There is a lot of advice out there that suggests what you should do with a financial windfall.
Extra money could come from a tax refund, a workplace bonus, or an inheritance.
This post, however, isn’t going to focus on the most sensible things that you could do with this money. Prudent advice will often include paying down debt, contributing to a retirement or college fund, and building up an emergency fund.
Let’s face it, most people aren’t going to use every last cent in the most practical way, and really, why should they?
Treating yourself to something special can be a wonderful idea.
A reporter with The New York Times wrote an article this month that offered a new twist on spending free money. Eric Ravenscraft suggested that people consider splurging on something that will provide the best bang for their buck.
Ravenscraft suggested that treating yourself to something that improves your daily life can have the biggest long-term impact.
“From a financial perspective, splurging where you spend the bulk of your time saves more money than buying things that seem the most fun.”
As an example, Ravenscraft mentioned the benefit of his purchase of an ugly yet comfortable office chair earlier this year compared to his purchase of Super Mario Party, a video game.
The game would seem more fun, but a comfy chair would bring more long-term enjoyment.
The journalist spent $160 on the chair and $60 on the video game. He played the game about 20 times, which brought the cost down to $3 a game.
In contrast, however, he sits in the chair five days a week, eight hours a day since he works at home. During a three-month period, he would have sat in the chair 480 hours, which would break down to 33 cents an hour. Over a year, the cost would be eight cents an hour.
It would take over 750 hours of playing Super Mario Party for the video game to be as cost effective as the chair. And that isn’t going to happen.
Here is the bottom line of this story:
The more time you spend on an activity, the more value you’ll derive from spending money on ways to improve it.
Can you think of what you could buy that would bring you the most bang for your buck?