Consider the following scenario:
In [a consumer finance] study, the authors, Abigail Sussman of Princeton University and Adam Alter of New York University, ask you to imagine that one of your favorite bands is performing nearby. The ticket costs more than you would ordinarily spend, but you have never seen this band live and decide the experience is worth the cost.
The next week, your television breaks and you buy a pricey replacement because you only buy a new TV once every few years. A week later, you are celebrating your 10th wedding anniversary. Since this is a once-in-a-lifetime event, you decide that the occasion warrants a splurge.
Here’s how I would handle that sequence of events–a sequence of events that the study found many people
For one thing, the first budgetary exception would change how I would handle the following two. Maybe it’s human nature to consider unexpected expenses as unrelated, but you can train yourself otherwise. Once I’ve dropped a large sum on something unexpected, whether it’s concert tickets or a repair to an air conditioner, I look at any expense beyond basic food, clothing and shelter with a cautious eye for at least a couple of pay periods.
So step two wouldn’t happen. If my TV broke outside its warranty period and I couldn’t fix it–now that televisions aren’t CRT-based anymore, fixing them yourself is much safer and more practical–I would consider short-term alternatives. There are independent TV repair shops, so I would call one of those first. If repair was impractical, I would look for a stopgap solution for a few months until my budget was in better shape. To me, having a secondary TV stand in for a few months in the living room is a perfectly acceptable solution. And what if someone comes over and sees a TV in the living room that’s somehow beneath my social status?
I’ll put it bluntly. If they think less of me because of the television in my living room, especially one that’s only going to be in there for a few weeks or months, that’s a problem with them, not me.
I would personally think more highly of someone who temporarily downgraded in such a situation.
Step three wouldn’t happen either. It’s a 10th wedding anniversary. It’s something you see coming. It’s something you plan in advance–perhaps years in advance–and save and budget for accordingly. A financially responsible person doesn’t decide the month before to drain the bank account on a surprise vacation for the occasion.
And here’s a radical thought. Step three is something planned in advance. That doesn’t mean it’s written in stone. You have plans and money set aside for it. Then along comes step one. Would you and your spouse decide to change plans, scale back on the anniversary plans a bit, and use some of the anniversary money to go to the concert?
My wife and I have done things like that before. In fact, I think she’s made more suggestions of that kind than I have. That flexibility is why we’re landlords instead of tenants.
Yes, we could easily be tenants today. In 2002, I bought a house that I could not have bought under today’s conditions. Today, a bank would question whether I could afford it. In 2002, the bank was willing to loan me money for considerably more house. At any rate, after running the numbers repeatedly, I decided I could afford the house and bought it. Then, in 2005, less than two months before we got married, we both lost our jobs.
The thought crossed our minds that we could lose that house before she’d even had a chance to move in. Since we were willing to make sacrifices to head off that possibility, we didn’t lose the house or either of our cars. But if I would have had to sell my car in order to keep the house, I would have done that.
As it turned out, losing that job ended up being just about the best thing that could have happened to me that year, even though it didn’t seem like it at the time. Part of the reason it didn’t go the other way was because of how we reacted to it.