What is the best way to determine if one should buy something or save their money?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
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GrayS26
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What is the best way to determine if one should buy something or save their money?

Post by GrayS26 » Mon Aug 13, 2018 7:33 pm

For example, let’s say someone is financially well off. They have no debt, plenty saved up, great income and continue to save every month.

They then decide to buy a new computer, that costs around $2600, BUT they don’t really NEED the new computer. They just want it bc it has some nice features their current one does not have.

What should one do? Is there a general rule when it comes to buying things, or even better a mathematical formula that can help someone figure out if they can afford to buy something they want?

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Re: What is the best way to determine if one should buy something or save their money?

Post by willthrill81 » Mon Aug 13, 2018 7:36 pm

If a person is otherwise financially sound enough in their own estimation, they can buy whatever they wish. I would add a caveat to that though, that they should not go into debt for such things.
Last edited by willthrill81 on Mon Aug 13, 2018 7:37 pm, edited 1 time in total.
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Re: What is the best way to determine if one should buy something or save their money?

Post by PFInterest » Mon Aug 13, 2018 7:37 pm

I would say I wouldn't spend that much on a Mac....

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Re: What is the best way to determine if one should buy something or save your money?

Post by TheDDC » Mon Aug 13, 2018 7:38 pm

I run a small IT consulting business on the side, so for me the question is "can I write this off?" A computer would fall into this category. A car lease *might* fall into that category.

If it is a potential non-business expense my question is "is it for the health or well being for my family?"

From there, you go from needs to wants. What are your savings goals? FIRE, more time/experiences with family? Is the expense something you have the cash flow for or is this something worth saving for?

Just a few of my questions I ask off the top of my head.

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Re: What is the best way to determine if one should buy something or save their money?

Post by ResearchMed » Mon Aug 13, 2018 7:39 pm

GrayS26 wrote:
Mon Aug 13, 2018 7:33 pm
For example, let’s say someone is financially well off. They have no debt, plenty saved up, great income and continue to save every month.

They then decide to buy a new computer, that costs around $2600, BUT they don’t really NEED the new computer. They just want it bc it has some nice features their current one does not have.

What should one do? Is there a general rule when it comes to buying things, or even better a mathematical formula that can help someone figure out if they can afford to buy something they want?
The way you've set this up, it doesn't sound like it's an "affordability" issue, in the sense of whether spending $2,600 will interfere with current needs/desires/saving and also financial future.

So what is the question?
"Should" they get it? Judging how?

As discussed in a few other recent threads, there tend to be very dramatic differences of opinion about things one "wants" but doesn't "need", or "doesn't need this price point", etc.

At a certain point, it's a matter of "you can buy almost anything [reasonable] that you want; you just can't by everything you want."

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Re: What is the best way to determine if one should buy something or save their money?

Post by nisiprius » Mon Aug 13, 2018 7:42 pm

The only rule I have is that it is not the one-time purchases or splurges that do the damage, it's anything with continuing monthly payments. Among other things, it is amazingly difficult to give up e.g. any magazine subscription, even if you are hardly reading and aren't enjoying the magazine.

So I'm relatively kind to myself on buying new toys, but extremely cautious about any kind of "subscription" or "service."

Oh, I guess another rule is that if you can buy it with less than 10% of your current checking account balance and still pay all the monthly bills, it's probably OK. Running up a credit card balance is evil... for the same reason as above, credit card finance charges are a monthly expense.

For some reason, my brain is completely unable to mentally multiply a monthly expense by the number of months it is likely to continue.
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Re: What is the best way to determine if one should buy something or save their money?

Post by H-Town » Mon Aug 13, 2018 7:44 pm

GrayS26 wrote:
Mon Aug 13, 2018 7:33 pm
For example, let’s say someone is financially well off. They have no debt, plenty saved up, great income and continue to save every month.

They then decide to buy a new computer, that costs around $2600, BUT they don’t really NEED the new computer. They just want it bc it has some nice features their current one does not have.

What should one do? Is there a general rule when it comes to buying things, or even better a mathematical formula that can help someone figure out if they can afford to buy something they want?
If one can keep track of their financials (their goals, where they are currently, and what they need to do to achieve their goals), then they have the info readily available to decide whether they can make the purchase without getting off track.

Just run the numbers.

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Re: What is the best way to determine if one should buy something or save their money?

Post by drawpoker » Mon Aug 13, 2018 7:53 pm

I think you have answered your own question here.

If you are already wondering if you "should" buy something or "save" the money - Likely you won't be able to enjoy the new product fully, derive full pleasure. Because you will always have that lingering doubt did I make the correct decision (?)

