Contract Diagnostics Banner
[Editor’s Note: This is part two of a two part series talking about how my wife and I make decisions about spending large amounts of money on stuff we want, but don’t necessarily need. It will make a lot more sense if you go back and read part 1 first.]

The Expensive Vacation

Your next major 2014 purchase was your 15th anniversary trip to France that cost you the better part of $10K. Your thoughts on that?

Her: We had a fantastic time. We could have done it on less money, but we went and did what we wanted to. We saved money where we could, but we weren’t trying to do this trip “on the cheap.”

Climbing in Chamonix France

Climbing in Chamonix France

Him: I don’t regret a dime I spent on this. Easily the most enjoyable $10K spent in the last decade and well worth 2 1/2 beat-up Durangos. We knew it was going to be expensive when we spent $2200 a piece on direct flights from SLC to Paris. Even the flights were awesome though. I caught 5 “free” movies going each way. What a pleasure compared to domestic travel! We basically did this trip without ever looking/caring about the price of anything. If we wanted to do something, we did it.

We didn’t have the kids, we saw a ton of sights we had always wanted to see (Normandy beaches, Carcassonne, Paris, the Riviera, Chamonix-Mont Blanc), did some climbing, ascended some via ferratas, and realized just how much better French food is than English.

Expensive Vacation Number Two

Although you had a lot of cheaper road trips, you also took the family to Hawaii for Christmas the same year the two of your went to France. That couldn’t have been cheap. Your thoughts on that splurge?

Her: That trip has been years in the making and was 90% paid for a year ago. It was actually a family reunion for my widespread family. I have siblings in Guam, Mauritania (Africa), Hawaii, Louisiana, and Oklahoma, along with parents and grandparents in two other states. Hawaii was as central as any other place to meet. This trip was a big deal because everyone was able to make it and we haven’t been all together for at least 5 years.

Hawaii at Christmas

Hawaii at Christmas

Him: Christmas in Hawaii? What’s not to like? Lava and sea turtles on the Big Island? Boogie boarding, hiking, snorkeling, and hanging out with the kids and the Obamas on Oahu? As you’ll notice, we have a lot lower threshold to spend a lot of money on a trip than on stuff. We find that makes us happier, and that’s certainly consistent with all the financial happiness studies out there. Again, you’ll notice a few key principles behind these “splurges”- paid for with saved money, well-researched and shopped, and purchased with an intent to increase our happiness. We generally also try to spend “extra money” on one time purchases, rather than ongoing expenses like a leased car or a fancier home.

The Fancy Bike

Jim bought a mountain bike that cost more than his old beater Durango this year. What was the thinking behind that?

Fancy new bike

Fancy new bike

Him: I love mountain biking and have been doing it for a long time. It’s something nearly every one of my partners do. We’ve actually had quite productive business meetings while out on the trails. However, my old bike was 20 years old and breaking frequently. In fact, I’ve replaced nearly every part on it, including the frame, at some point or other in the last 20 years. There are actually only three original components still on it- the two derailleurs and the front rim. It was a classic case of “use it up, wear it out, make it do, or do without.” Not only did this bicycle provide lots of fun recreation, but it was also my main transportation for 8 of those years. I commuted on it to college classes, to residency, and to my first job out of residency. But it was time to replace it so I’d quit being left in the dust by my partners. I saved up for it for a year, spent a few months shopping for it, then bought it in the off-season for a significant discount. I got tons of features that weren’t invented when I bought my last bike- carbon fiber frame, full suspension, disc brakes, tubeless wheels, 29 inch wheels etc. I don’t regret buying it at all.

Her: He bought it with his allowance money, so I can’t complain. Each month any money left over from the lump sum we allocate to our variable expenses (food, gas, kid’s activities etc) in our budget is split between us and put into our personal allowance fund. We’re allowed to spend that money without having to answer to the other person for it. I plan to buy a bike this year too with mine.

The Furnace
DRB_141201_bn_AR2_c_MedStudLoan_250x250[5]

You had to replace a furnace this year. What was that process like?

Her: The furnace went out. We couldn’t blame it, since it was 25 years old and you can only really expect 15 years out of them. It was pretty cold for a couple of weeks while we waited for it to be replaced. Luckily, our house has two, so we slept warm, but we had two space heaters going in the kitchen for a while. Clearly the furnace replacement was a need, but we didn’t need the fancy new one we bought. A bare-bones one (70% efficient) was $2500. After $600 of rebates from the manufacturer and our local gas supplier, the fancy one (98% efficient and much quieter) was $4000. We figured that it wouldn’t take 15 years to make up $1500 with lower energy costs.

