Author Topic: How do you de-rationalize a too expensive purchase and where do you stop?  (Read 5736 times)

Fastfwd

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I own a few expensive things that I don't really need.
Expensive cars, bike, house

I could easily sell the cars to get cheaper ones but I really like them and the difference in real money would be a small % of my income. Maybe 5%.
Bikes lose value like crazy so no real gain to be made there.
The house is slightly too big but changing for another area would bring trouble with school choice, work transport, ...

Seems much easier to just decide from now on to make better choices on future spending. But there is always that feeling in the back of my head that I am just rationalizing to myself to keep my expensive luxury things.

I know some of you have gone from spending 80-90% to saving 50%+

Have some of you found a way to convince yourself to get rid of things that you like but you know are really expensive vs the real benefit they provide? How?

ender

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Spending 48 hours after "deciding to buy" and then reevaluating would eliminate probably 25% of most people's spending on frivolous things.

5% of your income is a lot. Thinking 5% of your income as a "small %" is an attitude no one else here will have. People say, "wow I can immediately save 5% of my income simply by selling cars? Awesome!" and save more.

Ultimately, you are the only person who can decide whether or not the cars and other luxury items are worth it to you. Everyone on these boards has some sort of indulgence.

GuitarStv

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Just remember to ask yourself . . . WWMMMD?

Thegoblinchief

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Since you already OWN the stuff, evaluating the sunk cost is a bit harder.

Houses, like you noted, are about location. Bikes don't lose value like cars. If it's in well-maintained condition and you clean it, take good pictures - you could easily sell it for close to full value (at least in my area).

Avoiding purchases in the first place is easier. A lot of people use enderland's tip of waiting before buying. 48 hours isn't long enough, IMO, unless it's a true need item. During that "cool off" period I make myself think of what I already own that could do the same thing. Or accessories I could buy for a fraction of the cost of a whole new item. Then, if I've already committed to buying, I make myself spend a couple weeks searching craigslist or the equivalent.

arebelspy

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"How do you de-rationalize a too expensive purchase"?

I don't.  If it's rational, I buy it.

The issue is you are justifying something.  If you have to argue and make a case for it, it probably isn't prima facie rational.

Recalibrate, and the decisions will be easy.
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PantsOnFire

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I often spend time rationalizing (or de-rationalizing) ownership of things that I know were not Mustachian purchases.  Key word there is ownership--I already know the decision to buy was not entirely rational, so that's a moot point.  Then the issue becomes a question of whether returning, selling, donating, etc. is the rational next step, or is ALL the financial damage already done and nothing could be gained by getting rid of it. 

If you bought a car that gets 20 mpg and you now realize for the same money you could have gotten a car that is exactly equal in every way (price, quality, safety, utility, etc.) that gets 22 mpg, it's not necessarily rational to sell your car and buy that other one.  Yes, it would have been more rational to buy the more fuel-efficient car in the first place, but if you don't log a lot of miles, it might not be worth it to incur the costs associated with the purchase (tax, tags, title, etc.) until a few years down the line when you were planning on making another purchase anyway. 

Chalk it up to lesson learned and move on. 

James

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Remember that it's not just about the financial impact of getting rid of the expensive car, house, etc. Like rebel said, it's about calibration. It's the lesson you learn and the change in lifestyle that sticks with you that is an important as the actual financial effect. If you keep the expensive car will you be as willing to cut spending in other areas to the same extent as if you drop to a cheaper car? Each change you make can have effects far beyond the actual change, driving a more expensive car or living in a big nice house means you tend to "live that way" in the rest of your life. Driving the cheaper car can be a constant reminder of the choices you made and the choices you want to make in your financial life, which can have financial benefits for the rest of your life.


Having said that, if you aren't going to make those changes then consider how you will keep frugality front and center in your life despite the expensive items in your life. It doesn't mean you can't live frugally with expensive items in your life, just that you need to make sure that effect isn't pulling you in the wrong direction.

hybrid

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I know I speak for many when I say that although I had some frugal tendencies before I found these forums, there were a lot of financial decisions we made before finding these forums that I have to shoehorn into my new lifestyle. Cars are a good example. I bought a 2010 Mazda 3 new with 0% financing and I owe about 4-5K left on it. The missus is pretty insistent on our keeping it and we likely will. We tend to keep our cars until they drop and this car will last for many long reliable years if our previous Mazdas are a good indicator.

So in 2014 I would not make that same purchase, but in 2010 I did.

MMM has a huge advantage over many of us in that his lifestyle has always been his lifestyle, and for us it's been a process of developing new attitudes, new habits, and dealing with the baggage of a former, different lifestyle (which MMM has never had to do on a grand scale). I say give yourself a break on decisions you made in the past, make all the changes you can, constantly try to optimize going forward, and go from there.

MrCash

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Remember that it's not just about the financial impact of getting rid of the expensive car, house, etc. Like rebel said, it's about calibration. It's the lesson you learn and the change in lifestyle that sticks with you that is an important as the actual financial effect. If you keep the expensive car will you be as willing to cut spending in other areas to the same extent as if you drop to a cheaper car? Each change you make can have effects far beyond the actual change, driving a more expensive car or living in a big nice house means you tend to "live that way" in the rest of your life. Driving the cheaper car can be a constant reminder of the choices you made and the choices you want to make in your financial life, which can have financial benefits for the rest of your life.