If you hesitate to buy something new because you think you might feel pangs of guilt later, then, my advice is, Don't. Wait until you feel secure and confident in yourself and your good judgment. No special math or formula needed for that.

People should be able to enjoy their possessions, as long as they are able to afford them. Not beat themselves up later, thinking they "wasted" money.

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Re: What is the best way to determine if one should buy something or save their money?

Post by Dottie57 » Mon Aug 13, 2018 7:56 pm

willthrill81 wrote:
Mon Aug 13, 2018 7:36 pm
If a person is otherwise financially sound enough in their own estimation, they can buy whatever they wish. I would add a caveat to that though, that they should not go into debt for such things.
+1

You still have a life and should enjoy it.

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Re: What is the best way to determine if one should buy something or save their money?

Post by Fallible » Mon Aug 13, 2018 7:59 pm

GrayS26 wrote:
Mon Aug 13, 2018 7:33 pm
For example, let’s say someone is financially well off. They have no debt, plenty saved up, great income and continue to save every month.

They then decide to buy a new computer, that costs around $2600, BUT they don’t really NEED the new computer. They just want it bc it has some nice features their current one does not have.

What should one do? Is there a general rule when it comes to buying things, or even better a mathematical formula that can help someone figure out if they can afford to buy something they want?
Is this about buying the computer or is that just an example? I get the feeling there may be more to this, something like someone objecting to you or someone else buying something they don't need even if they can afford it. Or maybe there's some guilt feeling about buying what isn't needed?
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Re: What is the best way to determine if one should buy something or save their money?

Post by stoptothink » Mon Aug 13, 2018 8:14 pm

Before responding, everybody should do a search of OP's prior threads for some context. Entertaining is all I'll say.

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Re: What is the best way to determine if one should buy something or save their money?

Post by livesoft » Mon Aug 13, 2018 8:21 pm

My rules are simple:

1. If it is a piece of technology, then I have to need (not want) to use it every day and I have to give up a current piece of technology.

2. If it is clothing, then I need to use it almost every month and I have to give up a current piece of clothing or two.

3. If it is something that will take up space in the home or garage, then I cannot get it without throwing out something that takes up more space.

4. If it is food, that's OK since all food goes down the toilet or in the garbage and doesn't take up space.

5. Buying investments takes up no space, so they are always legit to buy.
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Re: What is the best way to determine if one should buy something or save their money?

Post by celia » Mon Aug 13, 2018 8:29 pm

I often decide to wait a few months to see if I still want it. Usually I forget about the item in 2 or 3 days, so end up not buying it. If I'm still thinking about it 3 months later, I'll get it.

But recently, I just bought a couple of things I regretted almost as soon as I got home. For example, I buy potted plants, then sometimes don't plant them right away. Do you know what happens to them when they sit in the sun for a week? :oops:

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Re: What is the best way to determine if one should buy something or save their money?

Post by ResearchMed » Mon Aug 13, 2018 8:33 pm

celia wrote:
Mon Aug 13, 2018 8:29 pm
I often decide to wait a few months to see if I still want it. Usually I forget about the item in 2 or 3 days, so end up not buying it. If I'm still thinking about it 3 months later, I'll get it.

But recently, I just bought a couple of things I regretted almost as soon as I got home. For example, I buy potted plants, then sometimes don't plant them right away. Do you know what happens to them when they sit in the sun for a week? :oops:
You get dried grasses to stuff into your very economical pillow or mattress?

:D

Hint: You can get that cheaper mowing the lawn!

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Re: What is the best way to determine if one should buy something or save their money?

Post by MrBeaver » Mon Aug 13, 2018 8:34 pm

I reframe it as ‘Do I want one of these now, or one every X years when I’m 60 for the rest of my life?’

X equals roughly:
1 when 15
2 when 25
4 when 35
8 when 45
16 when 55

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Re: What is the best way to determine if one should buy something or save their money?

Post by MrBeaver » Mon Aug 13, 2018 8:36 pm

livesoft wrote:
Mon Aug 13, 2018 8:21 pm
My rules are simple:

1. If it is a piece of technology, then I have to need (not want) to use it every day and I have to give up a current piece of technology.

2. If it is clothing, then I need to use it almost every month and I have to give up a current piece of clothing or two.

3. If it is something that will take up space in the home or garage, then I cannot get it without throwing out something that takes up more space.

4. If it is food, that's OK since all food goes down the toilet or in the garbage and doesn't take up space.

5. Buying investments takes up no space, so they are always legit to buy.
This is genius. If only I would live by it.

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Re: What is the best way to determine if one should buy something or save their money?

Post by AerialWombat » Mon Aug 13, 2018 8:39 pm

My strategy is simple: If I have to ask myself this question, then I probably don’t need it.

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Re: What is the best way to determine if one should buy something or save their money?

