure that the Twinkies (presumably) would bring. It's a trade-off. There's an opportunity cost for either choice.

I think it'd be fun to create a similar book built around personal finance. Some possible comparisons:

  • A Hummer H2 SUV vs. 50 bicycles.
  • A case of bottled water vs. a pool filled with tap water.
  • A single DVD vs. a one-month stack of Netflix DVDs.
  • A new shirt from REI vs. ten used shirts from Goodwill.
  • A dish of restaurant pasta vs. a vat of pasta prepared at home.

The point of an exercise like this isn't to guilt people into change. It's to make them aware of the opportunity costs associated with their choices, to point out the trade-offs, both conscious and unconscious.

Tangent This reminds me of a conversation I had once with my cousin. I was complaining that fitness was one of my top priorities, but I couldn't seem to get healthy. “That's because fitness isn't a priority for you, J.D.” Nick said.

“What do you mean?” I asked. “Yes it is.”

“No, it's not,” he said. “Your priorities are the things you do, not the things you say you'll do.

I argued at the time, but looking back, Nick was right. Saying that something is a priority doesn't make it so. We demonstrate in our daily lives the things that actually matter to us. To quote Will Durant (not Aristotle): “We are what we repeatedly do.”

Opportunity Costs in Practice

Since paying off my debt in 2007, I've relaxed my spending. I'm buying more books and comics and other things I enjoy. That was fine for a while, but now there's a problem. I want to travel. A lot. And soon. In order to do this, I need to free up cashflow from somewhere. Can you guess the most likely source? That's right: my discretionary spending.

Over the past couple of months, my comics spending has dropped close to zero. (Close to zero. I'm still buying a few digital comics on my iPad.) I've decided that travel is more important, so I'm putting my comics habit on hold again. I've also cut my book spending and the number of meals I'm eating out. In order to travel, I'm making sacrifices to other parts of my budget.

This marks only the second time I've consciously made big changes to my spending. (The first was when I got out of debt.) The changes ought to be painful, but they aren't. In fact, they're kind of liberating. I like channeling my money toward a goal. It gives me a sense of purpose.

What about you? Are you aware of the trade-offs you make with your purchases? Do you ever think in terms of opportunity costs? What sorts of sacrifices have you been willing to make to pursue larger financial goals?

More about...Psychology, Planning

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xoxobra
xoxobra
9 years ago

I think the advice you received in the “Tangent” is what I’ve been living by more or less for the last few years. It’s applicable to many different areas of life. It was that rationalization that made it a lot easier to purge my things in preparation for a big move. I had a bass guitar in my closet for years that I swore I’d learn how to play one day, but after years of failed attempts and passing on weekly one hour lessons offered to me for dirt cheap ($15 an hour), I was finally able to admit to… Read more »

Anonymous
Anonymous
9 years ago

One “faces” or “confronts” tradeoffs, one never “makes” them. They exist outside of our awareness of them. Your post comes a few weeks after a profound essay by psychologist Dan Gilbert in the journal Nature. He writes, “Alas, research shows that when human beings make decisions, they tend to focus on what they are getting and forget about what we are forgoing. For example, people are more likely to buy an item when they are asked to choose between buying and not buying it than when they are asked to choose between buying the item and keeping their money ‘for… Read more »

Elizabeth
Elizabeth
9 years ago
Reply to  Anonymous

I agree! On an individual level, it’s easy to see that if I buy this DVD, I won’t have that money to put towards savings or to donate. However, the bigger the institution, I think the harder it is for people to see the choices. For instance, we make demands of our governments to put more money towards this or that, but we don’t want to see cutbacks in other areas or pay more in taxes. We want a thriving economy, but we also want environmentally sound practices which would harm our industries. It’s scary when the financial decisions are… Read more »

Pamela
Pamela
9 years ago
Reply to  Elizabeth

Some of us would argue that environmental regs only hurt industries when they’re set up inappropriately to begin with.

In economic terms, environmental damage is considered an “externality.” If the U.S. required businesses to pay their own externalities instead of passing them on to governments and consumers, they’d develop new lines of business that work in that environment. And probably show the kinds of innovation U.S. business used to be famous for.

