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One of the questions that often pop into my inbox is “When is it appropriate to spend my money?”  When people ask, they often want someone to give them a general answer that will solve their problem.  They want a step by step guide because they want to splurge but don’t want to jeopardize their retirement.  Sadly, there is no cookie-cutter answer since every situation is different, but what I can do is try to guide you to make the right decision in case you are wondering about this.

The Answer of When to Spend is Easy for Some

Two types of people don’t have any problems deciding when to spend money - those who spend every penny and those who never spend any money.

Natural Born Consumers
These people just seem to have more fun.  They are the ones with the new cars, nice house and their kids always seem to be wearing new clothes.  It doesn’t matter if they are earning $200,000 or $20,000 a year because they will still be living paycheck to paycheck.

When they see something of interest, they buy it.  In recent years, these people have gotten even less responsible because even if they don’t have the cash for it, they buy it on credit.  Eventually, debt catches up to them and they are unable to repay the monthly payments.  Their dream life is taken away from them and they need to spend years repaying the money that they have borrowed.

We Cannot Save the Earth but We Can Save for One
Some people never spend any money.  It’s almost like they were born without the temptation to spend.   Money in their saving accounts is like mail in the post office mail drop - there is only a way in and no way out.

These people can earn a pretty good living and be really wealthy without anyone knowing.  In fact, I suspect that some of them don’t even know themselves.  They save every dollar they earn and never seem to enjoy buying anything.

For the Rest of Us, It’s Not So Easy

Most of us are either more of a saver or spender but seldom the extremes.  We know the importance of saving but we also splurge every once in a while.  We like to buy new clothes for our kids but understand that we can’t do this every weekend.  We all want to know “When is it appropriate to spend?”

There really isn’t a magical answer but here are some things to consider when you have decide for yourself.

Have a Goal and Plan
At some point, we all retire because of physical limitations.  It is at this time in our lives where we start relying on our savings with some help from social security.  If we plan this right, we will have a very enjoyable retirement.  It will involve some mathematical formulas but one thing you will know is how much you should save each month.  Once you figure that out, you can spend the rest!

Learn from Others
You probably have friends that spend too much or friends that never spend enough.  Why not learn from them?  Instead of trying to always match everything that your “spender” friend buy, why not try to assess whether his purchase make sense or not?  Learning to think about situation will divert your temptation and help your urge to spend.

On the other hand, if your friend never spends any money and you often wonder how it is possible, why not try to ask for their advice?  These people often provide valuable insights into what money and materials really mean and you can probably learn a thing or two about spending and happiness.

What is Life Like Without Spending that Money
To determine whether the money is worth spending, I usually try to think of what life is like if I don’t spend that money.  Often times, I realize after some thought that I end up just as happy even if I don’t buy the thing I really wanted.  I really wanted the 3G iPhone when it came out a few weeks ago but I figured that life is actually the same with or without it, so I didn’t end up getting it even though I can afford it.

Know What Is and Isn’t Important to You
When I was thinking about moving to the new apartment, I know that it will make Emma and I much happier.  After realizing that, the decision to spend more money was simple.  6 months later, I can say that I’m extremely happy with my decision.

Sooner or later, there comes a time when we make more money. Whether it is because we got a raise or because we found an additional income stream, it is something everyone will experience. Most of us start spending more money when these events happen because we feel that we can afford the extra expenses. However, if we want to achieve financial freedom, I suggest doing the following instead.

401k and IRAs - We should increase our 401k contributions and IRAs! Since we just got a raise, we wouldn’t feel much of a difference since we can probably increase our contribution rate and still get a higher take home pay!

Savings and Investments - Exactly the same as above. If you get a raise of 5%, why not put most of it into savings and investments? You won’t feel a difference and you will be much happier down the road. Save more, keep more and get to retire earlier.

Spend Some, But Delay It - When we increase our income, we should save the money and start spending it in a year. That way, you give your money time to accumulate and start earning interest. If you stick to this plan, you might be able to just live off the extra interest that you are earning!

Of course we should celebrate when we get an increase in income, but we should do it responsibly! Work hard, spend with discipline and live happily!!

Last two weeks was amazing with the wedding, moving and seeing my subscriber count jump from mid 700 to almost 1000!  Thank you for everyone that reads and subscribes to Money Ning.  Those that haven’t entered yet should head over there and give yourself a chance to win $1500 since there is still time!

Moving and getting married often means a lot of money spent, and in my case it’s no different.  That’s why it is the more important to continue reading other people’s personal finance articles.  I’ve come across a couple the past few days so here they are for you to enjoy!

