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Thursday, May 29, 2008

Can you spend irresponsibly if you're rich?

I have a friend who occasionally comments about how things are expensive and how she is working to pay off her credit cards. This friend also has a tendency to drop $20 on "whatever" around five days a week. In my opinion (and the opinion of some of our other friends), this is a stupid and irresponsible practice. If she would limit her "whatever spending" to once a week (or less!) she could save a significant amount of money. I don't think she even realizes how much she's spending, because it's "only $20."

This got me to thinking. Blowing through money when you're in debt and don't have much savings is clearly irresponsible. But what if my friend were doing quite well for herself? Let's say she's planning properly for retirement, owns her house and her car, has an emergency fund, and has a solid amount of savings. Now what about her tendency to drop at least $100 a week on things like books and knick knacks and coffee and other such things? Is it still irresponsible?

I go back and forth on this, primarily because of how I was raised. I have always believed that no matter whether you have the money or not, you should think about your purchase before you make it. Sure, you can afford those five books at the bookstore. But do you really need them? Do you need them all right now? Can you wait, or buy them online later for less money? Would you be just as happy with two books? If you decide yes, that you want all five right now, fine. But at least you thought about it.

Half of the time I see my grandfather, he's wearing clothes he's had for years, like a shirt from the tee ball team I played on almost 20 years ago or a pair of socks that originally belonged to my other grandfather, who passed away over 23 years ago. Admittedly, the t-shirts have seen better days, but if he's just out doing yard work, who cares what he's wearing, right? He could absolutely afford to buy new shirts and socks. He could buy a truckload of new clothes. But it's not something he needs. I wouldn't say he's excessively frugal - he just thinks about how he spends his money before he does it. He and my grandmother still go on fancy vacations and eat at nice restaurants and go out for ice cream.

I wonder if that's why I think that even if my friend were wealthy, her frivolous spending would still be fairly irresponsible. I tend to feel like her purchases are often wasteful, and I think of all the other things she could do with that money. Even if you're financially well off, even if $100 is just a drop in the bucket, I still think that money shouldn't just be frittered away. It could be saved for larger purchases or gifted to family or donated to charity or randomly handed out to panhandlers on the street.

Of course, I'm not in a position to tell my friend what she should do with her money, and given her spending, I don't think she'll ever get herself to a point where she will actually have an extra $100 to throw around. But it's something to think about.


Carrie said...

This is why I am both fascinated and appalled by celebrity spending. So many of celebrities seem to spend their money on so much unnecessary stuff (or unnecessarily huge houses) just because they can.

change is a good thing said...

Interesting subject...I tend to look at my friends frivilous spending and think it's foolish. I think that even if I were able to live differently, I would still choose the frugal route. It works for me and I never feel like I am wanting for more.

Mrs. Accountability said...

I read something recently about how poor people who win the lottery end up blowing through their winnings because they spend so frivolously. It is quite a trap that "It's only 20" here and there. For the longest time I had nothing to spend and I had to retrain myself that it's okay to spend some money on a few little things here and there, but then I think I went to the other side of the pendulum and now I'm reminding myself "Only FIVE $20 here and there's eats up $100" and so quickly!!!

MoneyEnergy said...

You can definitely spend irresponsibly if you're rich - we don't have to look further than many celebrity examples of this. It's easy to argue that driving more cars than you need is irresponsible due to pollution factors. Even having a private jet. Did you know that jets/planes are the one form of public transportation that ISN'T better for the environment? You could drive your car to NY and LA and back four times without even coming close to the amount of pollution that same trip in an airplane would cost.

But anyways...the point is, just look to certain celebrity spending habits (and I don't mean to pick on them: you can look to many CEO's and other political figures too).

Just because you CAN buy something doesn't mean you SHOULD.

just my two cents, though.