The Wall Street Journal recognizes that people are trying to save more money in this economy, but they say there are six times -- even in tough times -- when you should spend more money. Their list:
1. Pay for expert advice.
2. Pay to bring down debt.
3. Pay yourself.
4. Pay for little indulgences.
5. Pay for some things you could do yourself.
6. Comparison shop.
Here's my take on each of these:
1. I agree in part. If it's a big, expensive decision where you have little or no expertise and can't get it quickly (or don't want to), then by all means pay an expert. An example of this: I use a CPA to do my taxes. Then again, you need to be sure you select your "expert" very carefully as the wrong "expert" can lead you down a path into greater trouble. In addition, most "experts" believe that the "average person" can't grasp much of the keys to personal finance. I disagree with this 100%. In fact, I think that most people can easily learn a few simple financial principles and dramatically improve their finances if they simply apply them. You don't need an expert to teach you how to create a budget, save money, build an emergency fund, pay down debt, etc.
2. Or better yet, don't have debt in the first place. Funny how the "you should always have debt" crowd has been quiet lately, isn't it?
3. Of course. Make your emergency fund a bit bigger. Tougher times call for more of a cushion than normal.
4. Yes, indulge, otherwise life can beat you down, but you also don't have to spend a fortune. Here's an example of something we do all the time: eat Moose Tracks ice cream at home versus getting a dessert while eating out. You'll end up getting more dessert and saving a fortune. Ice cream will run you $4 or so for 56 oz. and you'll be able to have many family desserts with that amount. The last place we went (a casual dining place) wanted $4.99 for one piece of cake! Yikes!
5. In many cases, paying for something can save you money. My current favorite is the Entertainment Book.
6. We always, always, always comparison shop. This is not just a "tough economy" tip for us!
I also hear a lot of people that advocate paying for professional and career related services, such as career coaching and resume writing. Has anyone had any experience in whether career coaching is a worthwhile investment?
Posted by: Dana | March 12, 2009 at 02:09 PM
About #2 - pay to avoid debt. One of the macroeconomic results of trying to get out of the recession may be a period of high (above 4-5%/yr) inflation. If this is the case, I will look at taking on some debt, since inflation hurts savers and rewards borrowers.
Posted by: briang | March 12, 2009 at 07:43 PM
Sometimes, being too frugal and not spending where you should, can actually be more expensive.
You also have to have little indulgences ... otherwise, life is worth living!
Posted by: TStrump | March 15, 2009 at 01:45 AM