5 Examples Where Wasting Money Is Worth It

5 Examples Where Wasting Money Is Worth It

IAM1PERCENT recently put up an interesting post regarding 10 Examples of Wastes of Money which really got me thinking about costs and benefits of a range of items, from the cell phone in my pocket to the pool in my yard. What makes a decision to spend $2,500 on LASIK wasteful to him, but completely worth it to me when I had it done 8 years ago?

The answer could be analyzed in simple economic terms – is the incremental enjoyment of a more expensive choice worth the incremental cost of the item. As IAM1PERCENT points out, it’s often about what an individual values and prioritizes and is therefore a purely subjective point of view. Here are places that wasting $$ makes sense to me:

  1. Smartphones – I’m an Apple evangelist and feel that the premium you pay for the newest shiniest phone is valid. I have my phone with me all the time and use if for entertainment, news, communication and even on rare occasions, a phone call. iPhone’s do everything more simply and intuitively than the best other phones out there, many of which are really catching up but not there yet. So the $299 I paid for an iPhone 5 (I wouldn’t justify upgrading at a non-subsidized price) when you can get really cool phones for much less was worth it.
    • But – I don’t use Apple PCs; my family and I use enough Windows-based software at home that the benefit (and learning curve) of a switch to Apple PCs just isn’t worth it. Windows PCs are fine for now (although Windows 8 is pretty bad).
  2. Vacations – I’ve fairly recently become a believer that a great location/resort makes a vacation more memorable. We take a couple of vacations a year. Staying on the property at Disneyland while in Anaheim or taking the cruise on a massive new mega-liner is a substantively different experience than driving over to the park each day or cruising in an older boat. There is a premium for this but it’s worth it.
    • But – Upgrading to the multi-room cabin or the penthouse suite doesn’t justify the premium. Given we are a family of 5, it gets harder to squeeze into one hotel room but the prices of suites or multiple rooms don’t justify the added benefit.
  3. Steaks – We grew up in a more modest life style and my parents were immigrants who grew up with much less. They always joked that they wanted to have a steak for dinner but when they finally could afford it regularly, doctors would tell them to cut back. While I don’t pretend to be an overly healthy eater, it seems pretty clear that less red meat makes sense. So when I do grill a steak, it’s worth it to me to spend the extra few dollars on a good piece of your favorite cut. When you don’t have something that often, splurge when you do.
    • But – I enjoy wines but don’t appreciate fine wines. I’ve been fortunate enough to have some really expensive bottles of wine at the best restaurants. Even after a wine tasting class, I can’t really appreciate the difference between price classes of wines. I’ve had great $10 bottles as well as lousy ones. I’ve also had great $500 bottles as well as lousy ones. So if it’s a little hit or miss, I’d stick to a new $10 bottle and take my chances on whether I love it or not.
  4. New Cars – I get the logic and appreciate the numbers; new cars lose a significant fraction of their value the second you drive them off the lot. There is no disputing this fundamental point that from a strict $ perspective, buying a used car and selling the old one at a cash for cars site online makes sense. Similarly, I get that leasing is generally a bad move with a byzantine cost structure that makes it nearly impossible to figure out all the finance charges, fees at turn in, etc. and to understand whether it’s a good deal or not (or even compare deals). The best option financially speaking is to purchase a 2-3 year old car, maintain it meticulously and keep it for 10 years. I don’t do that.
    • But – We have recently moved away from premium brand cars. A friend once described himself as a ‘point A to point B car guy’ and I completely agree. Today, a top of the line tricked out minivan costs 50% less than a family sized Lexus or Mercedes. The status that these brands convey isn’t worth it to me. Their reliability isn’t that much higher to justify the premium, maintenance costs are significantly higher and I’m fine with the internal luxury of a new top of the line Honda over a few year old Acura especially since I get a to replace it with the most up to date model often. Driving performance hasn’t been a factor in my car decisions for many years, and I get my tech and environmental satisfaction from a Prius (new of course).
  5. Pool – We dropped a bundle over the last 2 years on a pool, patio and pool house – about $300,000. Before beginning our project, we evaluated a bunch of alternatives that would have kept the project to a sane budget – type of pool and features; pool house, outdoor kitchen, fire pit, water slide or not; size and type of patio; etc. At the end of the day, it came out spectacularly and really created an outdoor living space that we enjoy with family and friends. From an investment perspective, it’s a money loser. For net worth purposes, I assumed it added less than 50% of its cost to the value of my house, and direct maintenance costs are fairly high. However, we love playing host every weekend, and I look forward to my house being the place for my kids to hang out with their friends (from a purely selfish perspective of keeping an eye on them). At least that is the thinking today, I’m told the joys of hosting fade considerably over time.
    • But – We decided against buying a summer house because it just wouldn’t be utilized enough. The opportunity cost of investing there over other options didn’t sell me, for I could rotate weeks at various resorts for the place’s carrying costs and I didn’t believe I would enjoy the place renting it part of the time.