Elizabeth
Elizabeth
9 years ago
Reply to  Pamela

True, but even eco-friendly industries have a trade off. For instance, we want biofuel because it’s renewable and decreases our dependency on foreign oil, but corn that is grown for fuel isn’t feeding people. Increased demand = increased corn prices, which can have a devastating effect on low-income countries who rely on that staple. We want alternative fuel sources for our cars, but have we considered the rise in energy demands if we all plugged in our cars every day?

I’m not saying which is right or wrong — just that it’s a trade off.

Anonymous
Anonymous
9 years ago
Reply to  Pamela

The most poignant example in current U.S. culture might be health care policy, i.e., wanting simultaneously high coverage, quality, and choice. Lots of people suffer while we disagree about what tradeoffs must be made. And as Elizabeth said, these collective-action (‘institutional’) problems are truly difficult. I literally went to therapy over the fact that I found it so hard to cope in American society when it became obvious that the requisites for my functioning (e.g., the occasional beer with friends, new clothes) could instead help so many others in other economies, and I was every day choosing not to end… Read more »

Midwest Saver
Midwest Saver
9 years ago
Reply to  Pamela

@Elizabeth- I agree with where you are headed and understand your point.
Just wanted to clarify something on the example you used. The majority of the corn in the US that is used for ethanol isn’t the same corn that is directly used by consumers. It’s not the corn we eat off the cob, etc. Most of it is used for livestock feed, so indirectly, it’s used by consumers. Ethanol doesn’t take food out of the mouths of children.
That being said, I appreciate your thoughts on the subject!

Elizabeth
Elizabeth
9 years ago
Reply to  Pamela

@Midwest Saver — agreed! I was speaking of the market in general, but I know it’s not so simple. 🙂

@Anonymous — we struggle with health care policy in Canada too. People have a lot of demands, but not a lot of solutions for paying for our lofty goals 😉

Desai Singh
Desai Singh
9 years ago
Reply to  Pamela

@ Midwest Saver You are correct in that the corn used for biofuels is different than the type used to feed people. However, the surplus farm land around the U.S., during periods of increasing food demand, has been used to grow the people feeding corn variety. If that land is instead taken out of food production for biofuel production, it will inevitably increase corn prices as less agricultural land is available to meet increased food demand. Coming from a 3rd world nation, I personally blame 3rd world governments for having such screwed up farm policies. Tens of millions of Indians… Read more »

Rosa
Rosa
9 years ago
Reply to  Anonymous

Thank you for the citation! That article is amazing.

Beth
Beth
9 years ago

It took me a long time to figure this out — that spending choices are all about trading one opportunity for another. In my early twenties, I was really into decorating and unfortunately, filling up, our house. Later, I was into eating out at good restaurants. Then we had kids and I was into buying stuff for them. All this time, I was working at a job I no longer enjoyed. It had become draining. Finally, I realized that by spending my money on all of these things, I was choosing stuff over options. Spending less in these areas would… Read more »

Alexandra
Alexandra
9 years ago

I am an over-saver. I am well aware that I am making some pretty crappy trade-offs in terms of always putting my future self before my present self. But it’s a pretty hard habit to break because if I don’t max out my savings goals, I start to feel anxiety, even though I know that I am saving more than I need.

Anonymous
Anonymous
9 years ago
Reply to  Alexandra

I have the same problem. I’m trying to figure out where it comes from–some might be weariness with my current job and concern that there aren’t any jobs I can imagine that are both fun and potentially open to me. It’s an easier problem with the income constraints removed. Some also is seeing my parents’ retirement get severely derailed by their investment choices, even though they were together making over $500k/y for many years. I can make better investment decisions, but I don’t have nearly enough saved to buffer “errors” (like 2008!). And some is the fact that I realize… Read more »

Over-saver
Over-saver
9 years ago
Reply to  Anonymous

You know, if you are an over-saver, even if you make 500K, I bet you won’t change. In fact, it can just make things worse — you start thinking “I have so much money, there’s something wrong with me if I can’t build up millions in savings. And THEN I’ll give to charity.” I know this because this is how I am. People truly committed to charitable giving do it at all income levels. I am trying to work to be better at letting go and giving away now.

E. Murphy
E. Murphy
9 years ago
Reply to  Anonymous

It can be frustratng to not be able to give huge amounts to save the world. But just give small amounts and smile to yourself and think about what a great philanthropist you are at your particular level.

I’m extremely proud of the $75 check I write monthly to my local no kill shelter. I feel like a Rockefeller because I’m able to do that much.

