So my girlfriend had an epiphany recently: She wants to buy a car. Not some boring old Toyota Camry, mind you (no offense to the Toyota Camry drivers reading this), but a sexy, sporty Mazda MX 5.
Why now? Because she realized that she’ll only look cool driving a sports car while she’s still young. After all, the age when you can afford to buy a brand new sports car in Singapore exactly coincides with the age when you stop looking cool driving it. True story.
With cars priced the way they are in Singapore, a brand-new sports car is way out of reach for the average young person. Which is why my girlfriend wants to get a second-hand car, drive it for a year or two to feel awesome, and then ditch it and go back to normal life.
When I first heard her plan, my personal finance self wanted to jump out of my skin and go, “That’s a terrible idea! Cars in Singapore are wayyyyy too expensive, COE levels are ridiculous, the depreciation will kill you, you’ll rack up huge fuel and ERP bills, etc etc”
And then I stopped myself.
Who was I to tell her (or anyone else) that she can’t spend on something she wants?
Different Preferences
The truth is, we all have different preferences when it comes to spending money. What I enjoy spending on could be totally different from what floats your boat.
Personally, I don’t see the appeal of owning a car at this stage of my life. But then again, I’m a total weirdo who can’t tell the difference between a coupe and a convertible. (I know, I’m probably the only Singaporean dude who’s clueless about cars. Stop laughing at me already.)
So while I can’t imagine forking out $40,000 for a car, I’ve spent a small fortune on books, software, and premium courses. For example, I recently spent over $2,600 on an online course to learn how to make cheerfulegg rock even more. Am I crazy? Maybe. But that’s for me to decide.
We all love different things, and we shouldn’t feel guilty about spending on the things we love.
Notice how different this is from the usual advice that comes from other personal finance blogs (or our parents):
No, don’t go on expensive holidays because they’re a waste of money
No, you shouldn’t take cabs because they’re a total rip-off
Why the *&^#*@ do you need so many clothes?!
Nobody wants to hear that they can’t do something, yet the majority of the personal finance advice out there is focused on saying NO.
I’m here to tell you the opposite. YES, you can visit Europe every year if you want to. YES, you can take a cab, and YES, you can definitely go shopping if it makes you happy.
You can buy anything you want. But there’s a caveat.
The One Spending Principle To Live By
Here’s what I learnt from my surrogate Asian father Ramit Sethi:
“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.”
This one principle has guided my spending for the past 5 years, and it’s made me completely guilt-free about spending money.
My friends love to make fun of the fact that I run a personal finance blog. When they buy a really expensive meal at a restaurant, they’ll turn to me and ask, “Eh Lionel! So how ah? Is this cheerfulegg-endorsed or not?”
If I were Yoda from Star Wars, I’d turn around slowly, stroke my beard, and say, “It depends. Are you cutting costs mercilessly on the other parts of life?”
The truth is, I love drinking beer with friends, eating at atas restaurants, and taking annual vacations to the US or Europe. And I have no qualms about spending money on them.
But I am extremely frugal in the other parts of my life. For example, up till last weekend, I wore the same three shirts every time I went out on weekends. I literally go shopping once every 5 years. (I finally bought some new clothes last weekend, so I’m all set for the next 5 years)
I almost never take cabs, I don’t own an iPad (seriously, it boggles me why people would spend money on an iPad just to play Candy Crush on the MRT), and my phone is still a lowly iPhone 4.
These frills don’t matter to me, so I concentrate my spending on the things that do matter to me – which ultimately maximises my happiness.
Spending On What’s Right For Us
The lesson here is that it’s up to us to optimize our spending on what’s right for us – as long as we take care of the big things first.
Are you already allocating a portion of your salary to save up for your house and investments? If the answer is yes, then you’re perfectly entitled to spend whatever’s left on the things you love.
If you’re thinking of spending on something really big like a car, you might have to cut back on some other areas of your spending. Sit down, do some research, and carefully trim down the areas which don’t matter as much to you. Set a savings goal to automatically save up towards that big purchase, even if it’s a few months or years away.
Once you’ve reached your goal, don’t let to those naggy personal finance bloggers spoil your fun. Go ahead and buy that car/holiday/online course recommended by that weirdo blogger from cheerfulegg. You’ve worked hard for your money, you’ve taken care of the big things, now go enjoy yourself.
You deserve it.
Now, I’d love to hear from you: What are the areas of your life that you’d like to indulge in? What would you be willing to cut back mercilessly on in order to spend on what you love, guilt-free? Let me know in the comments below.
Image: Moyan_Brenn
Hi Lionel, I must say that I totally agree with you. Money is only useful when it is spent. Price is objective but value is subjective. When we spend on things we like, we extract much more value from it. This is why I think we should figure out how much money we need, save it, and spend the rest.
Nice weekend read, Lionel.
I cut back on myself basically, and spend more freely when I am with my other half. Reason being that I want her to eat better and be more comfortable. When I am on my own I can just make do with much less because I am a simple man 🙂
BTW I am still using an iphone 4 just like you. Sometimes I toy with the idea of buying those retro clamshell (flip phones) that I still find so cool, to use as a mobile, and replace my smartphone needs with an ipad!
I can tell you’re an awesome husband/boyfriend 😀 And clamshell phones rock.
Agree, as long as you spend within your means and pay yourself first, you can spend on whatever you like to. 🙂
Whether spending on a big ticket item is worthwhile depends on what kind of value-add that the purchase can bring into your life. For example, some people spent $10,000 to $20,000 every year on holiday vacation. They find it worthwhile because family vacations help to build bond and add life experiences. For many, car is a need because they need it for their livelihood (sales), fetch their family to work and school.
Just my thoughts. I have a blog on personal finance as well, called, SG Wealth Builder (www.sgwealthbuilder.com). Look forward to your sharing.
Regards,
Gerald
SG Wealth Builder
Totally agreed!
Financial planning is not all about saving to the extreme and consuming to the minimum level and then boast to the cyber world how low is our annual expenses.
Yes, agreed with your points, money by itself is nothing unless we attach value to it and the value is subjective. For me, I spend more lavishly when wife is around but spend simply when alone 😉
I’m loving the answers here! Question: WHY do we value some things over others?
Hi Lionel
Unlike financial assets, I think that the value of most things we spend on cannot be measured in terms of numbers.
So, for the same thing, it is likely that different people have completely different valuation of it. Generally speaking, I would say that how I value something will depend on how much happiness or meaning I can derive from it.
Personally, my friends always say I waste money because I spend quite a bit on buying the latest gadget. I also spend quite a bit on books on Amazon. But these are things I enjoy and I don’t mind spending money on them.
On the other hand, I rarely spend money on clothes and grooming. I know that I am not one who looks after my appearance, so buying expensive clothes is just a waste of money.
Chanced upon your blog from a OCBC email! Great job listing out all the strategies here… not sure I would lump ILPs as one of the strategy. People often confuse ILPs. One is a regular payment one which you mentioned but thats predominantly insurance. The other is more of investment with little or no insurance. Uh and I think you can add on mutual funds as an alternative as well. Most mutual funds underperforms the index but with some great dividend paying fund that could be reinvested into the fund, I think there is some good chances for investors to get back a decent return over say, a ten year period.