Finding that ultimate balance

The guide in helping you say “up yours” to Madison Avenue.

Maybe You’ll Pick up a Thing or Two (No Guarantees)

No matter if you’re a seasoned shopper who knows exactly what they want — or an impulsive buyer who grabs the $10 DVD at the check-out aisle — you can probably pick up a thing or two from reading this guide.

If not, be comforted on the fact that you’ll only waste about 17 minutes or so of your life (depending on your reading speed and tolerance for grammatically lacking writing).

One Man’s Crap is Another Man’s Han-Solo-Frozen-in-Carbonite

Solo-rificSpending $4,900 on a movie prop replica may seem like a ridiculous idea to most people, but try saying that to the 2,000 or so hardcore Star Wars fans that bought the limited production Han Solo in Carbonite replica.

Measuring at around 6 feet 8 inches long and weighing in at about 100 pounds, the Han Solo in Carbonite replica is one of the ultimate decorations for geeks across the globe (and a constant eyesore for their partner — if any).

As you can tell, what’s important to one person may be a complete waste of money to another person. In order to really “stop buying crap,” you must first figure out what’s truly important to you.

Perhaps you have a love for fine china? Or maybe you can’t get enough of your collectible lunch box? Whatever it may be, as long as it is important to you, or brings a value to you in a certain way, it is not “crap.”

Stop Buying Crap rule #22: It is perfectly acceptable to spend money on things that are important to you, as long as you can afford it.

It’s Not about Being Cheap, its About Being Sensible

Mmm.. swimming with hard solid coins If this is your first visit to the blog, you might get a wrong impression of the blog’s underlying message. You might even assume that the blog owner is a cheap person, with a deficient IQ, a questionable genital size, and thus enjoys making fun of people that spend money.

If that was the case, you would be 90% wrong. This isn’t about being cheap at all. This isn’t about hording up all your money so you can swim in it Scrooge McDuck style. This is about understanding your unlimited wants and needs, and how you may fulfill it with your limited resources. It’s about what you can and can’t afford, what’s realistic and what’s unrealistic.

Just because traveling around the globe is an important goal to you doesn’t mean you should max out your credit card to fulfill that particular need. Sure, you may be a hardcore Star Wars fan, but will it be practical for you to spend 90% of your income on Star Wars collectibles? Probably not.

Fitting the Non-Crap into the Budget

Creating a budget is the basic foundation of personal finance. It might be a bit boring (alright  it’s ridiculously boring) but budgeting is one of the most important step to gain control of your finances and the quickest way to know where you stand financially.

If you have never created a budget before, you are strongly encouraged to spend a few minutes right now and write out a rough estimate of your budget. Creating a budget can be surprisingly easy to do; the gist of it involves you figuring out how much you make per month and how much you spend per month. Subtract the total income from the total expense and you’ll figure out where you stand. Yup, that’s pretty much it!

To find out how to create a budget, check out “How to Budget & Save” from the Federal Reserve Bank of Chicago. There is a simple worksheet available that you can follow to better determine other budgeting values such as fixed expenses and variable expenses.

Once you have figured out your budget, you can then figure out how much crap you can or can’t afford. This may sound entirely stupid and obvious, but one of the reasons why people spend more money than they have is because they don’t know how much money they really have.

Here’s a random example (picked for numeric simplicity). What’s easier to do: Spend $2,400 on a brand new, top-of-the-line HDTV when you know fully well that you only have an extra $200 to spend per month (thereby putting you $2,200 in debt), or spend $2,400 on a brand new TV because you think you can afford the new TV?

It is a lot easier to spend responsibly when you understand where you stand financially and know the numbers involved.

Delay Gratification is Your Friend

In the $2,400 TV scenario, if you only have an extra $200 to a month to spend, what can you do to get that TV?

Option #1: Save up $200 per month and buy the pricey TV after a year.

Option #2: Charge it on a credit card at the current average interest rate of 14.79% APR and pay it off by a monthly payment of $200. Actual cost via this method? About $2,800.

An extra $400 because you couldn’t wait. Is it worthwhile? *shrug* Sensible? Probably not.

Avoiding Those Wacky Impulses

One of the quickest ways to trash a budget is to spend money impulsively. In order for you to buy the crap you really care about, you must avoid the impulsive purchase of crap you don’t need. Mastering delay gratification and avoiding impulsive purchase are both acquirable skills!

If you have a habit with impulsive purchase, it will be worthwhile to examine the cause of the habit more carefully. Do you spend without careful consideration because it’s easy to do? If so, perhaps cutting up the credit card up may make it harder for you to spend. Try the frequently mentioned method of switching to cash or using a debit/check card, seeing the cash immediately disappear from your wallet (or checking account) just might do the trick.

Do you have trouble with buying unnecessary things during a shopping trip? Find out exactly what you need, how much it cost, and limit yourself by bringing a specific amount of cash (minus the credit cards) before you head into the store.  Limiting your purchasing power may help you against impulsive purchases.

Understanding Marketing Influences

It’s not that marketers are evil brainwasher bent on tricking you into buying their products.  Marketers are simply brainwasher bent on influencing you to buy their crap.

Let’s put it this way: you should be aware that many companies are spending millions of dollar so that they can have a better chance to earn or sway your spending dollars. Because you most likely don’t have the same millions to spend, it’s important for you to choose the right crap to buy on the first try — especially if said crap is an expensive item.

A savvy shopper should know if a brand of a product matters or not, and spend the extra time to distinguish actual product differences from marketed differences. With the wealth of information available online, everything you want to know about that toilet seat cover can be a few mouse click away.

Obviously, spending hours reading up on mundane things such as toilet papers may not be the most productive use of your time, so apply product research at your discretion.

Don’t Forget the Big Picture

Alright, so you’ve figured out what’s important to you, know how much you can spend on it and how much you can afford, time to buy everything you’ve ever wanted?

Not quite. Even if you can afford it now, and even if it won’t put you into debt — you will still need to be sensible about your purchases, because every dollar you spend today is a few dollars less you will have to spend in the future.

Most of us will want to retire in comfort, or maybe even pay for our children’s education (damn kids). In order to do either of these things, you will need to be mindful of how your current spending will impact your future spending — after all, retirement accounts don’t magically fund itself. Saving money might not be sexy or fun, but it’s a whole lot better than worrying about money during your retirement years.

Summing It All Up

  1. Understand what’s important to you
  2. Know your budget
  3. Be patient and save
  4. Don’t let some jerk tell you what to buy (and what not to buy)
  5. Spend sensibly and don’t spend like there’s no tomorrow

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