Laura in ATL
Laura in ATL
9 years ago
Reply to  E. Murphy

#33, EMurphy?

“I’m extremely proud of the $75 check I write monthly to my local no kill shelter.”

I think you are awesome.

Lisa
Lisa
9 years ago
Reply to  E. Murphy

This is so true. All we’re able to do right now is buy an extra item at the grocery store for the food box bin, but it’s so important to me that we do it.

El Nerdo
El Nerdo
9 years ago

Used t-shirt? Marinated for years in strange armpit? No matter how many times it’s been bleached, I don’t want it. I’d rather wear my own clothes until they are threadbare (10, 15 years) instead of getting the last legs of somebody’s throwaways. Agree with you on the DVD purchases though, they have never made sense to me. How many times can you watch a movie? I understand that maybe you’d want to watch something super-special 50 times (really??), but for normal use, which is once or twice or maybe 3 times, Netflix is the way to go. (Also, DVDs are… Read more »

Jean
Jean
9 years ago
Reply to  El Nerdo
El Nerdo
El Nerdo
9 years ago
Reply to  Jean

Oh, I like that! Awesome.

Elizabeth
Elizabeth
9 years ago
Reply to  El Nerdo

I grew up with hand me downs, so I’m not grossed out by used clothing. (Well, with some exceptions…) A lot of what is donated is practically new — some even with the price tags still on it! A lot of people end up getting rid of barely touched stuff because it was a buying mistake, not because they wore it out. Most second-hand stores in my area will accept well-worn clothing, but it usually doesn’t make the racks. Rather, it’s bundled and sold for fiber recycling or sold as rags to industrial clients. Still better than them ending up… Read more »

El Nerdo
El Nerdo
9 years ago
Reply to  Elizabeth

I guess, I just.. people gross me out, in general, and I hate the smell of thrift stores. But that’s only an extra nuisance. There’s a time value of looking for something that is a) in good condition, b) fits, c) matches my other clothes. And I hate clothes shopping. Do I really want to waste a whole afternoon looking for a good shirt among piles of dubious merchandise? Do I want to drive from thrift store to thrift store looking for that one good bargain? Hell no. I buy only things I need, which saves time and money; I… Read more »

imelda
imelda
9 years ago
Reply to  El Nerdo

Lol, I take it you don’t have kids?

Neither do I, but i know from babysitting that kids can watch the same crap over and over and over and over again. And then again some more.

Eric J. Nisall
Eric J. Nisall
9 years ago

Opportunity costs are probably something that people think is better left to accountants or economists, but they don’t realize how simple the theory is to apply to their own lives. The choice to do one thing directly affects the choice to do another, it doesn’t need to be any more complex than that. And your examples, J.D., depict that simplicity perfectly.

Your idea for the book would probably be a best-seller given the right title and marketing approach (think of a pictorial guide perhaps)!

Jean
Jean
9 years ago

My husband and I live on another continent from my family. We live frugally in order to visit them a couple of times each year. And we often give up the delight of visiting my family at Thanksgiving, Christmas, or over the summer in order to visit more often using cheaper, low-season flights.

Quest
Quest
9 years ago
Reply to  Jean

That’s very smart of you! I too live on a different continent from my family and I am afraid that I chose stuff over maintaining relationships with them. I spent tens of thousands of dollars on collecting garbage from stores yet I ‘never had the money’ to visit my sister while our kids were all little. I didn’t regret that at the time I was blowing money all over town but I do regret it now.

Nathan
Nathan
9 years ago

I had a toy and comic collection too. In fact I used to buy issues and not have the time to read them until years later. I realised these toys/comics could be offloaded so I had extra cash to do other things that became more important for me, like paying the downpayment for an apartment. It was a hard decision but I’m glad I’m cure of my addiction. It isn’t easy walking into a toy/comic store and trying to come out empty-handed. But you know what they say – ‘whatever makes you happy’, so I can’t blame people for having… Read more »

Lauren
Lauren
9 years ago

There is a lot of value in what you write here. I just finished a clothes shopping free June. No bags, no shoes, no clothes. I have to do that every now and then when I get caught up in the amazing sale opportunities teasing me in my inbox every morning.

