Personal Finance Advice

A neighbor recently announced that she was getting serious about getting out of debt and saving for her family’s future. “Good for you,” I said and meant it, right up until she started detailing her plan for becoming more frugal.

“We need to start staying home more,” she said. “We waste too much money eating out, going to the movies and bars.”

“It’s an easy trap to fall into, but also an easy one to correct,” I said.

“Yes, but part of why we go out so much is because we don’t like being home. We don’t like our house and there’s nothing to do here.”

At this point I offered up some ideas for free/inexpensive entertainment that would get her out of the house but still enable her to save money.

“But I’ve already got a plan,” she said excitedly.

“What’s the plan, then?” I asked.

“We’re going to fix up the house and make it so we want to stay home more.”

She proceeded to lay out “the plan,” which included: ripping up the carpet and putting in new hardwood flooring, repainting almost every room in the house, purchasing a new home theater system (to make watching movies at home more exciting), upgrading the kitchen appliances and replacing the dining room group (to make cooking and eating at home more acceptable), redoing the three kid’s rooms to make them more fun to play in, putting in a bar so they could have friends over for drinks, and replacing all the lighting to make it more “atmospheric.” And all of this is to be completed by the end of the summer.

The amount of money she is proposing to lay out is substantial and will put her deeper in the hole. Even if, after all this work was completed, she and her family do opt to stay home more often, they will have to stay home practically forever to even begin to make this kind of money back, in addition to paying off their existing debt. And I have a feeling that, once the renovations are complete, this family will still be eating out and going to the movies. I don’t think they’re ready to face their financial problems. If they were serious about getting out of debt, they wouldn’t be thinking about spending this kind of money.

Hoping to salvage something from this plan, I asked, “Well, you’re probably doing most of the work yourself, right?” I was thinking that at least if they did the flooring, painting and installation themselves, it would shave something off the cost.

“Oh, no,” she said. “We’ve already hired some contractors.”

All I could do was plaster a smile on my face and wish her luck.

Now, I’m a big fan of home improvements and certainly recommend creating the home environment that makes you comfortable. However, I am also a big fan of being reasonable about it. And I don’t think this woman is being reasonable.

First of all, it’s not a good idea to launch major home improvements when you’re already in debt, as improvements are likely to add to your debt. No home improvement project ever ends up costing what you expect; they all go over. It’s almost a law. Second, I’m not a big fan of doing tons of improvements all at once, unless you have a lot of disposable income to cover it. I find it better to space things out. Do one project, let the finances recover a bit, and then move on to the next. Third, I’m a big believer in doing as much of the work as you can yourself to cut down the cost. Again, if you have the income to cover it and no debt, then maybe you want to splurge on some help but otherwise, get to work. This woman is doing none of these things.

Unfortunately, this woman is not the first I’ve encountered who believes that the answer to the money-draining problems of eating out, going to the movies, and going to bars is to be found in making their home into a showplace and entertainment center. There is some truth in the idea that having a wonderful home will make you more inclined to stay there. I don’t have any problem staying home because I have plenty to do and I genuinely love my home. However, I have worked at it over many years to accomplish this (and it’s still not a showplace because I don’t find that comfortable). During that time, I still didn’t go out to eat much or to the movies. I simply learned to make do and be happy with what I had while I saved up the money to improve it some more.

That’s what people like my neighbor are missing: the willingness to make do with that they have until they can afford to improve it. There is a belief that, if you’re going to “sacrifice” by staying home more, then you deserve to have it be as comfortable and posh as possible. Which, of course, negates the whole notion of “sacrifice.” And spending tons of money on improving the home negates the concept of “saving.” So you end up with a showplace home, but no further along the path to financial security than you were before. In fact, you’re probably further behind.

In addition, once the renovations are complete, you’re likely to find that your new showplace home is more expensive and labor intensive to maintain than it was before. That new home theater system eats electricity and demands new DVD’s and cable subscriptions to get the full use out of it. That new furniture is nice, but if you’re afraid of getting it dirty and messing it up, what was the point? Those commercial grade appliances may make it more fun to cook, but what are they doing to your electric bill? The kid’s new rooms are fun to play in, but how much better if they each had their own PlayStation and DVD players? And on it goes.

If it is going to be more expensive to stay in than to go out, continue going out and find some other places to save money. Don’t fool yourself into thinking you’re “saving” money by making your home into an entertainment center. Yes, staying home is less expensive than going out, but only if you don’t go into more debt to do so.

For most people their home isn’t the reason they won’t stay home. They have good, serviceable appliances that can make a great meal. They have a TV and a DVD player for watching movies. There are plenty of books and magazines lying around. They probably even own some board games, puzzles, or video games for more entertainment. The problem is that they simply don’t want to stay home.

They haven’t realized the value of staying home. They haven’t reached the point in their financial life where they understand that the “sacrifice” of staying home more often gives them other choices of what to do with their money. They see their friends going out and want to be with them. They want to keep up with the latest movies, restaurants, clubs, and bars. When these people do turn their attention to staying home, they mistakenly try to replace the experience of going out with a house that has all the things they liked about going out, at great cost to them.

For most people, the ideal home is not the one they see in a magazine or model home. It’s the one that’s comfortable and welcoming, filled with things that mean something to you and that you’re not afraid to use. It’s made up of things you’ve accumulated over a lifetime of experiences, rather than those that you picked only because they matched the decor. The home that one wants to stay in is neither a perfect showplace nor a shabby dump. It’s somewhere in between.

My advice, if you’re planning to stay in more often, is not to try to recreate the experience of going out in your home. Instead, look at what you have and discover the greatness of it. You probably have games or books lying around that you’ve forgotten about for entertainment. You probably have cooking tools you’ve never used that might give you new meal ideas. You might have a yard that’s great for playing football or catching fireflies. You might have an unused space that can become a play area or video room. Maybe you have a picnic table and grill that have gone unused for years and would make for some fun barbecues. Really look at what you have before you write it off as hopeless and miserable.

Maybe you’ll find that you do need to improve a few things around your home, but they can be fixed over time while you enjoy everything else that you have. Chances are you have more than you think and staying home won’t be a hardship at all, if you give it a chance.

Image courtesy of kurafire