What’s worse than watching your friends spend money on crap they don’t need? I’ll tell you… It’s hearing them afterwards try to convince you why their purchases were actually good choices!
My buddy recently bought a brand new Audi A4. Very sleek and sexy car. And while I’m really stoked for him and want him to enjoy the finer things in life, his reasons for the purchase didn’t quite make sense to me… His logic was:
- “Tax advantages” Basically, his tax guy told him that buying more expensive things could lower his taxable income. Since he can deduct car expenses against his income because of his work situation, he was advised that a more expensive car made better sense than buying a cheaper car. 😱
- “Higher resale value” My friend bought the $10k upgrade package (leather seats, fancy interior stuff) because he says the car will have a higher resale value later when he wants to sell it. 🤔Huh??!!
- “It’s worth it because I drive a lot” He spends a lot of time in the car, commuting for work. And since he doesn’t like driving, he thinks having a nicer car will make it a little less miserable vs. a modest car. 🙄
I don’t mean to judge … People can spend their money on whatever they want to in life. But justifying a luxury or impulse purchase with “it is a good investment” makes me cringe a little. Especially if it’s the complete opposite of common financial sense!
Other Money Excuses We Tell Ourselves to Justify Purchases
We probably all do it in some way or form. We mix up our wants with needs, and rationalize the poor decisions we make. Here’s a list of things I see pretty often (and admittedly, sometimes I think these myself!)
- “It’s a tax deduction!” While a tax deduction could be a great benefit of buying something, it should never be the primary reason to make a purchase. Paying a lot, just to save a little, doesn’t make financial sense.
- “I just got a tax refund check! So it’s basically free anyway!” Getting a tax refund just means you overpaid taxes throughout the year.l It’s not free money from the government! Thankfully, I’m hearing this reason for impulse purchases less and less. Glad to know people are educating themselves more about taxes! :)
- “I bought it because I’ve always wanted one” A friend-of-a-friend of mine just bought a brand new $700 surfboard… He’s never been surfing before in his life, and never really even talked about it. His reason for buying the new board was “My whole life I’ve always wanted to try surfing!”… And while that’s a great attitude (and I love seeing people try new hobbies!), he could probably rent a board for $10/hr to see if he enjoys it first. Heck, he could have even borrowed one of my boards for FREE and I’ll take him out for a few lessons, too. There’s no great reason to spend large amounts of cash on new hobbies that you might not end up liking.
- “Gotta experience this while I’m young. YOLO!” I hear this excuse a lot when people buy spontaneous and expensive vacations. Don’t get me wrong, traveling while young is good — you can’t wait until you’re an 80y/o to go backpacking across Papua New Guinea — but there’s a TON of travel you can enjoy at any age! And less expensive travel can be just as enjoyable as expensive trips! It’s the experience that counts, and that can’t just be bought.
- “Everyone else has one. So I had to buy one too!” I’m sure you’ve heard this quote before, but it’s always worth repeating…
“Stop buying stuff you don’t need, with money you don’t have, to impress people you don’t even like”. (Who said this first by the way? Suze Orman?)
- “My old one was dirty, and they’re so cheap to replace … so I just bought a new one” I’ll admit, I used to have a mindset like this. If my coffee maker was looking old and dirty, I’d just buy a new one and ditch the old one. It wasn’t until I met my wife that I really learned to reduce waste and save money!
- My “rich friend” said it was a good investment: I hear this money excuse a lot when investors make sudden large purchases of risky stocks, cryptocurrency, or get-rich-quick opportunities. For me, I’m very cautious of who I take investing advice from — no matter how good their financial situation is. Whenever I hear this I’m reminded of a quote from my fav personal finance book, The Millionaire Next Door:
“Would a business, especially a very productive one, ever hire a key employee without doing a serious background check and an in-depth interview? No! Yet most people, even those with high incomes, hire financial advisors after obtaining little or no background information about these “employment candidates.”
“Operate your household like a productive business. The best businesses hire the best people. They also patronize the best suppliers. Utilizing the best human resources and top suppliers are two major reasons the most productive organizations succeed while others fail.”
- “There were only a few left – so I had to buy it quickly!” The power of internet marketing continues to amaze me. If it’s a fast selling and good product, they will probably make more of them. Well-thought-out purchases usually trump speedy ones, regardless of how many items are left in stock.
- “I’m saving money in X category, so I can afford to waste a bit more on Y” I love it when people celebrate good budgeting and reward themselves for good habits!… But, it becomes a slippery slope when they start overspending extra money in discretionary categories. Excess spending can creep up and become bad spending habits!
- “The stock market is roaring so I can loosen my spending belt a bit” I know a lot of people who live this way. They spend a lot in the good times, then when the money stops rolling in they have a miserable time adjusting back downwards. Also, most stock market gains are unrealized. Beware of false profits $$!
- “This gadget will help me be more productive at work. Saving time = saving money!” While there are definitely some tools to help make your time more efficient, in my experience, more productivity happens when you have less stuff – not more 🙂
- “I’m getting a big bonus next month, so I can spend the money now” I heard this excuse a lot in my old sales career. Some of my colleagues would go out and blow their commission checks on fancy watches, electronics and stuff before the money was even paid to them! Sometimes sales would fall through, checks never came and they were stuck in credit card debt debt. :( If money is not in your bank account, don’t spend it yet!
- “I’ve already blown my budget, so who cares anyway. I’ll try harder next month/year.” This budgeting excuse is a funny one, because it’s like giving yourself a reward for bad behavior. Admittedly, I fall into this trap a lot … For example, around September of this year my wife and I exhausted our entire alcohol budget for 2020. Instead of stopping spending for the rest of the year, we just continued, knowing that our budget was blown anyway. In hindsight, we should have had a different attitude!
- “I can always return it if I don’t like it – so it’s like a free trial!” The whole point of return policies is to get products you love into your hands. But the likelihood of returning those things that you love is very small. “Free trials” are not a great reason to purchase things you don’t need.
- It was on sale! Stumbling across a killer deal is always exciting. But buying something you don’t need puts you further away from your financial goal, no matter how good the discount is.
Spending money in itself is not a bad thing… We are all free to budget for whatever we want in life. Spending should be FUN!
That being said, I want to encourage people to be intentional with every purchase – both needs and wants. Enjoyment doesn’t increase proportionally as spending increases, so when you do spend, enjoy it for the right reasons. :)
What bad excuses to spend money or weird justifications do you hear often? Caught yourself saying any of these?