Author Topic: Christmas Season Brain Warp (Spending / Financial Decisions)  (Read 4636 times)

Goldielocks

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Christmas Season Brain Warp (Spending / Financial Decisions)
« on: December 07, 2014, 09:32:53 AM »
I realized, that post-Black Friday, that my financial decisions have gone on a brain fart in the past three weeks.

Discussion with DH about buying a new 48" TV.

DH -- Okay Goldielocks, there are good prices on TV's right now, and we have been living with 24 black vertical lines through our current TV for the past 8 months.  Is it time?
Me: - let's go look and see what is out there --

-- we foray into the store, and yes there are prices that are lower than before, and I strongly put my foot down about getting one that is slightly larger than our space --

DH:  see -- the TV, for a better one is only $799, remember we paid over $1800 for the original one?  that's a terrifc price!
Me:  hmm   but we don't need it - we only use it for netflix, Dr.Who, movies and Utube with the kids... (cancelled cable)  and we are spending a lot on christmas presents, too.
Him -- so what are we going to do with the extra $7k we have in our savings account right now?    (I received a raise this year, and also joined MMM, and we changed from a cash budget to one with Mint used to tracking -- I have had trouble over depositing to savings locked in accounts until we figure out where the new mortgage costs, living costs, and budget is working out to be.. only increased RRSP contribution so far)
Me -- hmmm,  well, some of that is for your tuition in January, and we need to fix the front door --
Him -- the front door still locks fine!  (It doesn't really, but we can't agree on what the new door should look like, so we have put it off for now)
Me -- the best place is really to finish maxing out the RRSP (but the bonus this year should do that fine if it goes 100% into RRSP, there is a chance that bonus may not be as good as I think, so maybe not).   
Me -- maybe it is time to max out your TFSA - it's lower returns, than RRSP but maybe time to do it before your income increases after you graduate?

Few days later -- and this is the brain fart part --

Me:  So - you can pick up full time shifts after your final exam until the 23rd?   That's an extra $500+ right there.
Him -- yeah, and the film set called and want me to help out on Sunday with providing robots for a commercial this weekend, too, that will be fun, and maybe $200 more.
 
Me:  If you earn the money, with extra shifts, it makes sense to spend it on a new TV, I guess, no reason not to.
DH -- that's great, if I am going to work there should be a point to it, we can't just save it all the time.


ACK!   What did I do?  When does it ever make sense?   We should be saving this, or using it on planned family ski days after Christmas, or, finishing the house renovations, or a  million other things that make more sense.   From my other posts, some of you know that DH is not totally on board with MMM, and the fact that I agreed that his "extra" salary should be used at nearly 100% for something "fun" that he wants, but we all use together...  ARGH.  I can hardly wait for him to start contributing to household expenses (after being SAHD for 10ish years, our youngest is now 12).  What have I done?!

Have I set myself up for defeat later on?       Will his impression be that he only works for the fun money?

How do I go back and tell DH that despite his earning extra money to pay for something, and despite having thousands in the account, that replacing a half broken TV is foolish? Or should I?  Am I the foolish one?


Goldielocks

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #1 on: December 07, 2014, 03:57:27 PM »
Where to begin...


I had a similar thinking to your Husband... I Worked hard and put in extra time so Im getting what I want with the money... I get it...  And I even agree with his thinking to a certain degree...
If your Husband is going to pick up extra shifts and make extra money Yes I think he should get to keep some of that money for doing something fun, like Buying a New tv...
But here is the catch... If he makes 200 bucks working overtime, I think he should be able to take 10 - 20 dollars (roughly 10%) of the extra money and save it towards a large item, or spend it on something he wants to do...

Should he take that full 200 bucks and spend it on something absolutely not...

Now I don't have any kids, so its hard for me me to make a comment about spending money to take your kids on holidays and stuff...

What I do know is that if you didn't max out your RRSP's and didn't max out your TFSA yet for this year, Damn straight you should both be working all of the overtime you can and maxing out those two retirement plans before keeping any money for yourself for fun stuff...