Having said that, if you aren't going to make those changes then consider how you will keep frugality front and center in your life despite the expensive items in your life. It doesn't mean you can't live frugally with expensive items in your life, just that you need to make sure that effect isn't pulling you in the wrong direction.

James, I think your signature sums it up quite nicely.

MrFancypants

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I think the answer to this genuinely depends on your intended use.

For example, buying cheap simply for the sake of buying cheap is a poor person's habit that is likely to keep you poor.  If you need the item and are not accounting for that cheap item to fail prematurely and replacement cost, you aren't factoring correctly.  Occasionally it's better to spend more money up front for a quality item that is less likely to introduce further unexpected costs in the future.  An example of this might be various tools you use for maintainence of the house or other items, or frequently used kitchen equipment.  Obviously if the item has no lasting value and the cheap one fills the need, that's clearly the best choice.

When it comes to cars I think you have to determine if you own the vehicle because it brings genuine joy and happiness to your life, or if you're paying for it from a "keeping up with the Jones'" standpoint.

I recently went through this balancing act with my car.  I have three vehicles, one of which is going to be sold because it has been replaced.  The choice is regarding the vehicle I commute in.  It is between a 208,000 mile Scion xB with a sketchy service history, and a 77k mile Volkswagen GTI with a perfect service history.  I don't particularly enjoy driving the Scion, but the GTI brings me genuine happiness. 

If I sell the GTI, I could get more cash to put towards my long term goals, but that cash could be diminished if something on the xB fails prematurely and it needs to be repaired or replaced, which is likely given the age and history of the car.  But if I keep the GTI I'm passing on an opportunity to reduce the time to pay off my house by about six months.

After balancing the future rewards against the present enjoyment of hobbies, I decided to keep the GTI.  I love driving and I love cars, this is a hobby that brings me happiness.  I don't own it because I'm trying to "keep up" with anybody, because if I were I'd be driving a BMW or an Audi and not a Volkswagen.

Unless you're in dire financial straights you should never completely eliminate things you love from your life just to find that extra penny.  However, you should viciously eliminate excess drag that's slowing you down and keeping you from acquiring what it is that brings you happiness.

jordanread

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I've been struggling with this myself, lately. Fortunately for me, it's primarily my vehicles. Unfortunately, I commute 120 miles round trip twice a month, and the Jeep Cherokee ("Boris") just isn't the most efficient method of dealing with it. For me, the financial benefits of replacing the vehicle were obvious, but the ability to do so...not so much. Not enough liquid to buy a more efficient vehicle, and not enough interest in Boris to sell right away. That, and Boris was the first vehicle with which I did all the maintenance. It was my learning vehicle, and I had some pretty awesome plans to convert to a fuel efficient bio diesel monster. The fact that I wasn't able to do that was harder to get over than anything else.

Actually, re-reading that, I suppose that's exactly how I justified it. :-) Fortunately, an opportunity presented itself and I went ahead and made the changes I needed to.

travelbug

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Great thread.

If I want to buy something I generally have a 6 month wait to see if it's still on my list by then.
It's amazing what drops of the radar. If something we use everyday needs replacing I research, read reviews, do deals and buy the best replacement we can afford. I then have no qualms about spending that money.

I suppose it would depend on what your savings rate was and if these lifestyle changes would reap huge benefits.

We own anti-mustachian stuff but it's well loved and used and appreciated. The cost per dollar happiness level is one we are comfortable delaying something else for.

NumberJohnny5

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I just put down a deposit on an 08 Prius. "Well, how was the test drive" you ask? Well, it's in California, I'm still in Australia...but the Carfax did show plenty of services at the dealer (I swear Carfax must have gotten better, I can tell that the tires were checked and the water pump and belt was replaced).

I can't tell if it's an actual good idea, or if I'm just trying to justify it. I've run the numbers, and the odds are strongly in our favor that it won't be a horrible financial decision. Even if we end up buying high and selling low (though current sale prices suggest the opposite would be true), what's the alternative? Renting a car for three months, that's quite a lot of money down the drain.

But what about a $2k clunker that gets 25-30mpg instead? I dunno.

One thing I am better at doing now, is actually questioning these purchasing decisions. So, they may still happen, but they have some more thought behind them, and I often decide against spending lots of money (though, to be fair, sometimes when I decide against it, it turned out to not be the optimal decision).

Not sure if I'm adding anything relevant to the discussion, just wanted to say it's something I haven't fully figured out yet.

MissPeach

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I found minimalism before I found MMM. For me I was able to move to save 50% of my income by really questioning my consumption activities and what I was buying. I still buy expensive toys when I wouldn't be happier with the lower priced versions but I cut out the crap that I'll never miss such as impulse purchases, buying lunches at work, etc. Instead I'll get one nice item I've wanted for a long time instead of 10 on impulse, go out for one really good meal that i could never make myself every few weeks instead of several cheap meals during the week, etc.

Some blogs to start with if this direction is interesting to you is:
the minimalists
zen habits
miss minimalist
becoming minimalist

From the financial perspective 'Your Money or You Life' is a great book to look at the financial costs of your consumption.
« Last Edit: March 13, 2014, 02:25:23 PM by MissPeach »