...got to talking a little about finances in the past couple of days.
We are essentially polar opposites. I find our differences to be very interesting.
Now he and I make approximately the same salary. After rent and utilities, we have approximately the same amount of "disposable" income remaining--namely $1400 or so.
And here is where our spending parts ways.
I cook all of my food from the least processed source materials, to the cost of $2 per day.
He does not cook at all (doesn't know how), and feeds himself with pre-made, processed foods.
My car plans, if I go through with it, will involve a small, fuel-efficient used car that costs in the neighborhood of $5K. I am not buying it until I can pay in cash, and upkeep will probably be $400/mo due to considerable use.
My roommate bought a large, new, luxury sedan with a powerful engine that guzzles gas like a maniac. It was worth $50K when he bought it. He pays $450/mo on the car loan, plus an additional $150/mo for insurance. He buys premium gas at $3.50/gal, but I don't know how much he spends on gas per month.
I earmark $1000/mo for savings--$500 for retirement, and $500 for my car fund. Any excess money at the end of the month goes into general, non-earmarked savings.
He spends his entire paycheck every month. He has no savings whatsoever, no retirement fund, and insists that he likes it that way. He's going to enjoy his life in the present, and not worry or care about when he's old and retired and half-dead anyway.
Now, he sounds like your typical spendthrift, but here's where things get interesting. He doesn't spend his money negligently, a little on a latte here and a little on some piece of junk there.
He purposefully decides that he wants a particular type of product (mp3 player); he does research on which product is the best quality (60 GB video iPod); he then finds the best deal on that highest quality product and buys it no matter how much more expensive it is compared to the other "lower" quality products.
What do I do? If I allow myself to actually want something non-essential and decide that it can go in the budget and finally get past the "decide to buy" stage (the entire process of which is like pulling teeth), I'll choose the lowest tier product that fulfills my needs, and look for deals there.
Now, I'm not going to criticize him about his financial choices so long as it doesn't interfere with his half of the rent and utility payments, but I can't help but wonder if we both respresent extremes on the spending spectrum. He craves the satisfaction and ego-boost derived from expensive and high-quality material goods, while I crave the safety and security of accumulating significant assets in bank and retirement accounts.
How debatable are the merits of our two positions? Is hardcore saving truly better, or can we both benefit from a little moderation--him in spending, and me in saving?
Because in some ways, I have to admit that he's a very impressive individual, because he has amassed a large amount of fancy equipment on a relatively limited income.
But when one considers the fact that yesterday, he realized that he was overdue on the $1K in taxes that he owes on his car, and he needs to open a third credit card account (that has 0% interest for nine months) to charge it on temporarily, because he doesn't have enough in checking and isn't getting paid for another two weeks, I think I may prefer my approach to finances, after all.
My roommate and I...
August 17th, 2006 at 07:00 am
August 17th, 2006 at 02:32 pm 1155825179
On the issue of buying top quality/top dollar vs. lower quality, I go both ways, depending on the item. When it comes to many grocery and particularly non-food grocery items like laundry detergent, shampoo or toilet paper, i go with the cheapest, never name brand.
But if it's electronic, for instance, i do the research and tend to go with higher quality/name brand becus i believe it will last longer. I guess it's trial and error.
August 17th, 2006 at 02:39 pm 1155825555
To maintain the fancy widgets and gadgets anymore requires constant buying as there is always something newer and better coming along. Hi investments will depreciate all too soon.
Obviously savings compounds with time and is always a wise investment (so long as you do not carry debt).
My preference is financial security and someday financial independence ALWAYS over the material 'things' in life.
August 17th, 2006 at 02:40 pm 1155825633
August 17th, 2006 at 02:51 pm 1155826285
And sometimes we tend to be very critical of other's choices just because they are not like us. Also as he gets a little older and experienced, he may realize the way you live has it's merits. If you were to criticize him, he may never learn that. If you just live your way of life and are happy, that will teach him more than criticizing him. Who knows, he may end up asking you for advice!
Some here would not agree with some of our choices, but I drive a 12 year old dumpy car that costs me $25.00 a month in insurance in order to be able to make some of those other choices.
Nice post.
August 17th, 2006 at 04:32 pm 1155832320
August 17th, 2006 at 07:53 pm 1155844406
Regarding quality products... What I was trying to say is that I would never get something bigger and better "just because" it's bigger and better. I'm picky about electronics, myself, and I'm well aware of quality differences between brands. However, if I were choosing a laptop, for instance, I would get one with a small screen, not a large widescreen. Why? Because I want my laptop to be light, portable and for the battery to last, and I wouldn't want to watch movies on it, anyway, because that's what my giant CRT monitor is for!
But I have a feeling my roommate would choose the widescreen because it's "cooler" and he wants to be *able* to watch movies on it, even if he has a giant television as well. That's the difference between him and me.
[b/Thrifty Ray[/b]: I totally agree with the depreciation. It's one of the reasons why I can easily talk myself out of buying gadgets, and tend to stick with hand-me-downs that have already depreciated. I'm not willing to pay extra for a few months of ego-fluffage and bragging rights. And he's constantly buying new gadgets to replace obsolete ones that no longer "shine" enough. But if my stuff didn't shine in the first place, and I don't care about whether it's shiny, then I can keep it around for as long as it still works. Which is less wasteful, anyway.
ima saver: I'm afraid that he may regret it, but what can one do? Live and let live, is my general approach. I hope that he doesn't regret it, that he'll get to have his cake and eat it too, but this is a question that we won't know the answer to for a good few more decades.
homebody: He's about ten years older than me, so I don't know if getting older will help. He's also not from the US, and his salary here is much higher than what it would be in his home country, so he just got completely sucked into the American consumerist culture.
And I'm afraid I'm not a terribly good example of Happy Frugality at this point. I'm a stressful, nervous wreck regarding finances at the moment because I still have no clue what I'm doing, while he's happy as a clam. But really, it's his responsibility to make choices for himself. As long as he doesn't get himself/us evicted, I'm fine with his habits. Although having to pay half his utility bill may end up biting me in the a**.
carol: Practically every single piece of advice regarding retirement says to start early to give the money time to grow and compound, so that's what I'm trying to do. Thanks for the encouragement--sometimes, it's scary to lose so much of one's paycheck into a black hole. But I'm sure that in 50 years, I'll be thanking myself, even if I don't think I'll ever get there.