When's the right time to splurge?
Making a big, lavish purchase isn't always a bad thing. The key is knowing when to indulge and when to abstain.
With 12 million Americans unemployed, it's not surprising that more than half of Americans say the economy will affect their holiday spending this year.
11/30/2012 3:15 PM ET By By Liz Weston, MSN Money
Richer people and the young, though, plan on splurging more than others.
While overall spending on gifts is expected to decline 3.4% this year, the most affluent Americans -- those in the top 10%, with more than $100,000 in discretionary income -- plan to boost their spending on gifts by 22%, according to the American Express 2012 Survey of Affluence and Wealth in America.
Meanwhile, seven out of 10 young adults expect to "self-gift" this season, the highest percentage in the 10-year history of the National Retail Federation's holiday consumer-spending survey, compared with six out of 10 people overall. The survey found that 71.5% of those aged 18 to 24 intend to splurge on themselves, spending an average of $159.62. Survey spokeswoman Pam Goodfellow said young adults seem to have a "one for you, two for me" mentality about the holidays, "which is surprising given that this is also the age group that typically doesn't have the income or ability to splurge."
Splurging got a bit of a bad rap in recent years. Some even blamed profligate consumers for the mortgage mess and subsequent economic downturn. (Rather more to blame: banks making unwise loans, then exacerbating the effect with derivatives and other exotic investments.)
But splurging has an important place in our lives. The right splurges can bring us pleasure and keep us motivated as we work to meet our other financial goals. It's kind of like being on a diet -- an indulgence now and then makes it easier to stay the course.
When it comes to splurging, one group gets the lion's share of the attention: those who splurge too much. These are the folks who drag around thousands of dollars in credit card debt or outsized loan payments because they want what they want when they want it.
Another, less-noticed group are those who splurge too little. These folks, whom therapists call "under-spenders" or "over-savers," are so anxious about spending money that they will forgo luxuries they could easily afford and may even skimp on basics.
Finding a middle way may not be easy, but here are some of the wrong ways you can splurge:
On impulse. Whether you're an over-splurger or anunder-splurger, you're far more likely to regret an unplanned binge than one that's taken some thought. In other words, there needs to be a substantial pause between the idea "I deserve this!" or "I'm going to treat myself!" and an actual purchase.
In fear. We humans hate to regret. So we may lunge for a treat or opt for add-ons because we worry we'll regret it later if we don't.
Unwisely. Big-ticket purchases are particularly likely to fool our brains about relative costs. Let's say you're planning to spend $30,000 on a car. The salesman suggests a few add-ons, such as a better stereo system, custom mats or window tinting. Each costs "only" a few hundred bucks, a small portion of the amount you're paying for the car, so our brains say, "Why not?" But in reality, these add-ons aren't cheap -- they often come with big markups, compared with what you'd spend if you bought them on your own later.
Something similar happens when you shop for less expensive but still pricey items such as televisions or even appliances. Each step up in price offers more features and potentially higher quality, so it's easy to talk yourself, step by step, into a much more expensive purchase that isn't necessarily the best use of your money.
Habitually. Do you always reach for the name brand rather than the store brand? Sometimes, the name brand really is better, but sometimes the only difference is a bigger marketing budget. You might be better off economizing with the store brand, and then splurging on something that's truly higher quality.
Unconsciously. Any unthinking spending could be a waste of a splurge. Take the much-maligned latte: That $4 could be squandered if you suck down the coffee drink at your desk while your attention is elsewhere. But it could be a lovely splurge if it's savored slowly as a welcome break from a hectic day.
The difference between a splurge that counts and one that's a waste is often just a little thought and preparation. If you want to get the most out of your money, you should splurge when you:
Have the cash. Splurges are luxury spending, and it's still not OK to finance luxuries with debt, even if the splurge would be amazing. If you don't have the cash, save up until you do.
