Spend Now or Save Now: An Age Old Dilemma

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Lazy Man and I Have Plasmas, We Are Not Crazy…

Lazy Man penned a post in which he talked how he owned a plasma television and how personal finance bloggers called him crazy (technically, he only supposed that pfbloggers would call him crazy) and I’m here to back him up, I’m a pfblogger who wouldn’t call someone, with a plasma television, crazy. I would call that person foolish if they put the whole thing on a credit card and planned on paying it off over the next 234908230943 years at 203984230% interest (that’s quite a bit!), but I wouldn’t call them crazy.

See, I recently got into a discussion with my fiancee over the idea of spending now versus saving now. She wanted to save more now, I felt like we were saving enough, but she was just worried of the unknown that is the future and whether we were being foolish for buying too much stuff now. It’s a perfectly reasonable concern because not many people have nice televisions or nice cars and so if you spend money on those things, you’re wondering if you should be saving it like everyone else (reverse Keeping Up with the Joneses!). However, you need to strike a balance between save now and spend now because an unreasonable emphasis on saving now is just as bad as spending now, but because it’s less common it is not discussed as often.

Once we worked out the saving versus spending concerns, the next real concern is whether you’re able to make the purchase in the first place. If you are putting it entirely on a credit card that you can’t pay off by the next billing cycle, you probably don’t want to be buying a plasma television. If you know that you’re taking advantage of a 12-month Best Buy 0% financing offer and won’t be able to pay for the whole thing in 12 months, you probably shouldn’t buy it. If you could, but don’t so that you can take advantage of special offers, pay for the whole set right now with cash from your bank account without compromising your financial situation, then by all means enjoy your television.

One final thing to remember, with technology the prices are always falling. If you want a $2000 television and you only have $1500, just wait a few months and by then you’ll have padded that television fund up to $1700 and the television will have falled in price to $1700. A win win!

{ 13 comments, please add your thoughts now! }

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13 Responses to “Spend Now or Save Now: An Age Old Dilemma”

  1. eROCK says:

    I’ve done exactly what your last paragraph explains.

    I knew I had about $1,400 for a new TV, but the sets I was interested in were out of my range. I waited a few months until Sony released a new line of TV’s and the price on the TV I wanted dropped.

    Ended up getting a Sony WEGA LCD 46″ HDTV for $1,200 :-)!

  2. Debt Hater says:

    I actually think it’s possible to save too much. Something unexpected is always going to happen and you never really know what the future holds, but how is hoarding money going to protect you? Money is for spending. You can’t take it with you. But, it’s like you already said, going into debt is not about spending money for enjoyment or achievement. It’s just irresponsible.

  3. Jeremy says:

    Good topic. There is a fine line between spending now or saving for spending later. Clearly you need to save for the future but it should not compromise your enjoyment with life. The reality is we don’t know how long we’ll be around. For all I know I could be killed while crossing the street today. I don’t want to live a life where I make constant sacrifices all in hopes for reaping the reward in 30 years. I do want to enjoy the time I do have while I’m young and healthy as well.

    That being said, like you mentioned your spending needs to be done in a way that it doesn’t hurt your other savings and investment goals. If you can’t afford something, don’t buy it. But if you can afford to treat yourself without digging yourself into a deeper hole, then by all means do it. You deserve it!

  4. jim says:

    Along the same lines of saving for 30 years, if you’ve lived a life of thrift and you’re saving a ton for retirement, do you really think you’re going to be comfortable spending a ton of money when you do retire? I highly doubt it.

  5. Matt says:

    I’m just curious… you alluded to taking advantage of a (Company X) financing offer of 0% for 12 months. Do you consider that a good idea, so long as it is paid off in the twelve months?

  6. jim says:

    Generally if you can get a 0% loan for something you can otherwise pay the debt for anyway, I think you should get it. Now, there are pitfalls to 0% financing offers as I mentioned in a post on 0% financing on window replacement because the interest is still accruing and will strike hard if you don’t pay the loan off within the 0% time period.

    The biggest reason you shouldn’t take advantage of that offer is if you believe you will be needing a large loan in the near future, such as a home or a car. The 0% financing will lower your credit score because it will invariably increase your credit utilization and so the money saved on a $2,000 loan, especially if you don’t need it, will be overshadowed by the increased rate on a $200,000 mortgage loan (or even a $20,000 car note).

  7. Tim says:

    you can also mitigate the credit utilization by asking for twice as much credit limit than what you are planning on buying. if you only request credit limit for the amount of the purchase, then your utilization for that card is 100%.

    Money does no good to you if you cannot use it to buy things that you want. So long as you’ve accomodated for your need items and your overall goals, there shouldn’t be any reason not to buy want items.

  8. Foobarista says:

    I think peer pressure comes into play in the “frugalist” world as well as the consumerist world. If you like to watch TV, and enjoy watching movies and sports at home, and can afford it, getting a good TV is not a problem. Not everyone has to be a “reverse TV snob” who brags about rolling out a 25 year old dusty black and white out of the closet to watch PBS using rabbit-ears.

    That said, I’d probably buy LCD over plasma 🙂

  9. Wes says:

    I recently purchased a nice new 42″ LCD too. I think I used a pretty economical approach too. I got it on sale at Best Buy for $999. Plus I got several discounts buy using my RewardZone Master card (4% rebate) and upgrading to TWC HD (-$100). Finally I sold my 7 year old tv that it replaced for an additional $250. The net cost after taxes was $679.

    I love the TV and I have no guilt about the purchase of this luxury.

  10. db says:

    Personally, I think if your financial house is in good shape, you can afford it (e.g., not incur interest on debt for it), and truly want it, you should buy it. Like others have noted, life is too short and part of what your money is for is taking care of your needs and wants in the present.

    Of course, you’ve got to really want it for itself, and not to keep up with the Joneses. And this doesn’t give you license to just buy unthinkingly. But if you’ll get pleasure out of a plasma TV, or a special trip, etc — do it! and enjoy it!

    And keep on saving too. 🙂

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  12. mbhunter says:

    And if it’s not a plasma-screen TV, it’s something else. I don’t watch much TV but I do spend a lot of time on the computer, so flat-screen monitors might be my “enjoy-now” purchase.

  13. I bought a big screen as well. If you save all your money and don’t enjoy any of it I don’t see the point. Just gotta find that balance.

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