Your comments about RRSP's and TFSA's concern me a bit...  "Maybe its time to max our your TFSA's, its lower returns, than RRSP's but maybe time to do it before your income increases after you graduate"
Do you understand how RRSP's work? and how TFSA's work?

Why is your TFSA a lower return??? Thats your choice to make it a lower return? Unless your talking about the Tax brake you get at income tax time??? But then immediately after you contradict yourself again...  If your income is going to increase in the next short while (within a year or two)  Of course you should be putting all your money into your TFSA, and when you get a higher income then Max our your RRSP's and Max out your carry over room...  RRSP's are based off income... the More you make the more you can put in (to a certain max) But more importantly the More you make the higher percentage can be "written off"

If someone making 100,000 a year puts 10,000 into RRSP's
And someone making 40,000 a year puts 10,000 into RRSP's

Its a different outcome... same amount of money but the 100,000 Salary gets a lot more back...

Do your research, Understand your tax systems...

I get the tax breaks, don't worry!
Order of investment priority for us:

1. RRSP -- It is way, way more lucrative for us to maximize out the RRSP's,  (for the tax deduction).  But I may be already maxing it out this year,...    so it triggers the next step:
2. Max out the employee stock purchase plan employer matching (done)
3. Next is it ensuring that we don't have any tuition debt from the final year of school.  This as priority 3 is in my personal preference list, as we could borrow money at less than 4% variable, but I just don't like debt, and the extra $6k is a bad reason to incur debt if it can be avoided.
4. Next it is the RESP's - until we hit the point that we have / will have saved as much in there as we care to.  (The kids will NOT be getting $80k each for post secondary, sorry to say, we don't intend to max out the RESP limits, but that is related to our family values).  We are at this target if we contribute the yearly amount planned already.
6. Next on the list is the TFSA to max out.
The returns on TFSA are the smallest because of the limited tax sheltering / deduction.  For us, we agree to never withdraw from our RRSP or TFSA until we intend to use them for retirement funds.
7.  Lastly, we can save it in an emergency fund, in a vacation fund,  in a "buy a tv" fund, or home renovations completion (about $10k left to do)


In the end, the challenge is knowing how much you want to save for retirement, and when to FIRE?
Right now, we can stop saving for retirement, and if we wait until 65, have the same (or more) monthly income / spending as we have now as a family of 4 (adjusted for inflation.)

But -- I don't want to continue at this  pace of working.   Maybe if I took it slowly for a couple of years, I would be re-energized to work for another 10, then FIRE before 55, maybe not.
Using FireSim, I could FIRE in 12 months, as long as DH was working at least $50k salary.

We don't have enough saved up for me to FIRE completely quite yet -- due to only one income and a huge mortgage that needs to be paid each month... so someone needs to keep plugging away to pay our living costs for the next 20 years.  DH is quite happy with my continuing to work at this pace, and he is quite happy to work at a part time (or a full time) level, if the work is interesting and he sees a reason/incentive to do so.  Convincing him that we should save money (instead of a new TV) so that I can work Part time for a couple of years is going to take a LOT more discussion, which is why savings specifically for FIRE is not listed above, only included as RRSP / TFSA money.

Which brings me back to my original Brain Warp:

I said "yes" to the TV if new work shifts were going to it (it is a shared luxury, after all and won't break the bank, just delay other luxuries and choices)... in order to encourage him to keep working,  but it really is a luxury, not a need, or even a strong "want" like reducing my workload for a few years so I can spend time with the kids (teenagers).

So my question is -- did I screw up?   In the long run, is this tactically a good choice? 
What is my next step?

MayDay

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #2 on: December 07, 2014, 06:48:53 PM »
I think it is a question of marital compromise. 

If he "needs" a new Thing every month to not divorce you for being a miserly scrooge, then you probably come out ahead getting the Thing. 

If you agree that his overtime money is family money, then occasionally he gets an extra treat, that's probably fine.

