Wednesday, April 9, 2008

Reader Request: Balancing Frugality and Being Debt-Free

Kelly has a difficulty many of wish we had: she's debt-free. However, she feels guilty when she spends money on herself.

She left the following comment earlier today:

I consider myself frugal, although I do very much appreciate nice things like $250 jeans and such. As my husband and I become more successful- I will splurge on items here and there. recently I splurged and bought 2- $200 purses and a $130 on a single top- and I feel sooo guilty! Here's our situation:We have no debt, make good money and have 50k in savings. Most people in our situation would think that we've got it made and we're well off. so why do I feel sick to my stomach about spending money? Also I should point out that I recently sold a bunch of my old clothes on ebay to help justify this splurge- but it doesn't seem to be working! I wish I could just relax and enjoy my recent purchases which I absolutely LOVE but in the back of my head I just keep thinking I threw away $550. So PLEASE help me to put my splurge into perspective. what are your thoughts?

This is a perfect example of why I talk about balance. If someone practices strict frugality at some point in their life, to the point that it becomes second-nature, this guilt can easily appear.

Really though, as long as Kelly isn't spending like this weekly or monthly, I really don't see the problem in occasionally "splurging" on oneself. She didn't include her and her husband's income or monthly expenses, so it's difficult to say if $550 is a big percentage of their after-expense monthly budget. If they're both contributing solid amounts to retirement accounts, there's absolutely nothing wrong with splurging now and then. After all, if you're debt-free, earning good money and planning for the future, why not spend some of the extra money on yourself?

Too, I would also recommend paying attention to why and what is bought. If spending $200 on a purse means that you're buying a well-made purse that will last longer than it takes for the next fad to start and finish, great. But if that $200 is spent on something trendy and poorly made, then that isn't great. If buying these things is a stop-gap for other emotions, that needs to be addressed first -- because the issue isn't about money, money is just how the something else is being manifested.

Also, this really isn't a splurge, considering that ebay profits were (mostly) used to buy these items...

Aside from this, I think the real issue in this situation is a person's relationship with money. I, too, would love to have $50k in the bank and no debt. I know, too, that it would take a while for me to adjust to having money to spend after having been in debt for so many years. Kelly doesn't say if she's been in debt, or grew up with little money, so it's not clear if she has frugal habits from not having extra money before, or if there is another reason.

Overall, my advice is to still work from a budget and set aside a certain amount for splurges each month. As long as the occasional splurges don't become regular things (e.g. "where/when did I get this handbag?! It has dust/the tags on it!"), there's not a problem. If you have the excess money (post-monthly expenses and retirement contributions), there shouldn't be guilt in having the disposable income to buy things you like/want.

This situation is one of the reasons I have different savings accounts for different things, why I think super-strict budgets don't work in the long-run and why I think they create potentially dangerous money perceptions, and why I think we all need to work towards having a healthy relationship with money and how we manage it.

What do you think?


Anonymous said...

I like your emphasis on finding a balance and working on the underlying relationship with money. I'm passing along your article at Homemaker Barbi today. Thank you!

Fabulously Broke said...

I agree. It's difficult sometimes to get into perspective. I don't know how I'll feel next year when I'm debtfree, but I sure hope my guilt won't be as intense if I spend.....

Kelly said...

THANK YOU so much for taking the time to write out a post for me! I really appreciate what you had to say. My husband and I bring in about 100k a year (but this has only been for the past 2 years- before that we were broke, never in debt- just broke) We would have more in savings but this past year we both upgraded to nicer and newer cars. We don't have many monthly expenses- my husbands company pays for most of our rent, but we are saving to be able to buy a house soon and so when I spend $500 shopping I am starting to think- this could be a stove or a bed, but we estimate by the end of this year with my husbands bonus we will have about $100k in savings. I guess I was just always taught that a penny saved is a penny earned. My dad was such a hard worker and my parents never enjoyed the money they earned because they were always stashing it away. I was often embarrassed at times growing up because my parents were so incredibly cheap. So when I go out and buy lavish things I feel as if my family is judging me for being flashy and it makes me feel incredibly guilty and ridiculous for wanting to spend as much money on things as I do. Its really quite annoying actually!

I don't have a budget for shopping, probably because I am already so anal about finding the best prices and justifying the purchases by selling things on ebay. And yes, I definitly buy things of good quality and items that I know I can always resell on ebay. For example, last year I bought a Louis Vuitton purse (something I have always wanted) I bought it used on ebay for $700- and I just recently sold it on ebay for $800, so basically I was paid $100 to use a nice purse for a year!

Okay- so I just went on for way too long, but thank you soo much! I really appreciate everything you had to say. I LOVE your blog!

kelly said...

One more thing- I never felt guilty spending so much on the Louis Vuitton purse because I knew it would hold its value and it was a timeless purse. These $200 purses, although a nice quality are not "timeless". At first these 2 purses were a substitute for my Louis Vuitton purse at half the cost, but I am actually thinking the LV was a more practical purchase. In a year I would probably be lucky to get half my $400 back on these 2 purchases.