When these months are over, I realize that I was able to dress myself every morning and it’s much easier to stick to my budget and maximize savings. I guess that’s a trade-off but it feels good to know that I am being fiscally responsible.

jennypenny
jennypenny
9 years ago

I like the idea of comparing opportunity costs, but I don’t like the ones listed. They seem to emphasize volume more than value. (Who needs 50 bicycles??) The closest one to value is the REI shirt. If it’s a great hiking or running shirt that you wear every weekend for your long run, it has more value than other disposable kinds of clothing. I’d rather see comparisons based on two value-oriented choices (assuming most people on this site have stopped making foolish choices for the most part) $15K used vehicle V. 1 good bycycle and 154 shares of KO eating… Read more »

Talyssa
Talyssa
9 years ago
Reply to  jennypenny

Oh good, Jennypenny already wrote my comment for me! I would much rather have my one pair of nike running tights than 4 pairs of walmart leggings – not only do I not NEED 4 pairs but I tried on a bunch of cheaper things and HATED them, then tried on my nike ones and loved them. Ditto for the plate of pasta at a restaurant – I don’t WANT a vat of pasta. Maybe this analogy works better for families, where they really can look at that one plate and think “oh I could feed my whole family for… Read more »

Pamela
Pamela
9 years ago

Sometimes it takes a few years to get the perspective you need to understand opportunity costs.

It’s very hard for an 18 year old to realize that maxing out their student loans instead of working their way through college will cost them far more than they might be willing to pay at 30.

SB (One Cent At A Time)
SB (One Cent At A Time)
9 years ago

We have family trade off, the other form of opportunity cost. When I buy something, I am not buying things with same price for my wife and vice verse.

Specially for the kid this is a serious issue.

Kim
Kim
9 years ago

We bought a small home in an older neighborhood rather than a starter castle in the hottest new section of town like most of our friends.

We chose instead to invest the $ we saved by buying small. Eleven years have passed and we’ve watched our net worth grow as a result of that conscious choice.

We hope this decision will continue to pay off in the future culminating in an earlier retirement than we would have otherwise with a too-pricy home.

Rosa
Rosa
9 years ago
Reply to  Kim

For me, freedom is almost always worth any other tradeoff. We bought in a very affordable (and much-loved) neighborhood – we don’t do a whole lot with the extra cash, except pour it into prepaying the mortgage, so there’s no concrete “we have this”. Instead, what we have is a total lack of anxiety – should we need to relocate, we owe quite a bit less than even depressed market value. Should one of us lose a job, or be injured, or die, the other can handle normal living costs alone (though because our incomes are skewed, if I was… Read more »

Mom of five
Mom of five
9 years ago
Reply to  Kim

My husband and I were just having this conversation yesterday. We love our home in our middle class neighborhood – the neighborhood is safe, well kept, and family oriented, but not really upscale. There are nicer neighborhoods and we could afford them, but we prefer instead to live a more leisurely lifestyle which includes a cleaning lady, a lawn service, and eating out a couple of times a month. If we were in a fancier neighborhood, there would be months where those luxuries would be a stretch and we’d just rather not have that stress. Also, if some opportunity were… Read more »

Andrea
Andrea
9 years ago

A trick that works for me when considering a purchase is to think to myself would I rather have this or would I rather have someone give me the cost in cash right now. So if I would rather have $50 cash than the $50 item I am looking at, I don’t buy it.

Tyler Karaszewski
Tyler Karaszewski
9 years ago

I really like this post, especially the tangent in the middle. I don’t know how much I have to add, but it was a good post. One thing I can say is that it gets really hard to compare the two items your might be choosing when one of them is something really abstract, like “savings” or “retirement”. How would you represent “savings” in your book, J.D.? Each item, with a corresponding stack of cash across from it? This is essentially what a store is like, with a price tag on everything. Or retirement, do you put a picture of… Read more »

Elizabeth
Elizabeth
9 years ago

Tyler, your comment made me laugh but it’s true! And the bigger the difference between the real object and the blurry question mark, the harder it is to imagine. After all, what’s the price of a DVD against a mortgage or retirement? If we’re smart, we don’t see the one DVD in our hand but hundreds of DVDs over time versus the contribution to a down payment or retirement vehicle. I find it easier to simply budget for a little fun money in the first place. Then my opportunity costs become about one “fun” item or another because necessities, savings… Read more »

Rosa
Rosa
9 years ago

My mom always used the mental image of a woman who’d worked for years in her profession, but not saved, and ended up destitute. I think she saw it on the news during the recession in the ’80s.