If he spends every penny he makes on toys for himself, that's probably not ok.

I'd just have a conversation about yes you agreed to the TV, but getting on the same page that going forward, all his income is shared money, just like all your income for the past decade has been shared money.  And that you have been working for the past decade, and unless he is prepared to be the sole income earner for the next decade, you need to prioritize getting you out of the workforce via retirement savings. 

I stay at home, and when I bring in a bit of money my instinct is that it is MINE MINE MINE.  This is of course crazy because if my H did that with his paycheck, I would be screwed, lol.  But that is how my brain works!  I have had to override it.  Over time I have talked myself out of this thinking.  If this is his first paycheck in a long time, you might cut him a bit of slack and let it be "his" money, as long as he agrees that going forward, it is "our" money. 

Goldielocks

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #3 on: December 07, 2014, 07:15:42 PM »
I think it is a question of marital compromise. 

If he "needs" a new Thing every month to not divorce you for being a miserly scrooge, then you probably come out ahead getting the Thing. 

If you agree that his overtime money is family money, then occasionally he gets an extra treat, that's probably fine.

If he spends every penny he makes on toys for himself, that's probably not ok.

I'd just have a conversation about yes you agreed to the TV, but getting on the same page that going forward, all his income is shared money, just like all your income for the past decade has been shared money.  And that you have been working for the past decade, and unless he is prepared to be the sole income earner for the next decade, you need to prioritize getting you out of the workforce via retirement savings. 

I stay at home, and when I bring in a bit of money my instinct is that it is MINE MINE MINE.  This is of course crazy because if my H did that with his paycheck, I would be screwed, lol.  But that is how my brain works!  I have had to override it.  Over time I have talked myself out of this thinking.  If this is his first paycheck in a long time, you might cut him a bit of slack and let it be "his" money, as long as he agrees that going forward, it is "our" money.

thanks,  I like your outlook and humour about "new thing" not to divorce me  :-)   Marriage does sometimes have a bit of give and take, doesn't it?  Usually not so mercenary, but still at its roots.....

And yep. He spent about 60% of his first two months pay on eating out. (which he loves), -- a celebratory dinner with first paycheque, then lots of lunches / quick meals for kids when I am working out of town (because he can't cook rice and reheat the stew I left?).   Then we talked about  / agreed to our personal allowances moving forward,  then he spent $600 in the next month on eating out again (and I had him pay it from his stash this time), and now he has less money than he wants for Christmas presents, but that is the thing with money and budgets, no?

So, the TV and me saying yes caught me by surprise in hindsight and is related to Christmas fever and too much work travel, so I feel a bit guilty about not being around more.

It did seem like a reasonable suggestion at the time...  argh.




TerriM

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #4 on: December 07, 2014, 08:27:40 PM »
Couple of things regarding buying the TV:

1.  Since the old one is legitimately broken (even if vaguely watchable), buying a new one can be justified.   How many lines do you have to have missing before you buy a new one if you guys all like watching it?

2.  It doesn't matter what the last one cost.  If the current size is good for you, then buy the same size.  Don't think you're getting a deal just because electronics have become cheaper to manufacture.  You're still paying more for a larger TV.  You should know exactly how much you are willing to spend on the TV, then see if you're ok with that sized one.  Not the other way around--you shouldn't pay the 2004 price for a TV twice as large just because you paid that much in 2004.  And the TV will most likely continue to be half the price of the old one whether you buy it now or next year (unless there's some freak fire at the only TV plant in China which makes TV's twice as expensive next year. :)

3.  You guys really should be thinking ahead and budgeting for these things.  You shouldn't be making spur-of-the-moment budgeting decisions.  That's the real problem here.  Not that you're getting a new TV (which you both clearly want), but that you're not 100% sure how you're prioritizing your income.  You need to have talked about this a couple of missing lines before--what was the plan for replacing it--how many more lines? Then you could've decided to spend $800 on black Friday to get the $1200 model which you'd deeply researched and decided was just right.


