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Friday, February 13, 2009

Paying Yourself Forward: Spend or Save?

There was an interesting essay in the New York Times the other day. It had a bit of tongue-in-cheek to it, as well as some serious suggestions. There was a fair amount of outrage in the Comments section. Finance is a sensitive subject these days.

Anyway, the article talked about how we can be “patriotic”: do we spend or do we save? For years, Americans were chided for spending and not saving; now we are being chided for saving and not spending. The problem with saving has to do with the “paradox of thrift,” whereby spending can help the economy as our money spirals away from us, while saving is basically like putting a stopper in your drain.

The author went on to suggest a kind of spending that would be good for the economy and for us. He said we should spend for our future selves. Hence, instead of patronizing a rent-to-own furniture store (shoddy stuff at usury-level interest) we should save up for a better and less expensive sofa. He said that a Costco membership would help a family with babies save on diapers. Getting a programmable thermostat and investing in other energy-saving items would save your future self money on utility bills. And so on.

Well, aside from the fact that I am a strong advocate of cloth diapers for the bottoms of our precious little ones, I think all the ideas are good ones. Read the essay for other pay yourself forward ideas.

Then I thought it would be instructive to look back and see what I have now that involved paying myself forward. What was a nice gift from my past self to my present one? My big All-Clad sauté pan, my Calphalon cookwear, a few cookbooks, my good quality sheets, the expensive alpaca blanket that my son “borrowed,” the big cupboard in my kitchen, and, of course, my too-expensive cottage with its slate roof. All these items were bought expensively but right the first time and will provide many years of good service.

Wow! That’s a short list. Of course, I could mention my cloth diapers, but I gave them away long ago. Not one item of clothing or jewelry makes my list.

Then there are the intangibles that bring us the greatest happiness, according to reports. For this I would include our many vacations to visit family and to travel abroad. Funding our children’s trips to Japan and elsewhere. Sending our kids to a wonderful pre-school. Sending our kids to a wonderful summer camp. These pay forward memories, but are not the kinds of things the author was talking about.

Of course, all these lists are very personal. I was struck by how long it took me to compile my short list. And I am going to start thinking about how to pay forward my future self.

And so, dear readers, how did your past self pay forward your present self? And how will you pay your future self forward?


The Fabric Bolt said...

Good post today! My "pay forward" has a little twist. This is the second month where I have set a strict grocery budget - to be spent at grocery stores and target for household stuff like toilet paper. $400.00 for the four of us. Nothing else comes out of the monthly allotment for household except monthly bills. Everything that is left in that allotment gets set as a check at the end of the month to the mortgage company as an additional prepayment. So, I am spending, but on my future, to have my house paid off earlier. Don't know if this quite fits what you are saying, but this is quite important to me. Once the house is paid off, a lot can happen and we'll still be OK.

The Fabric Bolt said...
This comment has been removed by the author.
Frugal Scholar said...

This is a fantastic idea! Every time you save a bit at the store it goes to the mortgage. The great thing about that is, if you look at your mortgage statement, you can see exactly how much you are saving and when you will be mortgage-free! Love it. Thanks for posting this great idea.

Mary said...

This is the way I always live my life. Almost always, if you go cheap and have to re-purchase, you end up spending more in the end. I buy good quality towels and bed linens, I have All-Clad pots and pans (expensive but will never need replacing and yes, good pots & pans do make a difference). Last year I bought good quality patio furniture. I have bought more expensive DeWalt power tools, oh my goodness, I can't even think of everything. I've really adopted a pattern of saving until I can afford what I perceive of as the "best" and doing without until I reach that goal. It seems to work for me.

Frugal Scholar said...

Great comment. I've read your posts on cooking so I know that All-Clad is getting a good workout. Thanks for stopping by.

Duchesse said...

This is a variation on my parent's lesson of "buy the best and make it last", the "last" being your future. I would include my jewelry, which has returned decades of delight. My DH would list the wines he buys and cellars for many years. But really these things are luxuries we could live without. The most important thing is the educational savings plans for our sons, which we put in place when they were born. They are 21 now so we have yet to see how the investment plays out but I'll bet it's a good one.

Frugal Scholar said...

@Duchesse--Your comment and some of your blog posts make me realize that I should honor the jewelry I have from my grandmother and great-aunt by WEARING it. Aren't we lucky to have these luxuries, including wine?

Shelley said...

Way back in 1979 my Grandmother decided to sell all her furniture and move in with my Mom. It was Duncan Phyffe styled furniture she bought in the 1930's and I loved it. Mom gave me the heads up on this as I bought my Grandmother's living room and dining room furniture for $4,000. I'd been in a car accident with a drunk driver and had just received an insurance settlement. The upholstery was in sad shape and eventually, after saving up, I spent $2,000 to have the furniture recovered. 30 years later I still love my furniture and get lots of compliments on it. I will never need to consider any of the TV adverts for new furniture and consider my money very well spent.