Spending Your Way to Savings

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 ...


10 Years

20 Years

30 Years

Plasma TV





Dress Watch





Road Bicycle





Winter Adventure





Splurge Total





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!

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