Luxury is something I tend to spurn.
I’m well known for living a spartan lifestyle. I rarely eat out and when I do, I look for bargains. I brown bag lunch to the office daily. I enjoy the free hospital coffee while everyone else stands in line to pay 4 bucks for the same warm ground-up bean juice. Even at my financial stage of life, I still clip coupons every weekend and buy ketchup in bulk when on sale.
Since the greatest vehicle ever made is a pickup truck, I drive a 19-year-old one. I have no intention of buying another one for at least a decade.
My dream house is a log cabin in the woods with a great wood stove, more rabbits than neighbors, and an outhouse with a view.
Something happened that changed the way I view luxury.
Last April, I was able to combine grand rounds with a family vacation and birthday celebration for Cajun Sandra, Cajun Bob’s long-suffering Femme (wife in Cajun French).
Through a strange series of circumstances and luck, a bunch of free fancy stuff just fell into our lap.
When our flight landed, they had no available low-cost SUV’s (think Kia) and they gave us a free upgrade to a pretty sweet luxury SUV, a fully tricked out Audi Q7. I had to admit, the ride was pretty slick.
Upon arriving at the resort, the desk said there was a wedding going on and the room we had booked was going to be taken. Would we mind being bumped up to the higher suite level with the balcony, hot tub, and unobstructed view of the beach?
Of course, the room was amazing. The kids thought it was great. Hanging in the hot tub while the sun was setting over the Gulf was the stuff of dreams.
After a few days, we traveled the hotel to give grand rounds. The room booked for us had a single bed and wasn’t big enough for the whole. You guessed it, they moved us up to the presidential suite and charged the medical school the same price as the single room.
By then something about the experience changed.
The suite was great and all. It just didn’t impress me that much. Even the kids had lost the excitement of the super fancy room. It just felt like another room. Don’t get me wrong- we were very thankful.
The perceived value of the luxury had dropped significantly.
The “bloom” was off the rose. It was like I had eaten 3 or 4 extra pieces of cheesecake and it just wasn’t enjoyable any more. It was actually bordering on unpleasant.
Luxury is a commodity.
The experience helped me understand a few things.
- Luxury has a strong emotional component. Experiencing luxury is an emotional high. A sense of joy combined with feeling special, important, or worthy. The best way I could describe it would be walking into a high-class bar filled with “beautiful people” and every member of the opposite gender stops speaking and can’t take their eyes off of you. It can be a little addictive…
- Luxury quickly runs out. I don’t mean the actual luxurious item- they’ll keep making them as long as you keep paying for them. What I mean is that the joy is short lived. Like those horrible Pumpkin spiced lattes that come out every October. The first sip is divine. The third sip is slightly nauseating. The fifth sip tastes like rancid Nutria. I’ve never made it to the sixth sip. No matter how much luxury you surround yourself with, you will quickly lose the emotional “buzz”. It’s just stuff and you are stuck being the same old you. A fancy watch isn’t going to change that.
- Luxury is difficult to define. It’s not the same as “quality”. Quality is a pick-up truck. Luxury is a Lincoln SUV. There is no way a Lincoln SUV can be considered the same in quality range as a truck. Luxury is defined not by how well it performs at the best price. Luxury is defined by how it makes another feel about you.
- If you can remove the emotional content, it becomes clear that luxury is commodity. Luxury is like everything else- an item, good, or service that can be defined and bought for a certain price.
Why am I spending so much effort discussing luxury?
Luxury is a financial, relationship, and ego killer. It has destroyed more physicians than going out partying all night before MCAT’s.
Why do so many physicians never reach Financial Independence? A lot of it is the pursuit of luxury. You “need” that trophy house, trophy car, trophy vacation, trophy jewelry, overachieving trophy kids, and trophy third spouse. You destroy your financial future pursuing that fleeting sense of importance while seeking the approval of others.
Luxury is also a major relationship obstacle. You may want a luxurious item. Your spouse may be pulling their hair out thinking about how it will kill the budget. Maybe your spouse gets to travel all over the world giving lectures while you’re stuck eating gumbo with in-laws at home. That jealousy can build into something awful over time. Finally, maybe you are truly a spendthrift and your spouse is right. You can loosen the purse strings, but you are afraid to overspend.
And, of course, luxury affects your ego and self of self-worth. I’m sure there’s been more than one joke told at my expense when I pull into the doctor’s lot in my truck, while surrounded by BMW’s, Mercedes, and Audi’s. No one ever tells the jokes to me personally. I think the gun rack on the truck may be partly to blame…
What is the right amount of Luxury?
The ideal combination is a sensible moderate or spartan lifestyle surrounded by high-quality and high-value items. You also want to sprinkle in the right amount of luxury. The amount of luxury should be just enough that you get maximum enjoyment. You also want to avoid the “luxury hangover” or financial trouble.
Twenty percent. Twenty percent is the right amount of luxury.
You should aim to spend 20% of your discretionary budget on luxury.
To explain in more detail, here is the sequence of how to manage your budget at your monthly money meetings.
1. Maximize your retirement investing in tax advantaged vehicles.
2. Pay all of your non-discretionary bills like mortgage, insurance, electric and heat.
3. Pay off your discretionary spending like credit cards. Every month look for way to reduce unneeded expenses.
4. Save or top-off your emergency fund and month-to-month checking needs.
5. Any money left over should be split up. Invest or pay down debt with 80%. The remaining 20% can go into a luxury fund.
The luxury fund has a few rules.
- It is kept in a separate account from your other funds. You need to clearly know how much you have saved for luxury so you don’t overspend.
- You never burrow for luxury. I don’t care how much you want that Disney World vacation and cruise, you don’t put it on the credit card, unless you’ve saved the funds to pay it off
- It’s up to you to decide what is a luxury. If you normally eat a modest restaurant meal at Chik-Fil-A monthly, that’s not a luxury (be sure to look for coupons). But, if you decide to check out the “Frog and Peach”, you should put that in the luxury category. The same can hold true for cars, clothes, jewelry, and vacations.
- It’s your money. You worked hard for it. You planned and saved ahead. Spend it as you desire and feel no guilt or remorse.
- I do advise that you spend your luxury fund on things you desire, rather than what you think others demand from you. I get much more joy from a basement theater than a gold watch.
There are two ways to enjoy even more luxury value.
The easiest way to afford more luxury spending is to earn more income. Negotiating your best physician contract will ensure that you are earning what you deserve. Many physicians have no experience or training in negotiation, putting them at a distinct disadvantage when they sit down at the table.
Have you ever noticed that some people just seem to get the best bargains? They use those same negotiation skills to maximize their value when buying luxury as well. I haven’t paid for a tie or alteration of suit in over 30 years. I always negotiate that into the purchase. And I have rarely bought a luxury item without getting 15% or more off the price. Wouldn’t it be great if you could negotiate like a rock star?
So, what do you think? Can you live off of 20% luxury? Are you surrounded with luxury goods that you purchased at a premium that you don’t even use anymore? Do you think people even know or care what you drive? Leave your thoughts in the comment section.