Have a plan. Here's when a list can come in handy. Write down potential splurges as they occur to you, in a notebook you carry or as a note in your smartphone. Set aside some time to periodically review your list, and figure out which splurges you want to incorporate into your budget. Figure out where you can cut other spending, and start putting aside money in an earmarked savings account. Many online banks allow you to set up multiple savings accounts, each dedicated to a specific purpose, without charging setup or ongoing fees and without requiring minimum balances.
While you're waiting to save up the money, you can research your purchase to make sure you're getting a good deal. Anticipating the purchase, and feeling smart about it, are ways to extend the good feelings of a splurge.
Maximize real happiness. Most purchases can make you feel good for a little while, but the warm fuzzy quickly wears off. What you should look for are purchases that deliver longer-lasting results. That often means buying experiences rather than objects, although an object you truly will enjoy every day has the potential to be a good splurge.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
Your Black Friday survival guide
Don't just shop harder, shop smarter. Black Friday will be hectic, so here are some tips to ensure that your holiday shopping goes as smoothly as possible.
By Money Staff Fri 1:18 PM
This post comes from Kyle Woodley at partner site Investor Place.
We've got it pretty good for Black Friday. You and I get 60 percent, 70 percent, 80 percent off gifts for friends and family (and, OK, occasionally ourselves), and all we need to give up in return is a small piece of our sanity.
I kid, I kid … but Black Friday can be a pretty hectic day filled with stress, and even a little bit of danger.
So your smart play heading into the biggest shopping day of the year? A little bit of mental preparation, plus a little bit of awareness while you’re out and about.
To help you out, we've thrown together a Black Friday checklist to run through -- one that will help you save the most money, score you a little extra time, ensure your safety and keep you from tearing your hair out for the holidays.
Before you leave Dress for success:
Some of us will be shopping in sunny California, and others of us will be trudging through snow-covered parking lots to get into the mall. Either way, once you're indoors, it'll be nothing but plenty of walking or standing in cramped quarters. So wear comfortable shoes, and also make sure to dress light under your coat, unless you want to shop in a sweat bath. (Also check the weather -- if it calls for it, you might be looking for your most comfortable boots, not shoes.)
Know your friends/family:
Whether you ask for lists ahead of time, or you know you want to surprise your friends, have as many specific ideas on paper as you can. Black Friday is a grab-'n'-go affair, and you don't want to be hemming and hawing while others are snatching the last 80 percent-off pea
coat off the rack. Also, know clothing sizes in advance – the best Christmas gift is one you don't have to return.
4 Black Friday scams to watch out for
Watch the clock:
Compare sales papers (or for the technologically inclined, sales PDFs) ahead of time. Now that Black Friday is spilling over to create Black Thursday, retailers are throwing different "events," meaning a deal good at 6 p.m. Thursday won't necessarily be in effect once the 8 p.m. Thursday bonanza begins. Make appropriate notes on your shopping list and plan accordingly.
Identify the doorbusters:
The devil’s in the details -- specifically, the fine print that says "ONLY 2 PER STORE" right underneath the
giant, bold print that says "60-INCH HDTVs FOR 50 CENTS." Determine what deals are the most important to you ahead of time, and if they include any of these limited-quantity deals … well, start dragging the camping supplies out of the attic.
Case the joint:
Because no one has created an infinite-capacity storeroom, there's technically going to be a limited quantity of everything. Improve your chances of success by knowing the layout of the stores you plan on hitting up for Black Friday, especially if you're going after doorbusters and other limited-quantity deals. It's hard enough to find what you want without having to peruse through human walls.
Plan a route:
If you're not beholden to doorbusters, you can save yourself a little traffic hassle by planning out your route. Try to hit stores in a line, and use a paper map or GPS to suss out back-road routes. Time spent driving is time not spent shopping or relaxing.
While shopping Save those receipts:
If your gifts are 100 percent perfect year in and year out, then more power to you. But if you occasionally whiff, ask for gift receipts everywhere you go – then save them in a single bag or box. Save yourself the hassle of rifling through piles of shopping bags -- or worse,
realizing they’ve been thrown out with the trash.
