I had a lot of fun with the December "Best of Everything" issue of SmartMoney magazine. My copy arrived over the weekend, and I couldn't wait to see how much I could save by picking the smart choice. As it turns out, being frugal is a relative concept.
The feature article identifies nine holiday-season "splurges you deserve." First off, it seems, I just have to get a plasma TV. The winner is a model for the bargain price of $3,499. Bargain price? But of course! One of the runners-up costs $4,999. See? With my first splurge, I've already saved $1,500!
There are plenty of other categories. In place of my $15 wristwatch, I can upgrade to something called a TimeWalker for just $2,150. A bit more expensive, but it's still $1,300 less than the even more expensive model that's recommended as the magazine's all-around favorite.
Similarly, picking a $3,000 road bike can save me $600 over the runner-up, even though I haven't actually ridden a bicycle in years and have no interest in it now. And since my wife constantly fantasizes about vacations, I think I'll pick up a week at Lake Placid for just $4,480 per couple. Compared with the runner-up Antarctic cruise, put another $8,000 in the savings column.
Do I need all that stuff? Nah. But I'd sure hate to miss that savings!
But on further reflection ...
As tempting as these items are, maybe I ought to think about what spending that money could really cost me. Let's see what happens when I plug the prices into a future value calculator at 10%, which is just about the market's historical annualized return.
|
Best Of ... |
Price |
10 Years |
20 Years |
30 Years |
|---|---|---|---|---|
|
Plasma TV |
$3,499 |
$9,076 |
$23,540 |
$61,055 |
|
Dress Watch |
$3,450 |
$8,948 |
$23,210 |
$60,200 |
|
Road Bicycle |
$2,999 |
$7,779 |
$20,176 |
$52,331 |
|
Winter Adventure |
$4,480 |
$11,620 |
$30,139 |
$78,173 |
|
Splurge Total |
$14,428 |
$37,423 |
$97,064 |
$251,760 |
Wow! It turns out that the splurges my wife and I deserve could cost us more than a quarter of a million from our portfolio 30 years down the road. All that for a bike hanging in the garage, a TV with nothing worth watching on it, a watch that's so nice that I don't dare wear it on the street, and a photo album full of vacation pictures.
That sounds pricey. Maybe splurging on luxury purchases isn't the best of strategies for our household finances -- even if they are a bargain. For us, this holiday season's smart money will go into our IRAs!