And a final thought on IAM1PERCENT’s article, while I agree with a couple of his examples of wasting money, I will continue to shop in Costco for another big screen super flat LED TV using my cell phone to check reviews for the right model, which I will bring home in a reliable new car, then hook up to my premium cable package and watch from across the room (without the need for contact lenses).

About The Author

Edwin is a marketer, social media influencer and head writer here at I Am 1 Percent. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.


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18 Comments

  1. six figure investor

    The tradeoffs on car buying and leasing are worth your time to analyze. Here’s my recent experience. I was looking for a second car. I decided to lease for the first time. Here’s why.

    If you buy an ordinary car, it will cost about $20,000 (some are less, many cost more of course). If you average that out over 10 years, assuming you want to keep it a long time (good idea), it comes to $2,000/year.

    You would need to factor in some maintenance in the out years, call it $5000. This increases the average yearly cost to $2,500/year.

    It’s possible to lease a car for this amount of money ( or likely somewhat higher) per year. You get the benefit of the opportunity cost of keeping your money (the lease I got was no money down). If you don’t pay in full you would need to get a 3% loan today. So the lease lets you keep your money or save the 3% interest.

    If you buy a 3 year old car, the math will likely work the same way. You save money but the maintenance costs will occur sooner. There’s no getting around the average yearly cost however you choose to structure it. (You can get lucky and get a car that is relatively problem free – but they still need brakes, etc.).

    You have to be willing to live within the lease constraints (mileage/year). But, the lease provides a lot of certainty with your costs since the maintenance and warranty cover you during the lease.

    Reply
    1. ANOTHERKINDOF1%ER

      Makes sense. In my case, its a loaded minivan, about a $40K car. I always try and negotiate assuming absolutely $0 down and nothing out of pocket on day 1, to try and get apples to apples comparisons from dealers (this works OK once you settle on the car and just go to some local dealers to compete on price). Price works out to a little over $500/m so $18k out of pocket for a three year lease. Rough numbers tell me I’d probably have more than a $22k residual value after 3 years if I bought it outright, even factoring in opportunity cost on the sunk $$, so I presume the lease is a bad financial move. If I do this over 10 years, with successive cars, it’s clearly a bad move as compared to simply buying and holding the original one.

      So I cite this as an instance where I know its a bad $$ move, but its a price I’m willing to pay. Thanks for the feedback.

      Reply
  2. krantcents

    I think I agree with all of the above arguments, although I do not have a smartphone! I use a PC, but I am going to switch to an iMac in the next few years. The learning curve is nearly zero since they started to use Intel chips. The platform supports all the things you are used to on a PC. The only difference is no right click mouse and a few other minor things. Quality products are less expensive and more problem free in the long run.

    Reply
    1. Shape

      The Intel Chip is the CPU. It has nothing to do with the ease of use of the machine or the learning curve. I can run a windows machine on an Intel and on an AMD and it does nothing to change how I see or use windows. The same applies to Mac. You can run their OS on both CPUs and it would be the same.

      In fact, no hardware in the computer such as hard drive, video card, RAM etc. changes the way you interact with Windows or Mac.

      I have access to both and its not a learning curve but a fact that you have to relearn where and how everything is done. Most of the time if I am having issues with a network I can solve them much faster on a windows box than trying to troubleshoot with a Mac. When I have had Mac issues most of the online solutions are people waiting for apple to fix them with no real solution. I have NEVER encountered that with any Windows machine and I run a lot of them including a bunch of servers.