Keep tabs on your wallet/purse:
No one is browsing on Black Friday, and ne'er-do-wells know it. Stay mindful of whether your wallet is still in your pocket. If you have a clasp or zipper on your purse, use it, and always keep it in sight while checking out or grabbing a bite to eat in the food court. You might consider RFID blockers to thwart more technologically advanced thieves, but keep in mind that Consumer Reports and other reviewers have
pooh-poohed most RFID shields' efficacy.
Be ready:
Have your credit card or cash ready to go by the time you're up at the register, and whatever you do, don't gab on your cell phone or get
lost in texting while you're on deck. Yes, you're bored. Yes, you've been in line for an hour. But so has everyone else, so don't hold up the queue. (This is less about survival and more about courtesy, but if everyone did this, Black Friday would be a little more tolerable.)
If you're going to eat, eat early:
Surprise, surprise -- when the whole world is out shopping, restaurants tend to fill up in a flash. If you think you're going to get a seat right away at noon, I've got a bridge you might be interested in purchasing. If you're even getting remotely hungry by 10 a.m., figure out who opens at 11 and be there at 11. Otherwise, you'll be enjoying that bench by the door.
Outside the store Lock your car:
Thieves take the path of least resistance. Much like simply locking your doors and windows at home can deter crime, so can locking your car. Of course, some criminals are brash enough to pull off the smash-'n'-grab, so …
Don't leave presents in sight:
If you're looking out for the five-finger discount, are you going to break into the barren Jetta or the minivan with Macy's bags piled up to the headrests? If you said the latter, congratulations, you've got a criminal mind! (Just kidding.) But seriously, keep as many of your gifts -- especially the more expensive ones -- in the trunk. If you have a heavy shopping list, stow other gifts under seats, or throw a coat
over a bag or two.
Watch out for black ice:
A Three Stooges-esque spill in the parking lot might kill on YouTube, but it can also kill in real life. Many retailers don't take care of parking lots like they should, so just keep an eye on the ground to keep your keister from landing there.
Pay attention behind the wheel:
Seems like common sense, but that's one thing people find themselves awfully short of during the holiday shopping rush. You will encounter more cars and people on the road and in parking lots than almost any other day of the year, and the last thing you want from Christmas is a fat insurance claim or date in court. Get yourself, your children and your husband's new iPad home safe.
Don't just shop harder, shop smarter. Black Friday will be hectic, so here are some tips to ensure that your holiday shopping goes as smoothly as possible.
By Money Staff Fri 1:18 PM
This post comes from Kyle Woodley at partner site Investor Place.
We've got it pretty good for Black Friday. You and I get 60 percent, 70 percent, 80 percent off gifts for friends and family (and, OK, occasionally ourselves), and all we need to give up in return is a small piece of our sanity.
I kid, I kid … but Black Friday can be a pretty hectic day filled with stress, and even a little bit of danger.
So your smart play heading into the biggest shopping day of the year? A little bit of mental preparation, plus a little bit of awareness while you’re out and about.
To help you out, we've thrown together a Black Friday checklist to run through -- one that will help you save the most money, score you a little extra time, ensure your safety and keep you from tearing your hair out for the holidays.
Before you leave Dress for success:
Some of us will be shopping in sunny California, and others of us will be trudging through snow-covered parking lots to get into the mall. Either way, once you're indoors, it'll be nothing but plenty of walking or standing in cramped quarters. So wear comfortable shoes, and also make sure to dress light under your coat, unless you want to shop in a sweat bath. (Also check the weather -- if it calls for it, you might be looking for your most comfortable boots, not shoes.)
Know your friends/family:
Whether you ask for lists ahead of time, or you know you want to surprise your friends, have as many specific ideas on paper as you can. Black Friday is a grab-'n'-go affair, and you don't want to be hemming and hawing while others are snatching the last 80 percent-off pea
coat off the rack. Also, know clothing sizes in advance – the best Christmas gift is one you don't have to return.