Post by weltschmerz » Mon Aug 13, 2018 8:43 pm

As a mental exercise, I started trying to devise a formula to answer the OP's question.

In this case, let's say that the 'something' is an item, which will give you some pleasure for some amount of time, but is essentially becomes worthless in a relatively short time, such as a whisk, a cell phone, or a computer. Then you have to decide how much of your hard-earned dollars to spend on such an item. Perhaps it is the amount of money that you earn in a given time period, proportional to the amount of time you will use the item.

For example, if the item is a whisk, then let's say you will use the item for approximately 1 minute per day. So then how much can you spend on this item? Let's take a person who makes $40k per year, or about $30k after taxes. Assuming 2000 hours per year of working, that's around $15 per hour (after tax). If we say that this person can spend 1 hour's pay on this item used 1 minute per day, this would be $15 that can be spent on the whisk. The formula here is:

T * E = M

Time of daily use (in minutes) * Earnings, hourly (after-tax) = Maximum amount to spend on item

If the item is a computer that gets used 2 hours per day, then the same person can spend up to 120 * $15 = $1800.

Now, these are just maximum amounts. In a world of decent $300 chromebooks, no one should be spending $1800 on a computer, unless they are big-time into gaming or crunching numbers for SETI.

If the item retains significant value, such as a car or a house, the formula doesn't work so well, but feel free to offer your own suggestions for modification.

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Re: What is the best way to determine if one should buy something or save their money?

Post by drawpoker » Mon Aug 13, 2018 8:58 pm

stoptothink wrote:
Mon Aug 13, 2018 8:14 pm
Before responding, everybody should do a search of OP's prior threads for some context. Entertaining is all I'll say.
Ahhh, I see, said the blind man. As he picked up hammer and saw.

(Good sleuthing work, stoptothink :!: "Now, That's Entertainment"

8-) 8-) 8-)

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Re: What is the best way to determine if one should buy something or save their money?

Post by Shadetreeinprocess » Mon Aug 13, 2018 9:06 pm

First post from a very appreciative lurker, here goes;
I like to think of things as tradeoffs. In a situation like you describe, the tradeoff may be; spend money now and delay retirement as a result. I find myself going through this thought process often (which my wife finds rather annoying!). I made a spreadsheet to help with the math; I input the one-time or recurring expense, our annual savings rate, the interest rate we’d get if we were to invest the money instead, our target withdrawal rate in retirement and the approximate number of years before we retire at our current spending and savings rates. The output is simply a number of years that our retirement is delayed by the purchase. A one-time $2600 purchase delays our retirement by weeks. However, making an extra purchase that size every year, especially if the expectation is to continue to make it until one dies, results in a delay of retirement counted in years. It’s actually fun (and scary) to play around with the numbers to see how much going out to lunch every day or hiring a lawn service delays ones retirement. This way of thinking really helped my wife and decide whether or not to hire a house cleaner. A house cleaner costs us X and we therefore have to work an extra Y years to pay for it. It came out to somewhere right around one year and we both jumped up and down so excited that we’d never have to clean the house again if we just work an ‘extra’ year. Hopefully we don’t convince ourselves to make similar lifestyle creep decisions every year or we’ll never stop working! YMMV. Thank you all.

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Re: What is the best way to determine if one should buy something or save their money?

Post by weltschmerz » Mon Aug 13, 2018 9:30 pm

drawpoker wrote:
Mon Aug 13, 2018 8:58 pm
stoptothink wrote:
Mon Aug 13, 2018 8:14 pm
Before responding, everybody should do a search of OP's prior threads for some context. Entertaining is all I'll say.
Ahhh, I see, said the blind man. As he picked up hammer and saw.

(Good sleuthing work, stoptothink :!: "Now, That's Entertainment"

8-) 8-) 8-)
So the OP is 26 and gets $100k from their parents per year, that's cool. But even they should learn some good financial habits, for who knows when the gravy train will come to a screeching halt. I applaud this young person for seeking the wisdom of the Bogleheads, instead of blowing it trying to impress their Tinder dates.

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Re: What is the best way to determine if one should buy something or save their money?

Post by veindoc » Mon Aug 13, 2018 9:50 pm

I generally decide how much I am going to save a year. We try for at least a third of our gross salary but ideally 50%. Then I automate it. What’s leftover is free for me to spend. At the same time I do not like to overspend on things so favor sales/clearance. I also do not like to pay for things I can make/do myself or buy used. I also spend according to my priorities which are family related. I will hem and haw about a $30 haircut/blow dry for myself before a wedding or other formal event but drop $99/month each for three kids without a second thought to take taekwondo.