Him: I had a beautiful experience buying this furnace. The furnace saleswoman came over and showed us 30 furnaces in a brochure. It is a wonderful thing to only have to ask a single question with a purchase like this- “Which one is the best?” She pointed it out, and I said, “Let’s get that one.” Having a good income, a solid emergency fund, and an optimized financial situation provides for lots of financial freedom, like buying any furnace you want without having to worry about whether you’ll be able to put food on the table that month.

The Boat

Okay, let’s talk about the boat. What’s going on there?

Him: We bought a $6K boat 5 years ago as I was leaving the military. Actually, it was only a $3K boat, since the military subsequently paid me $3K (about a dollar a pound) to drive it across the country as part of our moving allowance. It has been a ton of fun, despite fulfilling the old adage that “a boat is a hole in the water that you throw money into.” We go to Lake Powell once or twice a year to explore, canyoneer, wakeboard, waterski, camp, and just relax, and use it on the local lakes as well. Despite the cost, these are some of our favorite family days of the year. However, our 17 foot, 135 hp boat doesn’t quite do everything I want it to do, especially as our family gets older. We’d like to be able to take more stuff and people (we boat into remote sites and camp at Lake Powell) without having to worry about whether the boat will get out of the hole upon exiting the marina.


The boat is also 13 years old and a little less reliable than I would like when 50 miles away from the nearest marina. (Although I’ve learned a lot of neat tricks, like how to get water out of an engine block, how to hotwire a boat, and how to repair a starter with a cotter pin.) Not to mention it doesn’t throw much of a wake. I want a big fancy wakeboat that will haul more people and allow us to catch some air and wakesurf behind it. Unfortunately, those are really expensive. The manufacturer’s suggested retail price (MSRP) on the biggest, fanciest wake boats these days is pushing $150K. Even the “price-point” brands (think Toyota vs Lexus) are going to be $60-80K for a nice, new boat. Unfortunately, the whole wake surfing system thing is pretty new, so if you want one, you’re looking at something 2013 or newer, so the used option isn’t really there for what I’m looking for. So we’ve been shopping for the last 6 months and will be purchasing one in the next few weeks, hopefully getting a pretty good discount for buying it in the middle of the winter.

Her: The boat we have doesn’t allow us to take very many others outside of our immediate family on our adventures. I’m happy enough with the boat we have but I can see the benefits of getting a bigger, nicer boat. I’ve got some home renovation projects on the long-term list that I’m more interested in than a boat upgrade, although I confess I don’t really enjoy boat breakdowns 50 miles away from a marina. It seems extravagant to spend 10 times as much on a boat as the last one we bought, but if we’re going to buy a boat, we might as well buy the one we want in the long-term. Plus, I know if I let him buy “his boat” he’ll have no room to complain about more house renovations.

Loosening the Purse Strings

Robert Doroghazi, author of The Physician’s Guide to Investing, said this about splurging:

If you do wish to “splurge” a little, to loosen up, do it after there is $1 million in the bank and after the mortgage has been paid.

Well, the mortgage isn’t quite paid yet, but more on that in a couple of weeks. We’re certainly at that point where by any reasonable measure we can afford to loosen the purse strings. Despite all of these expensive, unnecessary purchases in the last year, we’re still saving 25-30% of our income (maxing out all retirement accounts,) giving 10% of it away, and paying almost a quarter of it in taxes. Our “mandatory” (fixed + reasonable variable) monthly spending is just 10-20% of our income. I see these “splurges” as the benefits of a well-planned financial life and expect to continue to do them from time to time going forward. We want to be just as deliberate about how we spend our money as we are about budgeting it, investing it, and giving it away. Here are a few guidelines to use when deciding whether you should buy expensive stuff like we have this year.


10 Questions to Ask Yourself (and your spouse) Before Splurging

1) Are you keeping your fixed expenses as low as possible, so that in the event of economic downturn you can rapidly pare back your lifestyle?

2) Have you honestly determined your needs versus your wants?

3) How many months have you been considering this purchase for?

4) Do you have the money, in cash, to purchase this item?

5) Is this item going to make you happier than any other use of this amount of money?

6) Are you already saving 20% of your gross income for retirement and enough to meet your other investing goals?

7) Do you have any consumer or student loan debt at all?

8) Do you have a plan to pay off your mortgage in less than 15 years total?

9) Are you buying this item at the best time of year to purchase it?

10) How much time have you spent researching and shopping around for this purchase?

Now it’s time for you to weigh in readers. What do you think about our reasoning for purchases? What did you spend money on in 2014? Do you regret any of it? What other rules for spending would you add to this list? Comment below!