Anthony's spending tip - buy stuff that you like...

A couple weeks ago, Jane Galt had savings tips followed by a defense of them after people in the comments accused her of basically assuming that everyone should think like she does. She said that people should save more, and should spend money on things like family, pets, and exersize and not on Starbucks, chain resturants, flat panel TV's, cars, ect.

I tend to be somewhere in the middle on this. Savings is important, and reducing costs is a great way to save money. But people have different preferences than she does, and I don't think that buying a daily cup of Starbucks or the occasional resturant meal or lunch out is going to wreck you - if you are careful in the other things you spend money on.

I don't buy takeout coffee - I brew my own and take a travel mug with me. It actually takes me less time than parking, walking into a coffee shop, waiting, and walking back out would. I do, however, splurge for good beans - usually Starbucks or Trader Joe's. I try to brown-bag my lunch, but often end up eating lunch out - but aside from my weekly Taco Bell trip, that's about the only time I eat out.

I don't think cooking is quite as simple for many people as Jane makes it out be. By the time I get back from the gym most days, it's usually around 6:30 and I've usually still got a bunch of stuff (homework, paperwork, ebay, cleaning, ect) to do. Also, I don't have a real kitchen on my floor in the house I share - just a microwave, toaster oven, and stove. I can use one of the house's downstairs kitchen, but it's a pain to carry everything up and down two flights of stairs just to cook dinner. So I end up eating a lot of frozen food, which is cheaper than takout but more expensive than cooking from scratch. But it takes a lot less time, and I don't have 20 dishes to wash afterwords (and no dishwasher), so it's a reasonable compromise.

And I think that's what most people do - compromise. I want a new car, but I'm going to try to get another couple years out of my paid-off Chrysler. I'm still using the same TV I bought 7 years ago - but when I finally convince myself to buy a new one, it will probably be a plasma. I splurged on an iPod Nano last month, but I use it almost daily, so I think it was worth it - and I resold the shuffle it replaced to a coworker for half of what I paid.

Economists have used the term "satisficing" for explaining the decisions people make when faced with an information overload. Spend enough time researching, and you can come up with the perfect optimal decision - but at huge research costs. So you make the best decision possible with a reasonable amount of research, and that's usually good enough. I think people do that when they plan financially too - they compromise. They spend money on the things that they get a reasonably good amount of benefit from. They use an alternative that sits somewhere between the most expensive and the least expensive.

And of course, not everyone's values align. I've been a car nut all my life, so I'm willing to spend more on nice new car, even though it would be cheaper to buy a used one and drive it until the wheels fall off (and then put them back on and keep driving). I'm an electronics junky, so I spend more than most people on computers, electronics, and gadgets. But I'm also a bargin hunter, so I spend a lot less on those gadgets than most, and make some money reselling good deals I find (and can easily eBay gadgets that I no longer want and get most of what I paid for it). On the other hand, I don't have any pets (and don't trust myself to have care over any living thing), and I don't have the time or desire to travel. Most of my "vacations" consist of visiting my parents in NJ, which costs me about $50 round trip in gas and gas-station coffee.

I'm also planning on violating another of Jane's rules, "wait a few years before buying a house." The market in the Baltimore area already appears to be softening - from what I see, asking prices haven't dropped a whole lot, but houses are staying on the market longer and people are making offers below the asking price instead of above it. I'm not convinced that there is going to be a sharp decrease anytime soon barring massive unemployment, so I think now is a good time to buy. People have to live somewhere, and there isn't really any undeveloped land in Baltimore (and what little there is is being used for high-end homes) - so I don't think housing prices will go down much. Plus, I'm getting tired of living in my tiny apartment and tripping over stuff all the time. I feel that I've sacrificed and saved long enough, and that now is the time to act.

Which means that housing prices will probably drop as soon as I buy, knowing my luck.