I tend to agree with a previous poster. If I find myself questioning a purchase, I know deep down it doesn’t align with my values for one reason or another and skip it. I’d really like an upgrade from my 8 yr old minivan but can’t seem to pull the trigger. I’m sure at some point when I’m ready, I’ll do it and with no regret.

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Re: What is the best way to determine if one should buy something or save their money?

Post by LadyGeek » Mon Aug 13, 2018 10:02 pm

This thread is now in the Personal Consumer Issues forum (how you spend your money and your time).

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Re: What is the best way to determine if one should buy something or save their money?

Post by AlphaLess » Mon Aug 13, 2018 10:08 pm

I would say that I never buy anything I don't need.

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Re: What is the best way to determine if one should buy something or save their money?

Post by runner540 » Mon Aug 13, 2018 10:31 pm

GrayS26 wrote:
Mon Aug 13, 2018 7:33 pm
For example, let’s say someone is financially well off. They have no debt, plenty saved up, great income and continue to save every month.

They then decide to buy a new computer, that costs around $2600, BUT they don’t really NEED the new computer. They just want it bc it has some nice features their current one does not have.

What should one do? Is there a general rule when it comes to buying things, or even better a mathematical formula that can help someone figure out if they can afford to buy something they want?
Here's a rule of thumb that helps me gut check luxury purchases and not go overboard on spending: if you can give away as much as you spend (buy $2600 computer, give $2600 to a charity), and it fits in the overall budget toward financial goals. Hypothetically, for someone who has no debt, a steady source of income, and uses a budget to make sure they are saving enough to hit their long term financial goals, they can spend it if it's in the budget.

OP, I remember your previous threads - they made quite an impression viewtopic.php?f=1&t=215204. Do you now have a source of income besides your parents, and a budget to live off of?

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Re: What is the best way to determine if one should buy something or save their money?

Post by TheDDC » Mon Aug 13, 2018 10:36 pm

Ah. Well now my advice changes after getting up to speed on your situation. The best strategy is to marry a rich woman and continue the $100k float, your original plan, and have her do all the spending for you. Then have her pay for your college education at the best schools in LA. No need to worry about finances and making pesky decisions in that case.

-TheDDC

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Re: What is the best way to determine if one should buy something or save their money?

Post by 123 » Mon Aug 13, 2018 10:48 pm

A lot of my purchase decision-making is driven by the clutter factor of any new acquisition. I want to eliminate and prevent the formation of new clutter. If the new item totally replaces an old item that WILL be trashed or recycled (old computer) than replacement is usually okay. If there's useful life in the old item or I'm not going to get rid of it for some reason (like well worn jeans) then I'm much more hesitant to proceed with a purchase.
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Re: What is the best way to determine if one should buy something or save their money?

Post by celia » Mon Aug 13, 2018 11:26 pm

ResearchMed wrote:
Mon Aug 13, 2018 8:33 pm
celia wrote:
Mon Aug 13, 2018 8:29 pm
I often decide to wait a few months to see if I still want it. Usually I forget about the item in 2 or 3 days, so end up not buying it. If I'm still thinking about it 3 months later, I'll get it.

But recently, I just bought a couple of things I regretted almost as soon as I got home. For example, I buy potted plants, then sometimes don't plant them right away. Do you know what happens to them when they sit in the sun for a week? :oops:
You get dried grasses to stuff into your very economical pillow or mattress?

:D

Hint: You can get that cheaper mowing the lawn!

RM
Well... we do live in California.... but why would I stick weeds in my pillow when I can smoke it? :D

Seriously, we have no lawn. Also no gardener or rain. I'm into native plants that require very little care.

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Re: What is the best way to determine if one should buy something or save their money?

Post by drawpoker » Mon Aug 13, 2018 11:33 pm

runner540 wrote:
Mon Aug 13, 2018 10:31 pm


OP, I remember your previous threads - they made quite an impression viewtopic.php?f=1&t=215204. Do you now have a source of income besides your parents, and a budget to live off of?
Can answer that one for him - A resounding "No"

Looks like you didn't dig back far enough. Did you not know He is on his way to becoming a big name in the fashion and modeling industry out in L.A? Just as soon as he can find a .............. :P :P :P

viewtopic.php?f=11&t=237208&p=3707392#p3707392

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Re: What is the best way to determine if one should buy something or save their money?

Post by LadyGeek » Tue Aug 14, 2018 3:32 pm

This thread has run its course and is locked (topic exhausted, no added value to continue). See: Personal Consumer Issues
Note that this subforum has a much lower threshold for locking or removing posts than the financial and investing subforums. In general, controversial, offensive, pointless, divisive or mean-spirited posts or topics may be locked, edited or deleted (with or without notice) at the discretion of the moderating staff even if they do not otherwise violate forum policies.
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