My partner always half-jokes that if we make a spending choice he doesn’t agree with, we’ll end up living in a box under a bridge.

I just picture myself stuck in a job I hate, because I can’t afford to quit and find a new one.

Money Reasons
Money Reasons
9 years ago

I would like to take my family to Hawaii next year, and then a few years later, to Paris (perhaps during Christmas even).

Unfortunately, I haven’t started saving yet and I hate to take the financial hit such a vacation would do to my net worth. I’m in the accumulation period and every dime counts.

I like your idea of giving up something to fund the trip though… Now I’ll just have to hash over my expenses and come up with a plan.

Ali
Ali
9 years ago

This is an easy one for me. I grew up thinking like this, and I’m not sure why, probably because my dad thinks this way. It’s been a struggle for me to do simple things like, for example, buy an Iced Mocha and just think of it as a delicious Iced Mocha, and not as a lost opportunity to save money or spend the money on something else, which results in guilt. It’s only been in the last few years that I’ve allowed myself to simply enjoy buying things I want without thinking about whether the purchase is worth the… Read more »

Heather
Heather
9 years ago
Reply to  Ali

I have had the same trouble. I went to Germany on an exchange program in high school and bought almost no souvenirs while I was there because I was afraid there would be something I would want *more* later and I wouldn’t have money for it.

Gift cards used to be a burden for the same reason – what should I buy with it? What if there’s something later that I’d rather spend the gift card on? It was insane, really.

I still have trouble sometimes, but it’s not *nearly* as bad as it used to be.

jackowick
jackowick
9 years ago

I enjoy when you point something out to someone to say “you know, you’re paying an awful lot for that…” and they get indignant. How dare they get rude for me intruding on their personal spending decisions! That’s my point, right there. We take these decisions so personally that it can be very hard to overcome intertia of the body at rest and put the plan into motion. If I told you that you are paying double what I pay for gas, you’d probably beg me for my source, or you’d tell me it’s impossible. But people put the decision… Read more »

Jeffrey
Jeffrey
9 years ago

I think being aware of trade-offs is definitely an “advanced” personal finance topic. It’s hard to translate from saving $5 twenty times on a latte to saving that $100 for vacation instead. I don’t think most people think that way. But if it’s something you are aware of (like in the example with comic books), that’s very powerful.

For me, I’m much more willing to trade out a year of eating lunches out on workdays for an addition to my travel budget.

Jynet
Jynet
9 years ago

I have this conversation over and over again with friends, family and clients. Of course I can afford to travel “as much as I want”… and stay nice places when I want to. BECAUSE I don’t own a car, AND I live in 800 sqft with my daughter. I’m sure if these complainers gave up thier 4000sqft home and downsized to 2000sqft home they could easily support [insert expenive habit of your choice here]. But THIER priority is the house, mine is travel. It doesn’t make either one right or wrong, it just IS. But I sure get sick of… Read more »

Rosa
Rosa
9 years ago
Reply to  Jynet

I had a boss who was remodeling her house, so every day I got to hear her on the phone choosing marble countertops or cherry hardwood or whatever, and then when I quit she said “I wish *I* could afford to just quit my job!”

J.D. Roth
J.D. Roth
9 years ago
Reply to  Rosa

Rosa, I love this comment. It made me laugh.

Victoria
Victoria
9 years ago

J.D., you said that “One of his tools is a clever book that compares common junk-food indulgences to healthy foods using photographs. For instance, one photo might show a plate with a pack of Twinkies next to a plate stacked with six cups of carrots.” This sounds like an excellent tool! Can you tell us which book it is? Thanks.

Andrea
Andrea
9 years ago
Reply to  Victoria

I think he is referring to “Eat This, Not That”

Jenna
Jenna
9 years ago
Reply to  Victoria

I believe this series of books is called “Eat this, not that!”. If not, it sounds similar for sure.

Jenzer
Jenzer
9 years ago
Reply to  Victoria

There’s also an older book called “Picture Perfect Weight Loss” which does much the same thing.

J.D. Roth
J.D. Roth
9 years ago
Reply to  Jenzer

That’s it: Picture Perfect Weight Loss is the book my brother has and uses. It’s less gimmick-y than Eat This Not That, but I couldn’t remember the title, so I used the “this not that” bit in this post.