      Reply
      1. ANOTHERKINDOF1%ER

        Agree with Shape on this. Not really an Intel Chip issue, and even subtle differences in operating styles make a huge difference in explaining things to my kids at a young age. And my wife is awesome in so many ways but actually believes she emanates an electronic field that causes PCs and other tech to fail on her, so introducing a new OS is problematic – her switch to Windows 8 on a new PC is not going well.

        Reply
  3. Shape

    You should have jumped off the iphone bandwagon, went with a new Android phone., and saved money. The Samsung Galaxy S3’s are by far the best phones on the market. The previous Droid Razr Maxx’s are still high on the list despite being on the market a year (a massive battery, big screen, solid aluminum frame, gorilla glass, water resistant, kevlar back all in a thin phone you can drop without a case and not break anything). Plus, most other phones get the latest features way before the iphone.

    And, all phones have been simple to use from the Blackberry I had 5 years ago, to my iphone, and now my Droid. They have all been intutitve and simple (wait, I can’t say that as I have not use a windows phone yet).

    In regards to cars, I use to buy new, but now buy used. I can get better cars used and some still have warranties or extended warranties. With the internet and network of shippers in this country you can shop every state, find the car you want with the features you want, and get it brought to your door. I would rather save that new car premium. Also, New cars are getting more reliable so a used car doesn’t mean “used” like it use to. In fact, used doesn’t even have to mean old. The last car we bought was a year old.

    I still look for performance in cars though and being that my commute is so short mpg aren’t a concern.

    Reply
    1. ANOTHERKINDOF1%ER

      I’d love to disagree with you on the iPhone 5 but you make a lot of sense. I wouldn’t have said that on the 4, but the 5 isn’t as far ahead of the pack as the 4 had been. I’ve never had a chance to ‘live’ with an Android phone but the general impression I get from reading and users is that it is still a little more techie than an iphone, for example Android app store experience isn’t as curated as iTunes, more tinkering is involved to modify settings properly, etc. I think I’d enjoy it but am not certain that others in my family would, for example the kids love the apps and I’ve got a few years worth now invested in it. But I do stare at the S3 and its beautiful screen (maybe too big), and will strongly consider going outside Apple soon. Fortunately/unfortunately we are now a multiple smartphone home, and I’ve staggered upgrades out so will be choosing again soon enough. I don’t claim many prerogatives of being in charge around here but I do get the new phone…Interestingly I bet if I got an iphone 6 or S4 later this year, and offered my wife the 5, I’d bet she turns it down because the battery life is much worse than the 4.

      On the cars, perhaps its because I don’t go for a high end car that I generally go new. A 3 year old Mercedes or Lexus is very different than a 3 year old Honda or Toyota. Its possible that my theory on getting 3 years out of a new car before headaches develop is only really true for those. Will have to think about that, but I stand by the fact that after 3 years of use in my family, I’d pay them to take it away.

      Reply
      1. Shape

        Another thing about phones running Android is Swype. I don’t think I can go back to a normal keyboard now.

        I would have considered a 3 year old Honda or Toyota more reliable than a 3 year old Mercedes or BMW. I don’t know much about Lexus reliability. My parents had a Toyota for 8 years with minimal issues. A friend is on his second Honda with the first having over 200,000 mile on it before ditching it for another used Honda, which has been giving similar superior reliability over the last 2 years. He also racks up a lot of miles on his cars (Something like 55,000 / year). I have had time to use a Honda Ridgeline and its quality has impressed me, especially the quality of the interior components and sound system.

        Hyundai has also impressed me with their Sonata, which I always try to rent for business trips. The surprise is the 37 mpg I averaged and the 600+ miles I was able to drive on a single tank.

        For our last car purchase I was looking at Consumer Reports reliability ratings, but then came across another report that looked at the cost of repairs. The report also used mechanic records instead of relying on owners to report their own problems, which the Consumer Report study does (self-selection bias).