This showed up in another thread, but money is money.  In general, you should ask "where do I put the next $$?" not "I work this job for fun $$, and that job for savings $$."  Although, there is certainly something to be said regarding a treat as motivation for doing extra work that he might otherwise refuse to do.

TerriM

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #5 on: December 07, 2014, 08:30:16 PM »
PS:  " so what are we going to do with the extra $7k we have in our savings account right now"

This seems to be a problem.  Can you use YNab to give your $$ a job?  That way you won't think you have extra $$, you'll know exactly how much is in the we-need-a-tv fund.

Goldielocks

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #6 on: December 07, 2014, 09:13:13 PM »
PS:  " so what are we going to do with the extra $7k we have in our savings account right now"

This seems to be a problem.  Can you use YNab to give your $$ a job?  That way you won't think you have extra $$, you'll know exactly how much is in the we-need-a-tv fund.

Yep,  this is definitely one of the easier to solve problems, and core to this issue.

We changed our budgeting  / finances / bank account setup recently, and I left a bit of wiggle room in, "just in case", I missed something.   I also have very large work travel expenses that need to flow through my bank account before  / after reimbursement, ($5k at a time), so I did not want to cut it too close for a few months to be certain the accounts are on the right track.   Also, it is December, and the EI / CPP amounts are no longer coming off the paystub (pre paid to maximum earlier in theyear), yet our budget is based on annual spends and income. 

He prefers a tightly budgeted ship, with very low amounts hanging around in the chequing acct.   

So we need to reallocate / auto save the extra contributions, for sure!

Also definitely need to talk more about common money goals, but I stop talking when he stops listening to FIRE suggestions, and just nudge it from time to time.

TerriM

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #7 on: December 07, 2014, 10:08:23 PM »
It sounds like you look at the checking account to budget expenses.  Best thing is to try to separate out how much is in an account vs. where money is allocated to spend.  For example, we have a lot of money in Checking and Savings and want to buy a house.  If I look at the accounts and do some mental math, I can convince myself that  we have roughly $70K for a house.  But when I go through the process in YNAB, with money allocated for different--all very valid--purposes, from kid's schooling to clothing to Christmas to rainy day fund to replacement couches, it turns out we have $42K.  HUGE difference which really shocked me when I finally put the numbers into YNAB and tweaked everything.   So I'm definitely in favor of separating out the "I've got this much money to spend" from looking at your accounts.

Goldielocks

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Re: Christmas Season Brain Warp (Spending / Financial Decisions)
« Reply #8 on: December 08, 2014, 04:55:03 PM »
It sounds like you look at the checking account to budget expenses.  Best thing is to try to separate out how much is in an account vs. where money is allocated to spend.  For example, we have a lot of money in Checking and Savings and want to buy a house.  If I look at the accounts and do some mental math, I can convince myself that  we have roughly $70K for a house.  But when I go through the process in YNAB, with money allocated for different--all very valid--purposes, from kid's schooling to clothing to Christmas to rainy day fund to replacement couches, it turns out we have $42K.  HUGE difference which really shocked me when I finally put the numbers into YNAB and tweaked everything.   So I'm definitely in favor of separating out the "I've got this much money to spend" from looking at your accounts.
Yeah, the problem is not a lack of dedicated accounts, it is that I did not screw down tightly the amounts to automatically transfer all extra $$'s out of chequing, when we reset our banking accounts last august.  (Due to various in the budget unknowns I mentioned earlier)

I left a little wiggle room, "just in case" which turned out to be more wiggle than I thought, so we just need to increase the $'s going to the different accounts in future.

My problem is just making the (maybe?) error of agreeing to a luxury purchase, in a way that seems that I am in agreement that his income is just for fun stuff.   Now that I realize it (that I got caught up in the christmas emotions of it all, -- we really should save for other things i think have more value), I am not sure how to retract, or if I am over reacting.

Moreover, it is because I value other things more than a luxury tv... but our goals are not 100% aligned, so maybe this is okay -- a strategic move to nudge us towards a middle ground in future.