As Canadians start their Christmas shopping, I would encourage them all to think of this: is what you are buying for your friend or family going to be worth the price? Will it last or be used more than once?
I am a very practical guy, and I recognize that not everyone wants a practical gift. Some people think that practical items should be bought whenever needed and that birthday and Christmas gifts should be different, purely for luxury purposes. I can understand the sentiment, but I don't buy into it. I have seen far too many times when my kids get the fad toy of the year, only to end up spending more time playing with the box it came in than with the toy itself. Go to a garage sale or charity store the next summer and see how many of those fad toys are there because the kids don't actually play with them. What a waste of money.
I hate the thought of wasting money on toys that don't get used. We need to replace the carpet in our home, and that money could have gone to the new floor that we would use everyday rather than to the toy that is never used. Practical, I know, but for long term convenience and return on money spent, the floor would have been a netter buy.
I feel the same way with weddings. It is a very special day and should be celebrated. However, to me, the many years after the wedding day should not be impacted by the debt accumulated from that single day. $20,000 could be used for a house down payment, or pay off student loan debt, or invested in TFSAs. It could be used for many other things that would make life some much easier and better than spending it on just one day. Spend it on the marriage, not the wedding.
I have similar thoughts regarding vehicles, grad/prom dresses and tuxes, and many other things that see large amounts of money spent for little or no economic return. This is not to say that I don't spend money on anything but needs. I like my TV and stereo system, but at least I am getting several years of enjoyment from those items rather than just one day.
This is a topic of conversation I have with my kids, repeatedly. They do chores around the house and yard and get paid for them. As soon as they are paid they want to get a slush, or ice cream cone, or something else that is gone as quick as you can buy it. We hold a lot of conversations about what they are trying to save money for, like an iPod Touch, and try to convey that by spending the money today on a slush (which is gone in 20 minutes) that they are putting off the bigger item that they keep talking about. They are so focused on what they can get today that they blind themselves to their long-term goals. The thing is they will talk about saving for the iPod Touch an hour later and not even mention the slush again until they have money again. I tell them they could have saved enough this past summer for the iPod Touch if they hadn't spent the money on the ice cream cones and slushes. I'm not sure if they believe me.
Adults do the same thing, except at a much more expensive scale. They also have the advantage of being to borrow to pay for things they want today, even things that disappear quickly, like vacations, wedding days and parties. At the credit union, as we deal with people who have trouble dealing with their debt, we hear many people express regret at having borrowed so much to pay for a quad, snowmobile, RV, or boat. All we can do is try to help them through the debt payment mess and hope they have learned how make better spending choices.
This article is completely my own rant and is not necessarily the view of Rocky Credit Union. Feel free to comment. Jerry
Yikes Christmas times and birthdays seem a little light around your Christmas tree. I'm glad i never got a new carpet from my parents for Christmas. I do agree with some points that you don't always need the best and brightest things but i also am of the belief that you only live once and you can't take those pennies with you when you die..... Weddings cost money, venues now a days are expensive and caterers and etcetera are pricy..... However if someone is going to fly/drive a long way to share in my special day and bring a usually expensive present then i am of the belief that showing them a good time and feeding them is appropriate..... And that represents the biggest cost. In regards to Grad i am wondering if your opinion will change when your kids come of that age and don't want to be the only kids at prom with a recycled paper bag dress! I'm not trying to be negative to your article but to me their are some costs that are tough to avoid for some important events and by "cheaping out" i believe you may have regrets in the long run. I can honestly say my wife and i spent over $20K on our wedding last year and i don't regret it for a second. It was the best day ever, our pictures are unreal and everybody had a great time...... Did we have to save, yes, do we have student loans, yes, do we have a mortgage, yes......
ReplyDeleteBottom line is being frugal is fine however i think some people may be too far on the frugal side and all of a sudden you wake up at 85 with no cool life experiences and money in the bank that you will never enjoy!!!! The times of living for the day are upon us..... Everything is great in moderation...
Dear Anonymous, I completely agree that we should not forego all life experiences for the sake of being frugal. Weddings and grads are celebrations of important events in our lives. What I tend to focus on, however, is that each one of those events is really just a step along a much longer journey, and that going into debt for the sake of just one step (or day) could do a disservice to all the days that follow by creating financial hardship.