        This other report compared the total cost of repairs instead of the frequencies and brings up a good point. Who cares if your car has 2 issues per year that cost $150 each to repair vs another car that only has 1 issue in 2 years but costs $2000 to repair. The severity also can dictate the inconvenience of the problem. A cheap repair is probably less likely to be a problem that leaves you stranded on the side of the road or takes a long time to repair (e.g. a transmission rebuild is a lot longer than swapping out a window motor). We went with a Subaru for our last purchase because the average cost of repair was around $150 for the model we chose. It so far has been a nice car, but I still prefer the performance of my Infiniti.

        When you get into the Luxury cars it definitely becomes one of those things that is a “waste” of money, but if you are into that sort of thing it can be a quality of life improvement.

        Reply
        1. iam1percent

          Lexus is made by Toyota so the reliability is equal to toyota. Most of their cars are essentially the same engines stamped with a Lexus badge. Same goes for Infiniti/Nissan and Acura/Honda. Of course you pay a slight premium for the nameplate, but to some, its worth it.

          Reply
  4. TX Mom

    I have to agree your luxury spending list is very similar to ours…All those wasted dollars have enhanced our life (maybe not financially but in overall quality) and I don’t feel one ounce of guilt about it. I put about 20,000 miles a year on my car and with 4 children, I count on the reliability of a new vehicle every 3-4 years. The lifetime memories we have collected from great vacations and grilling a prime steak around the pool with family and friends are priceless.

    Thanks for your article, I enjoyed reading it with my surgically corrected vision!

    Reply
    1. ANOTHERKINDOF1%ER

      Thanks for the kind words – great to get some feedback that I’m not wacky in my choices. Got to admit that some good points are being made here on a used car over new, and leasing vs. buying, but no one can argue a good steak.

      Reply
  5. Mrs. Pop @ Planting Our Pennies

    Our luxury list is significantly smaller in magnitude compared to yours, but the idea is basically the same. If something is enhancing an experience that we value a lot, we’re a lot more likely to make the extra spend than if it’s on something that we aren’t really that into.

    Reply
    1. ANOTHERKINDOF1%ER

      Totally agree, tough to judge sometimes and juggle where its worth it. Also rough when different family members have different priorities. Seems easier to do now that the kids are young, but makes me wonder what happens when they become teenagers and really have minds of their own….

      Reply
  6. Brick By Brick Investing | Marvin

    Very interesting list. I agree that a smartphone is worth it especially in this day and age. I’m also an avid steak eater and could not agree more, we eat cuts that are very lean coupled with regular exercise.

    Reply
  7. KK @ Student Debt Survivor

    As you said, it all sort of boils down to personal choice and what you value the most. What’s worth the extra money for me might not be worth it to you. I’m sure this even varies within families. On a lesser scale then you mentioned, the BF is willing to spend on an iphone and computer things that make no sense or no difference to me. I’m willing to spend on $50 face moisturizer because it’s the only only that works for me. BF thinks I’m nuts and will use $10 drugstore cream. To each his own.

    Reply
    1. ANOTHERKINDOF1%ER

      KK – great example on the moisturizer vs. tech toys. I think the key is to balance these choices, and only select some of them hopefully which give some max value preferably without blowing the budget. The $200 on a new iPhone each 2 years will not be the end of the world, but if you also need the new ipad mini and touch and …., then you quickly get out of hand. If the moisturizer works for you, then you go for it and (at least in my wife’s case), its a moment of joy each night that is worth it. At some point, however adding the same expensive line of shampoo, blush and perfume gets to be too much and eats into other goals. So I agree completely that its all about personal choice, so long as some prioritization and constraints are placed with a longer term view in mind.

      Reply
  8. Renee s

    haha, I like your style. You know what you want/like and you’re honest about it. I admire that 🙂 I may not agree with it all (however, I am far from being in the 1%…so my priorities may change as my net worth increases), but I like your reasoning and your “but…” section.

    Reply
  9. toof

    I never understood the passion over steaks or why steak is such a sacred cow (pun intended). It’s just bare meat. And, yes, I’ve had “good” steaks at many fine/expensive steakhouses. What gets me most is when others act offended when I add A-1 sauce or ketchup or something to MY steak (not theirs) to give it flavor. I’m not asking them to eat it. Why don’t they get offended when I put ketchup on my hamburger?

    Reply

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