1) I am not purchasing a watch until I am out of debt, at which point I would be purchasing the watch with money I have earned that I do not owe anyone else. This works for me, and is not "digging myself deeper into debt". I'm a planner! I'm planning, people! I don't want to make an impulsive decision :) Whew. Ok, that's off my chest.
I do see several people are getting hung up on the fact you're still in debt. If I were them, and wanted to scream about how "stupid" this is, I'd say "WHAT??!! You're almost out of debt and are about to make a crazy expensive purchase??!!" But that doesn't sound near as good as "OMG! You're in debt and wanting to buy a crazy expensive watch??!!" I dunno if they just missed that part, or if they just wanted to scream a bit louder. My advice regarding that would be "Don't be tempted if you see a great deal pop up; stay the course, get out of debt, and don't get back in!"
2) Does Mustachianism = extreme frugality forever? It's an honest question. I think I'm confused about what it really means to subscribe to the mustachian way of life. And hey - maybe it's not for me! Maybe I've confused it with some less extreme way of living. But in my mind, it was always a way to maximize your happiness and be efficient with your money and way of living. There are so many things in life that I could technically live without - but, is that how I want to live? Heck, no. MMM himself describes his current house as bigger than he needs. MMM drinks alcohol (I almost never do). We all have the things that bring us pleasure, and we pay for them when we can't get them for free. Isn't it ok to be Mustachian and budget for things? Get out of debt, and then spend your money where you want while maintaining a very high savings rate?
I think there's three main camps.
#1, Do as MMM does, don't stray even a tiny bit, you must be a carbon copy (might be a bit hard for you, as I "think" it'd be hard for you to be a male with a mustache). If he doesn't spend money on a certain "luxury," then neither can you.
#2, Be extremely frugal. All extra money must go for retirement. No spending on luxuries at all. Do note, that anything they spend money on, is deemed to not be a luxury. But if you're spending on something that they don't, that's a luxury and you need to be called out on it. Case in point, I think most here would think nothing of dropping $1k or possibly more on an international trip, because that's something they value. But if that $1k is going toward a watch, OMG you better watch out!!
#3, Debt = bad. You MIGHT get a pass on a mortgage, especially if the interest is lower than you can expect to make in the stock market. They're more about optimizing your overall life. Want to spend $X on Y? Well, sit down and look at all the options, and how they each affect you. If spending $X on a watch/vacation/car/Dalek is important to you, and you're willing to give up 6months retirement/newer car/daily latte/etc., then feel free to do so, as long as you're NOT IN DEBT! And try to spend as frugally as possible; if a $250 watch will suit your purposes as well as a $1k one...get the $250 one, that's a no brainer.
I guess I should add a #4, Debt = good, spendy lifestyle = good, I want it all now and you guys suck for saying I can't! If you come here, you can't expect someone to say "Yeah, that car loan is fine...credit card debt is only $10k at 15% interest so that's not too bad, you'll never retire at this rate; looks good to me!"