ReplyDeleteIt's that hardship I want people to avoid. If you have saved the money, or are able to control your finances so that you can afford the extras and still have room for emergencies, then go ahead and take the vacation, spend on the wedding, or buy that quad. However, if buying that quad means you have increased the mortgage on your home, or you are paying for a trip with an 18% credit card, maybe it's time to review your spending habits.
I wrote an article some time ago about guerrilla frugality, which has people saving money in extreme, even wildly inconvenient ways. Most people who start living the guerrilla frugality philosophy do so because they were living the other extreme that lead to living with tremendous debt burdens. They then go to the extreme of cost cutting to get their spending and debt under control. If they had been more moderate before, they wouldn't need to use such extreme budgetary measures.
One last comment on this subject: Last year I spoke with a gentleman who was telling me about how he was having trouble making his mortgage payments. In almost the same breath he said he & his wife were going to get away from the stress of bills and jobs by going to Las Vegas the next week. I was flabbergasted and didn't really know what to say, so I told him to enjoy the trip. Now he has had to cut back in other areas quite severely in order to keep the house. The actions didn't line up with solving the problem. The same thing is happening with parents who are losing their quad/boat/snowmobile from payment problems, but are using the credit card to pay the over for $750 hockey registration and another $750 for equipment. Travel and meals at gmaes are in addtion to this. Sometimes a couple of years of restraint can really help in the long-term.
I stress frugality, or even moderation, not for its own sake but for the consequences that come from controlling your finances, versus your spending and debt controlling you. Jerry
Dear Anonymous, I agree completely that people should not cut themselves off from experiences just to save money. Weddings and graduations are important events that should be celebrated. Each of those events is an important step in life's journey, but I encourage budgetary control because I don't think that a few large steps should create a debt burden for so many of the steps following those events. If you have the money saved, or are able to control your budget, then go ahead and splurge a bit. Unfortunately, too many people spend a lot of money on these one day events without any savings or budget planning for how to handle the debt afterwards, and they suffer from it.
ReplyDeleteAbout a year ago I wrote an article about Guerrilla Frugality, where people go to some pretty amazing extremes, maybe even a little dangerous, to save money. Most people choose to live a Guerrilla Frugality philosophy because they used to live the other extreme of spending far too much, and are now dealing with the consequences of overspending, trying to get their debt under control. While I respect the desire and behaviour it takes to get debt under control, I would emphasize more moderate spending and control beforehand so that someone doesn't have to adopt severe spending constraints to get debt in order. I encourage control today so people don't have to suffer later.
Over a year ago I spoke with a gentleman who told me that he & his wife were having trouble making their mortgage payments because things were so tight. In almost the same breath he told me they wee going get away from the stress of jobs and bills by going to Las Vegas for a week. Having trouble with the mortgage, but going to Vegas for a week! I didn't know what to say, so I wished him a happy trip. Since then his family has had to make some more drastic budget cuts (sell a boat, take kids out of sports) so they can keep their house. I don't want anyone to have to go through that.
So, Anonymous, I do encourage people to think about what they spend their money on. With Christmas toys, it's a matter of asking if the kids really want it and will play with it, or are they just influenced by the TV ads. With grad, it's a question of will that dress really be worn again, or could the money be used for school, a vehicle, or something else that will get repeated use. I don't want people to be cheap just to be cheap, but I do want people to be able to control their spending so their debt doesn't control them. In encouraging people to think about spending, I hope to help them avoid the burden of over-debt, and enjoy the peace of mind that comes with being in control of their finances. Idealistic, maybe, but not a miser or Scrooge. Jerry
In my humble opinion, I think you are bang on with your observations and budgeting suggestions, Jerry. Wake up people! Canadians who have prided themselves in being 'better' than the Americans in handling finances are now way behind our neighbors to the south in savings and debt, in comparison to our income. Our houses are not atm machines, we don't need every new gadget being produced and there is nothing wrong in living within our means. At the end of the day, life is about people, not things. Jerry, keep up your good work in attempting to educate people in handling finances. My motto is, 'Yes, you have to save for a rainy day, but you also have to live for today'. Merry Christmas and Happy New Year.
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