Personal Finance Apprentice

On Expense Planning

On Expense Planning Spenders have another slight advantage over their thriftier counterparts: they can be less likely to end up having to spend a ton in a short burst to replace stuff.



On Expense Planning

On Expense Planning   Spenders have another slight advantage over their thriftier counterparts: they can be less likely to end up having to spend a ton in a short burst to replace stuff.

If you read a lot of personal finance blogs, you’ve probably come across the thinking that while frugality is an asset, spenders have one big advantage.

They’re more aware of the prices and can tell if something is real bargain and why something is as pricey as it is and isn’t likely to be any cheaper.

As an infrequent spender, that’s intuitively true for me. I rarely spend and the next time I buy an item I find that prices and choices have changed significantly.

Which leads me to a different thought: Spenders have another slight advantage over their thriftier counterparts: they can be less likely to end up having to spend a ton in a short burst to replace stuff.

Why do I say that?

Well, I always buy high quality products that I know will last a long time. And then I frugally maximize their use and put off “upgrades” until it’s necessary.

Like my old phone and computer. I never gave into the temptation to chase the latest smartphone. And I never upgraded my desktop either, since it was more than enough for browsing, watching movies and playing music (Which was all I was using it for at that point).

And that was a good thing. I saved a lot of money and was able to invest a lot as well.

The downside is that those broke down at roughly the same time. Worse, pretty much soon after being able to replace them my glasses broke, our car’s air conditioning malfunctioned, and my shoes finally gave out (I practically have just one pair at a time).

They’re not expensive things to fix or replace, at least compared to a mobile phone and laptop. But collectively it’s another big, unplanned expense right after paying off an unplanned, big expense.

Thankfully, I’ve got an emergency fund, and even a mini-mergency fund. But that’s not free money; I have to replace them. So ultimately those expenses are going to take a chunk out of my budget.

Which is very unfortunate. I had just been able to “turn the corner” – made some side income, even if small and irregular and managed to trim the budget a little bit. That’s effectively been nullified.

But those are things that were going to be replaced eventually. It’s actually possible to realistically predict their “expiry” date:

  • 5 years for a computer (though mine lasted 6), 
  • 3 years max for shoes (I’ve never had a pair that lasted longer, no matter the brand), 
  • probably 5 years also for a phone (hey, they’re basically small computers now, right?)
  • eye-glasses are probably 3-4 years (but really depends; I should get my eyes checked yearly)
  • Car problems are difficult to predict, but it’s probably safe to assume at least one unforeseen problem a year (even for new cars; traffic accidents happen after all)

A person like me tends to replace things only if it really breaks down and can’t be fixed anymore. But sometimes that’s detrimental.

Theoretically, that’s cost-efficient. But in practice, it could come simultaneously at an unfortunate time. Which can put a cramp on your cash-flow, and that’s never a good thing.

Besides, it would be even more cost efficient to buy those replacements at discount prices when the opportunity arises instead of waiting until the last minute and having to buy what’s available (provided the “expiry” date of the current item is near).

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photo credit: Expense Sheet via photopin (license)

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