Kathryn
Kathryn
9 years ago

I love this post–it’s exactly where DH and I are right now. About a month ago, we got a burning desire to pay off our mortgage (our only debt) within 5 years. So we went through our already-frugal budget with a fine-tooth comb, looking at every item as x extra house payments per year. We managed to squeeze out an extra payment per year by switching to prepaid cell phones and Netflix. That shaved 4 years off the mortgage! And we’ve decided that I’ll go back to work at least part-time when our daughter starts kindergarten this year. Like you,… Read more »

Adam P
Adam P
9 years ago

Right now I am stuck with a bunch of “wants” and afraid to commit to spending my spare money to any one of them (the expense of each makes them mutually exclusive). I’m afraid that if I say, buy this painting I’ve wanted since I was a kid over a 2 week trip to South Africa, I will regret my choice. Or the new bedroom furniture I really want/need (my drawers have now fallen in on themselves making it a chore to get at my gym clothes). My solution is to save even more rather than spend it, because I… Read more »

Max From Liquid
Max From Liquid
9 years ago

The biggest trade off we ALL make with our purchases is our time. Think about how long you have to work to obtain the dollars to make the purchase. You’re trading your time for the purchase.

Susan
Susan
9 years ago

I used to have very poor spending and saving habits. I would throw thousands of dollars away on things like eating out and buying books that I never got around to reading. I was not too concerned about putting away money for a rainy day. Well, all of that changed after I incurred a lot of debt. Now, I am very conscious about how I spend my money. I would say that now I think more about opportunity costs, and regret that I did not put my money to better use. I have given up spending money on eating out,… Read more »

Brigitte
Brigitte
9 years ago

When you buy food for your family, you’re giving up other things you might really want, like new furniture or a car repair. Well, you sort of addressed this by including “car repair” but the fact is that for so many people, when you buy food for your family, you might be giving up badly needed medication, or the ability to afford transportation. You’re giving up things you need for other things you need. Granted, most of those people are probably not worried about reading your blog… but some of us are, and I think it’s important to acknowledge that… Read more »

jennifer
jennifer
9 years ago

Isn’t life all about trade-offs? We just spent the holiday weekend laying low at home, doing housework and napping, and enjoying long walks with our dogs around our neighborhood, because we’d rather save the money we would have spent on barbecues or parties with friends for an emergency fund as well as an upcoming vacation to Napa Valley with friends. It’s all about budgeting, and what “line items” one is willing to sacrifice. As my late mother would say, “you gotta take the bitter with the better.”

Melanie
Melanie
9 years ago
Reply to  jennifer

If you don’t mind, I think I will start using that…

“You gotta take the bitter with the better…”

chacha1
chacha1
9 years ago

This is an extremely timely and useful post for me – thanks, J.D.!

And thanks to commenter Desai Singh above (no reply option for some reason) for pointing out that the problems of the world do not begin and end with the U.S.A.

Sometimes we forget that we don’t cause every tragedy, and we can’t fix every tragedy either.

Squirrelers
Squirrelers
9 years ago

It’s all about opportunity costs and tradeoffs. I totally agree, and have been a proponent of this for a while. An example: let’s say you have the opportunity to buy a new car (side note: I prefer used, but let’s set aside the new/used topic for no). Car#1 is a big brand name car that’s a cool brand name and is stylish will bells and whistles – and costs $35,000. Car#2 is a no-frills brand name car that will last the same amount of time, but is not trendy or stylish at all – but it’s a solid, equally reliable… Read more »

Melissa
Melissa
9 years ago

That line about priorities is SO GOOD. I feel like I want to print that out and hang it on my wall. I think we all fall victim to that sometimes, when what we think is a priority really isn’t.

Mutant Supermodel
Mutant Supermodel
9 years ago

Agreeing with others who love the line about Priorities.

Also agree with whoever mentioned tradeoffs are an advanced concept.

I think the visual would be a fantastic personal project though. To sit and go through your spending habits and then create your personal “book” would be quite an exercise in self-reflection and focus.

You’ve given me something to think about. These are my favorite posts.

