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Strategic Spending: The “Fruitful or Frivolous” Test

Overspenders and cheapskates have the same problem. They can’t make strategic spending decisions. Can you?

Overspenders and cheapskates have the same problem. They can’t make strategic spending decisions. Can you?

If you have ever seen 3 a.m. infomercials or browsed the web long enough, you have probably seen slick self-help gurus pitching their multi-hundred dollar programs as “the best investment you’ll ever make it!” Of course, they want you to believe you’re “investing” money in their program, not just spending it.

In a way, they’re right.

Not that you should buy some box of promises from an infomercial; but you should ask yourself every time you buy something: “is this an investment, or am I just blowing money?”

To tell if a widget you’re about to buy will be fruitful or frivolous, ask yourself: “Will this widget appreciate in value?” If yes, it’s a no-brainer. But even if not, ask: “Will this widget enable me to do my job better, to land a better job, to earn more money?” Yes? Then it’s probably a wise purchase.

The interesting thing is that the same widget might be fruitful to one person yet fruitless to another. To a carpenter, new tools are one of the best investments she could make, but she wouldn’t get much out of a business suit. Conversely, an executive might like some tools to do woodworking on the weekend, but they aren’t going to win her business like dressing sharply might.

The rule of strategic spending doesn’t just apply to products or services that will provide a financial return; health and happiness matter, too. You can’t put a price on the fitness benefit of a regularly-used gym membership or relaxing on your annual vacation.

What then, is frivolous spending? It’s “buying for buying’s sake”. Frivolous spending going to the mall on a Saturday because you can’t think of anything better to do. It’s buying made-in-China souvenirs and as-seen-on-TV gadgetry. It’s anything that you don’t need, or doesn’t add value to your life.

Marketers talk about “value” all the time. Value is arbitrary to an extent, and value is always subjective. An extremely well-researched engineering textbook might sell for $100 or more. To a third-year engineering student, that book is a career tool and easily worth $100. But that’s an expensive book to you and me. Supposing I had a genuine curiosity about engineering and thought I would read the book cover to cover to learn more about how things work, it is unlikely I would ever get $100 of value from that book the same way the student will.

Assessing the personal value of every potential purchase is the best way to decide how to spend your money. It will help you stop buying things you shouldn’t and make it easier to spend money where it’s needed.

Do you have any tips for assigning value to your purchases or prioritizing your spending? Please share them in a comment!

About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

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