Big Spending

I am fairly certain that no big purchase ever costs just the sticker price. It is actually incredibly deceptive in a way, and very frustrating to your carefully budgeted plan. Somehow, spending a large chunk of money becomes some sort of sinkhole for your finances. You start out spending what you had planned and then end up spending way more because of all of the additional costs and the tendency to freefall afterwards.

A very large example of this is the purchase of a new home. When Matt and I were buying our home, we had such a wonderful budgeting plan in place. We saved for our down payment. We were so careful with our money leading up to the purchase of our house. We knew we could afford the payment and asked around to get an accurate assessment of what our other bills would be. We thought we had covered everything. However, what we didn’t count on was all the other expenses that come with moving. It wasn’t just buying the home, it was the cost of the moving truck, the start up deposit for the utilities (many companies require an initial deposit or installation fee), we needed a lawn mower, lightbulbs (sounds small, but they really add up), extension cords, and a million other little projects that you discover when you move into a house.

By the end of it, we sat in a barely furnished home, just thankful to have survived the move. And this is where many people go right down the sink hole. It is so difficult when you have moved into a new home to not want to furnish it immediately. They justify their purchases because they have figured out a 0% payment plan, or something like that, and the debt just piles on. Those 0% plans are so incredibly tricky because many times the interest is just accruing until the specified time has past. Also if you are late on a payment, all of your interest becomes due. The only way to do it is to budget a plan to pay it off before a year so that you never pay interest. All in all however, it is extremely dangerous.

But the point is, once you have spent a large amount of money, it is just easier to keep spending because nothing else seems as large. Another example is buying a new washing machine/dryer. Our dryer broke about a year ago. We had the money set aside and knew how much we wanted to spend. We shopped carefully, we chose wisely, and bought the dryer. However, we then figured out we needed new connectors for this particular dryer, and it was also very tempting to want to buy the matching washer as well. And then we didn’t know what to do with our old dryer. We also didn’t have access to a truck and needed to get them home, so we ended up paying a delivery/removal charge. And after all of the extra little charges, we ended up paying way more than we had originally thought.

A friend of mine in the process of purchasing a new washer and dryer, just added a new refrigerator to the tab because they were already spending a lot, why not spend a little more? I am telling you, the time following a major purchase is such a dangerous time in your financial life. Freefall spending happens far too often. Only, because you have just spent a lot of money, many times the fall is even harder.

I do not have a great solution for this dilemma, but I think one very important key is to recognize the danger. Whenever you are making a major purchase, be very aware of the temptation to freefall spend on the other side of that purchase. It is fun to have something big and new, but it is not fun to go into debt because of it. Some friends of mine did this when they purchased a new television for their house. They had just come out of debt and made the decision to put the TV on a 0% financing plan thinking they would pay it off quickly. Somehow after they bought the television it just unleashed this flood of spending which landed them right back in debt. This just happens so often that I think large purchases should come with a warning label – “Caution, purchase of this item may lead to a freefall in your spending habits.” Of course, no store would put a label on like that because they love it when you freefall.

So here is your warning label… Buyer be warned!! Enjoy your wonderful new “whatever”, but make sure to budget for the accessories as well. And at the end of the day, remember this warning label, put your checkbook away, and avoid the spending sinkhole. It is extremely difficult to do, but trust me… your budget will thank you for it 🙂