4 Black Friday scams to watch out for
Watch the clock:
Compare sales papers (or for the technologically inclined, sales PDFs) ahead of time. Now that Black Friday is spilling over to create Black Thursday, retailers are throwing different "events," meaning a deal good at 6 p.m. Thursday won't necessarily be in effect once the 8 p.m. Thursday bonanza begins. Make appropriate notes on your shopping list and plan accordingly.
Identify the doorbusters:
The devil’s in the details -- specifically, the fine print that says "ONLY 2 PER STORE" right underneath the
giant, bold print that says "60-INCH HDTVs FOR 50 CENTS." Determine what deals are the most important to you ahead of time, and if they include any of these limited-quantity deals … well, start dragging the camping supplies out of the attic.
Case the joint:
Because no one has created an infinite-capacity storeroom, there's technically going to be a limited quantity of everything. Improve your chances of success by knowing the layout of the stores you plan on hitting up for Black Friday, especially if you're going after doorbusters and other limited-quantity deals. It's hard enough to find what you want without having to peruse through human walls.
Plan a route:
If you're not beholden to doorbusters, you can save yourself a little traffic hassle by planning out your route. Try to hit stores in a line, and use a paper map or GPS to suss out back-road routes. Time spent driving is time not spent shopping or relaxing.
While shopping Save those receipts:
If your gifts are 100 percent perfect year in and year out, then more power to you. But if you occasionally whiff, ask for gift receipts everywhere you go – then save them in a single bag or box. Save yourself the hassle of rifling through piles of shopping bags -- or worse,
realizing they’ve been thrown out with the trash.
Keep tabs on your wallet/purse:
No one is browsing on Black Friday, and ne'er-do-wells know it. Stay mindful of whether your wallet is still in your pocket. If you have a clasp or zipper on your purse, use it, and always keep it in sight while checking out or grabbing a bite to eat in the food court. You might consider RFID blockers to thwart more technologically advanced thieves, but keep in mind that Consumer Reports and other reviewers have
pooh-poohed most RFID shields' efficacy.
Be ready:
Have your credit card or cash ready to go by the time you're up at the register, and whatever you do, don't gab on your cell phone or get
lost in texting while you're on deck. Yes, you're bored. Yes, you've been in line for an hour. But so has everyone else, so don't hold up the queue. (This is less about survival and more about courtesy, but if everyone did this, Black Friday would be a little more tolerable.)
If you're going to eat, eat early:
Surprise, surprise -- when the whole world is out shopping, restaurants tend to fill up in a flash. If you think you're going to get a seat right away at noon, I've got a bridge you might be interested in purchasing. If you're even getting remotely hungry by 10 a.m., figure out who opens at 11 and be there at 11. Otherwise, you'll be enjoying that bench by the door.
Outside the store Lock your car:
Thieves take the path of least resistance. Much like simply locking your doors and windows at home can deter crime, so can locking your car. Of course, some criminals are brash enough to pull off the smash-'n'-grab, so …
Don't leave presents in sight:
If you're looking out for the five-finger discount, are you going to break into the barren Jetta or the minivan with Macy's bags piled up to the headrests? If you said the latter, congratulations, you've got a criminal mind! (Just kidding.) But seriously, keep as many of your gifts -- especially the more expensive ones -- in the trunk. If you have a heavy shopping list, stow other gifts under seats, or throw a coat
over a bag or two.
Watch out for black ice:
A Three Stooges-esque spill in the parking lot might kill on YouTube, but it can also kill in real life. Many retailers don't take care of parking lots like they should, so just keep an eye on the ground to keep your keister from landing there.
Pay attention behind the wheel:
Seems like common sense, but that's one thing people find themselves awfully short of during the holiday shopping rush. You will encounter more cars and people on the road and in parking lots than almost any other day of the year, and the last thing you want from Christmas is a fat insurance claim or date in court. Get yourself, your children and your husband's new iPad home safe.