• Moolanomy lists some of the money mistakes he’s made recently.  This just shows you that even personal finance bloggers are human, and that we face the same situations as everyone else.
• My Two Dollars gives us five inexpensive things we can buy today that can help the environment.
• The Digerati Life shares with us how she plans to slash her budget by 25% by living more frugally.  Wow!
• Paid Twice urges us to start planning for next year’s valentine’s day already!  Although I think it’s a little early, planning early almost always saves you money!
• Being Frugal asks readers what his/her spending weakness is.  Remember to check out the comment section!
• Fiscal Musings shares with us why he chose to get MBA even though he has an electrical engineering background.

Remember to read all of the articles since the more you read, the better you become with personal finance topics!!!

Recently, my fiancee and I decided to move after we get married so we created our personal budget plan for this event. However, it seemed like there were many associated cost with moving that we did not consider originally. Although these add to our moving expenses, it wouldn’t necessarily change our decision. Nevertheless, let me share with you the ones we’ve discovered so far.

Extra charges for moving/establishing monthly services
We were charged $25 for establishing gas service and $15 for moving our electricity to the new place. On top of that, our monthly bill for our cable + internet will go up by approximately $30 dollars because the new company (Cox in our case) has pretty bad deals.

Cost of Moving Day
After hearing about people getting into arguments when they ask their friends to help them move, we decided to hire a moving company. We estimate that the charge will be $200 for this to happen. We figured that renting a truck for $100 and treating our friends to dinner afterwards is going to be the same price. So, we might as well hire professionals and preserve our friendship!

Duplicate Days of Rentals
We decided that we will get the keys of the new apartment on Feb 12th because it allows us to move into the apartment and have time to be with our families from overseas for our wedding. However, our commitment on the old apartment doesn’t end until Feb 20th. This means that we will be paying quite a bit of extra rent. In theory, you can always time it perfectly so you only pay one extra day of rent but it is often not possible. Therefore, most people will be paying extra rent when they move.

Hopefully there are much more expenses that we didn’t originally account for but I will definitely keep you guys updated!

Every year, I analyze my spending during the past year to spot irrational behavior and see where my money went. By doing this, I’m able to help myself find ways to save more in the future because I’m aware of where I like to splurge. I also use this opportunity to improve my personal budget for the next year by readjusting the categories to better track spending effectively.

I’m sure the benefits of analyzing spending are pretty obvious so let’s dive into the actual charts.

Housing expense is a necessity and its pretty stable so it is nothing exciting. Even though it’s steadily going up, it is still relatively cheap compared to other places that I am thinking about moving to.

Food expense is quite steady at roughly $150 - $200 a month. It is very interesting to note that the three big months (February, July and December) are all related to having a very nice dinner as follows:

• February - Valentine’s Day
• July - Fiancee’s Birthday
• December - Christmas Dinner

I wonder if my fiancee will see this and ask me to spend less money on those three big dinners!

Goods represent my slurge money on gifts for myself. As you can see, there are many months that I don’t buy anything at all. The biggest slurging month by far is July when I bought an iPhone. However, I don’t regret the purchase one bit since it helped me be much more responsive to my customers by letting me check my emails while I’m on the road. Overall, I’m quite happy with my spending habits in 2007 because I rarely bought anything the entire year.

Entertainment expense was surprisingly sporadic and I spent the most money on entertainment in December. I drilled down further and golf expense was by far the number one entertainment expense. Normally, I would tell myself to spend less money if something dominates a category but if I don’t even golf anymore, I wouldn’t have any motivation to save money since I would have no entertainment whatsoever. Furthermore, this level of spending is acceptable so I will continue to watch this but not try to adjust at all.

I definitely need to tweak this category since everything is falling under miscellaneous! Actually, there are basically three months with big spikes in money outflow and they are as follows:

• April - Prepay 6 months car insurance
• August - $4,000 deposit for wedding
• October - Prepay 6 months car insurance

As you can see, these were big ticket items that could explain the big jump for the month. I expect my car insurance to drop significantly next year as I get married and as my speeding tickets are erased from DMV’s record (it’s finally been 3 years). I will have even higher wedding expenses next year but that is to be expected and I would consider that a special case.

Overall, I’m quite happy with my spending for the year. As you can see, I usually keep everything under $2,000 a month including rent which is half of the total amount. In the future, I expect the 3 highest spending months to be drastically lower as my wedding expense and my car insurance premiums will be reduced. This thesis hinges on the fact that I do not move though. If I move after I get married, then my total spending will go up at least a couple hundred dollars per month.

