Lazy Man and Money

Sometimes, Luxury is the Most Financially Sound Option

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[Today’s article comes from a new author, Megan Sullivan. She’s got a different perspective on personal finance, that I don’t necessary subscribe to, but I thought it was worth exploring. It’s probably because I’ve got two small kids, but I’d certainly value a couple of trips to Applebee’s. You’ll see what I mean in the article below.]

What makes something affordable? Is it really only a matter of the price tag? You might think so at first glance. But closer inspection reveals a more nuanced truth. If I offered you a used Yugo for $10,000, you might balk at the idea, and rightfully so, as the best of them didn’t cost that much when they were new, and actually being made. Whatever stock there is remaining has certainly not gone up in value. But what if I offered you a brand new Mercedes fresh out of the factory for that same $10,000? Suddenly, it is the most affordable thing you’ve ever heard of. What changed?

Affordability, cost effectiveness, and financial soundness (whatever term you prefer) are all relative. In a vacuum with nothing else available for comparison, those concepts are meaningless. So if you find yourself looking to make a big-ticket purchase, regardless of what you might have heard, there are times when the luxury item is the more financially sound decision. Here are a few factors to consider:

How Long Will It Last?

Back in 2006, nbcnews.com did a report on the life expectancy of the average automobile. Based on data from Consumer Reports, it was about 8 years. That is not particularly impressive when measured against the fact that 1995 Mercedes Benz parts are still being bought on aftermarket sites by happy owners of a 20 year-old vehicle. With reasonable upkeep, those cars are still going strong, with no signs of stopping.

In financial terms, what is a financially sound amount of money to spend on a car? A big part of the answer is dependent on how long you plan to keep it. If you are going to turn it over every two to five years, you should probably think about leasing. If you plan to keep it for a long time, and even pass it down to your kids, a luxury car that is built to last could make a lot more sense.

How Important Is the Experience of Using the Product to You?

Sticking with cars, do you consider driving a utilitarian function, or is it an experience worth savoring? If you are the type of person who only cares about getting from point A to point B, then utility is all that matters. You are unlikely to place a very high premium on experience. However, if the drive is more important than the destination, you may be willing to accept less utility for a greater overall experience.

Safely getting from point A to point B is a necessity. Any experience above that is a luxury. Perhaps that experience you seek is sudden acceleration, raw speed, or race-track performance. Those are still luxuries just as much as heated leather seats, mahogany accents, and foot-massaging floor mats.

If those are the experiences you desire, then you don’t save any money by purchasing something without those features. You will not be happy with your purchase. You might even buy a bunch of expensive, aftermarket modifications to try to get what you should have bought in the first place. There is no substitute for experience.

Does It Scratch the Itch?

How much anxiety and dissatisfaction are you willing to put up with over not getting what you really wanted? When a company offers an inferior product at a steep discount such as two for the price of one, they are hoping to make up for in volume, what they cannot offer in ultimate satisfaction. You don’t want two meals at Applebee’s. You want one great meal at Ruth’s Chris. You don’t want two Blackberry phones. You want one iPhone. You don’t want two Chromebooks. You want one MacBook Pro.

Accumulating a bunch of “reasonably priced” items that you don’t want is not nearly as efficient as getting the one thing that will satisfy you in the first place. The same is true for allowing price to trump experience and longevity. When it comes to making the most financially sound decision, sometimes the luxury item is the better deal.

Veteran’s Day Deals that Aren’t

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I’m usually not one to look a gift horse in the mouth. If you’ve got something free, I’ll definitely look into taking it (though that leads me to me collecting a fair amount of junk). That said, this is the time of year where everyone posts great Veteran’s Day meals and deals.

As I’ve mentioned many times before, my wife is in the military and though she’s not a veteran, she qualifies for many of these deals. Over the years we’ve tried to take advantage of them. “Try” is often the operative word. We’ve found that going anywhere near an Applebee’s, one of the top advertisers, is a mess. Wait times are often over an hour long. I’ve seen them set up tents outside with coffee for the people waiting.

Last year, we went to Chili’s. Chili’s has a similar deal, but we’ve found it to be less crowded if you get there at 5PM. By around 5:30 it started to fill up and a line formed. (It may vary based on location.)

I took a long-look around because I think I noticed something interesting.

I asked my wife, “Do you see any single military men here in a group?” She thought maybe she saw one couple on the other side of the restaurant, but couldn’t be sure. I saw table after table filled with families, 3 or 4 people at every one. It occurred to me that this is almost exactly the kind of deal that you’d get with an Entertainment Book coupon… a buy one, get one free dinner. And as I covered previously, it is questionable whether the Entertainment Book saves you money. Restaurants do these deals because it packs the house and they’ll make up the cost of a free meal on drinks and the other meal. Now if 7 military guys go out in one group and fill up a restaurant, they are going to lose some money. However, it didn’t look like that was happening. My wife noted that military often marry younger – they get a pay bump when they have a spouse as a dependent.

So in the end, while it is a good deal, I find it more of an amazing marketing gimmick to pack the restaurant for one day. Considering that Tuesday is usually a very light day for restaurants this is likely to be profitable.

Another “deal” that caught my eye comes from Home Depot. They do a bit of advertising for their 10% discount on Veteran’s Day. For a long time my wife would save up her Home Depot purchases to get the savings on that day. What they don’t advertise as loudly: Military gets 10% at Home Depot every day.

Again, I don’t mean to look a gift horse in the mouth. I love free. I just find these marketing gimmicks very interesting. It’s certainly great from a public relations point of view as everyone loves a patriotic cause. I just wonder if people are getting the value they think they are.

Personally, I’m going to make a donation to the USO for Veteran’s Day. That’s my go-to military charity along with the Wounded Warrior Project (WWP). From experience, I know the value military (and their families) get every time they step in a USO at an airport… it’s tremendous. And I can’t barely keep a dry eye when I see what the WWP does.