Adrian
Adrian
9 years ago

Essentially, J.D., These trade-offs even trickle down to the picayune nickel-and-dime daily purchases (i.e. a packet of gum etc.) that while seemingly irrelevant in the moment, *could* potentially add up to hundreds, or even thousands of dollars a year in debt if left unnoticed. This is why I am a staunch-practitioner of the “Adult Allowance” monthly routine because it allows me to consciously organize & compartmentalize my “splurge” purchases with little going unnoticed; even raising the satisfaction of those very purchases through their anticipation. On a tangent of my own, I am certain we all have friends & colleges who… Read more »

Jammie
Jammie
9 years ago

I understand this concept all too well. My husband and I have $40k in combined school loans. I am modaerately aggressive with paying down this debt. But we each get $100 every with which we can do whatever we want. I am a saver so I always 3-4 months of fun money on hand. I want to purchase an iphone without a contract (about $650), but then I realize I could purchase a flat screen tv (something I also really want), or pay down student loans (but this is my fun money), or cover school fees for a semester (I… Read more »

skydivingchic
skydivingchic
9 years ago

This is one of the things that Mvelopes has helped me with. I have an envelope for personal savings. That generally is for travel and a new-to-me car. Whenever I want to make a big purchase, I have to figure out how to pay for it. That usually means either taking money from my personal savings or diverting part of my monthly contribution to that envelope. So the question becomes, is the object of my desire worth delaying my next vacation or car purchase? Sometimes yes, sometimes no, but the trade off aspect has become extremely clear when all my… Read more »

Bakari
Bakari
9 years ago

Excellent article. I’m doing the same thing with the goal of A $2000 emergency fund. That’s not a lot, but it’s I’ve never done it. One way I’m meeting this goal is to have a few no discretionary spending months–no buying of books, software, extra music beyond my $5 per month Rdio.com account, which by the way has saved me a ton of money on music downloads. Also, when I feel the urge to go out and by magazine or splurge on something I really dont need, if I don’t make that purchase i’m going to immediatly put that money… Read more »

Rosa
Rosa
9 years ago
Reply to  Bakari

When we were house-shopping, we went to a first time homeowner’s class where the presenter gave this tip: keep a photo of the thing you really want (for that class, a house) in your wallet or taped to your credit card, where you have to see it every time you make a spending choice.

Jaime
Jaime
9 years ago

Yep this is pretty basic, everyone knows this, I think its pretty obvious there are trade offs for everything you do in life.

Kevin M
Kevin M
9 years ago

Love it JD, as a CPA I am a big fan of using the term opportunity cost in a personal finance post.

Wearsunscreen
Wearsunscreen
9 years ago

I’ve been home shopping since February. Made a low-ball offer on a short sell that went on and on and didn’t turn into a closing, made another low ball offer on a nicer short-sell that was rejected, and finally made a full asking offer on a old folks moving on situation with an actual owner. Glad I waited, every house had loads of consequences and trade-offs like being a fixer upper or not, but I’m glad I get to choose.

Skye
Skye
9 years ago

I can relate to this article. I am 24, a recent college graduate, am employed with good starting pay (family business) and no debt. After graduating last fall, I definitely treated myself via some discretionary spending: high quality clothing (modern shirts with vintage inspiration, selvedge denim, Alden boots, ect). I’m a style freak in the making and would eventually like to start a small side business in an industry that I find very appealing (natural vegetable tanned leather wallets maybe?) However, at the same time, I realized that I was falling ill to lifestyle inflation and that my values were… Read more »

Bella
Bella
9 years ago

I’m sure it’s not “Eat this, not that”. That book is for people who don’t know that fried chicken and mayo are bad for you.
I mean who doesn’t know that?

Ben
Ben
9 years ago

This was the single most important epiphany in my adult life. Spending money isn’t bad, but make sure you’re spending it on the things that you really want. When I realized that every restaurant meal I skipped on in the USA was worth 5-10 meals in Latin America, it made it easy to save for my travels. I try not to think in terms of dollar value. Instead, I think in terms of travel value (beer, motorcycle gas, time spent traveling while still being able to repay my student loans, sitting on the dock of a beautiful crystal clear lake… Read more »

Joe
Joe
9 years ago

I’d be very interested in choosing to buy a “Buy This Not That” book instead of coffee for a week!

You’ll let us know if you pursue this endeavor, right?

Emogene Sivertson
Emogene Sivertson
7 years ago

I actually enjoy reading this short article and it also helped me in using my devices, as I love reading posts about upgrading electronic products and accessories, many thanks for this interesting information and read more unique posts like this one.

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