There are two changes that I intend to make:

1. I’m changing housing expense to be called “necessary expense”. This means that my gas expense will be moved from miscellaneous to this category as will rent.
2. I contemplated a bit but I also plan to put all car related expense in necessary expenses since I really can’t function in Southern California without a car.
3. My entertainment expense includes outings where I treated my friends out to golf. I plan to separate this from entertainment. Starting in 2008, only expenses from my fiancee and I will be included here.
4. The separated entertainment expense and also all gifts will be under a new section called Gifts. In 2008, I want to see how generous I am with gifts to others.
5. 2007’s goods expense included goods for only myself. 2008 will also include Emma’s goods that I pay for. As we get married, expenses for her will be considered as my own so this will include all my gifts for her such as flowers, birthday presents etc.

What do you think? Do you have any suggestions on what I should look more into? Are you impressed with my spending habits or do you think it downright sucks? I’d love to hear from you so I can see if I can save more money in 2008!

Awhile back, I asked you how much money you would spend if you won $1 million dollars instantly. Before I go into details, let’s see the results first.

Would you rather get consistent monthly income or an one time payment?

• Monthly Payment!!
• All Up Front!!
• Can't decide... Help!!

View Results

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As you can see, many people (exactly 50% in fact) say they will spend less than 5% ($50,000) if they instantly won this amount of money. Stephen suggested

…I would put it in a high yield savings account that earns at least 5%. In a year, I would earn 50k or more in interest without ever touching the principle. After taxes, you are looking at around 35k a year to spend.

Pretty smart I’d say if you have no debt to pay. Many people instantly spend their good fortune and fail to recognize that delaying their gratification for 1-2 years might mean forever prosperity.

44% of the people voted to spend 5% to 50% of the winnings to pay off debt with a significant portion of it being their mortgage. Can you imagine that somehow you don’t need to pay your monthly mortgages? Thinking about these types of questions are the reasons why we all buy lottery tickets. Personally, I buy lottery tickets only once in a blue moon because I buy it for the fun of checking the numbers against my ticket and not because I believe I will win. I feel that if I put too much emphasis on pure luck, it demotes the importance of hard work.

6% of the people plans to spend all of his winnings. Several people claimed that $1 million is not that much money nowadays. This is certainly true but every little bit of savings help! These people are probably the ones that also say their income is too small for them to be able to save money. To that statement, I honestly say “Shame on You!”. There are always ways to save more money, especially for people that live in a developed countries because of our relatively higher incomes. Be creative and you will find ways to save, guaranteed.

So which option did you vote? Did this article help change your mind?

The holiday season is coming and our company asked us to participate in the annual Secret Santa event. Secret Santa for those who aren’t familiar is a game where each person buys a gift for another person. Everyone picks a person to buy the gift for by drawing the name out of a hat and the recipient of the gift is never supposed to know who the gift came from. The idea of this is very good, but the last few years have seen the price limit of gifts skyrocket.

Every year, we say that the rules are to buy a gift that falls in the $10 - $15 range. This is good because it keeps the dollar amount low so everyone can concentrate on the fun spirit of the game instead of thinking that it will break his/her wallet.

Last few years though, things have changed. There were some people that literally buy gifts that must be worth at least $100 dollars. Some of you might think that this is fine if the person wants to spend the money but what ends up happening is that everyone else is pressured to buy a more expensive gift now. (It is interesting to note that the boss always get the most expensive gift.)

Instead of the game being fun, it has turned into a good size expense for people who participate. The game is supposed to be fun and creativity should be a big part of it! The excuse that one cannot buy anything for $10 - $15 is just incorrect! The point of Secret Santa is so everyone gets something around Christmas and seeing what everyone else gets, not to mention the fun we get with shopping for the gift. There’s nowhere that says gifts have to be at least $50!

It’s Christmas! Enjoy our Secret Santa game and don’t spoil it! I hope that everyone that works at my office stumbles onto this article before they buy their gifts this year!!

What about you? Does your company host Secret Santa? How is your experience there?

No matter how frugal we are, everyone eventually ends up spending money. Christmas is coming up so the need to make difficult buying decisions will fall onto our shoulders. It is at these times that people who are frugal can really spend much less money than people who aren’t.

It is also during these holiday times when our wish list suddenly pushes itself onto the forefront of our minds. Not every wish list item is created equal however. Some can cost tens of dollars while others can be hundreds, if not thousands.

We cannot buy everything and probably cannot even afford some items on the list. I for instance can scratch the Ferrari off this Christmas’ shopping list so let’s not focus on those. Do we just buy the most expensive item on the list that’s remaining? Is putting a monetary value to it appropriate?

What do you think? How do you decide what to get for Christmas, either for yourself or for others?

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