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How can I responsibly save for a non-necessity purchase?

I'd like to buy a PlayStation 4. As you may know, I can't eat or live in said PS4.

Buying something that is more than a week's worth of pay seems irresponsible, but that doesn't stop me from wanting one.

How can I responsibly save for a PS4 while also taking into account all of my other financial short- and long-term goals?

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    If you've never bought something that takes more than a week's pay you must be pretty young or pretty poor--and the fact that you're asking this question says the latter is unlikely. As a very frugal married couple we have spent more than a week's pay on non-essentials probably 20 times. Add essentials and we've spent a month's pay 3 times (cars) and a year's pay (houses) twice. – Loren Pechtel Apr 11 '15 at 4:24
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Total income - mandatory spending (ie bills) = discretionary income.

Make a budget and calculate how much discretionary income you have each pay period. Save some fraction of your discretionary income towards this purchase. Pull the trigger when you have enough saved.

By thinking this way, you ensure that the PS is robbing from movies, dining out, booze, etc instead of taking from rent money or the electric bill. Do not use debt to make this purchase.

It would be wise to put off this purchase until you have a solid emergency cash reserve that can sustain you if life throws you a curve ball. You should also make sure to eliminate any bad debt, like credit card debt, before splurging on a new gaming console.

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The same as you would save for anything else, buget and make sure your expenses are less than your income each week. Put away a little each week for the item you want to buy, and when you have saved up enough for the item you can buy it.

In the mean time whilst you are saving for it, you can shop around to see where you can buy it at the lowest price.

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    And, the best thing about having saved specifically for it is you don't have to feel guilty buying it. – Kent A. Apr 10 '15 at 23:58
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Your question is rather direct, but I think there is some underlying issues that are worth addressing.

  1. How to save and purchase ~$500 worth items.
  2. How to evaluate if a purchase is appropriate.
  3. Console and computer gaming, and commendation of the latter.

One

How to save and purchase ~$500 worth items

This one is the easy one, since we confront it often enough.

Never, ever, ever buy anything on credit. The only exception might be your first house, but that's it.

Simply redirect the money you would spend in non necessities ('Pleasure and entertainment') to your big purchase fund (the PS4, in this case). When you get the target amount, simply purchase it.

When you get your salary use it to pay for the monthly actual necessities (rent, groceries, etc) and go through the list. The money flow should be like this:

  • Necessities: Rent, groceries, heating, electricity.
  • Debt: Prioritising according to interest rate. This is the pitfall of many US citizens; credit card debt is the worst among financial demons, and shall be exorcised first.
  • Emergency fund: A certain multiple of your 'Necessities' expenses. e.g. 3-6 months worth of 'Necessities' spending. The lower they are, the better, as you will need less idle cash to be and feel financially safe.
  • Pleasure and entertainment: Dining out, fancy beverages, clubbing, vehicles, cinema, clothing (unless your garments are torn apart by a tiger or you start looking like a time traveller. Then you really have to replace them), lattes, video game systems and a long etcetera.
  • Investment: The money surplus that you hold when your next pay check arrives should be wisely invested. Preferably, on an index fund with low (TER) Total Expense Ratio and good diversification. If in the US, 401(k) plans seem to offer tax related advantages.

Two

How to evaluate if a purchase is appropriate

It seems that you may be reluctant to spend a rather chunky amount of money on a single item. Let me try to assuage you.

'Expensive' is not defined by price alone, but by utility. To compare the price of items you should take into account their utility.

Let's compare your prized PS4 to a soda can.

Is a soda can expensive? It quenches your thirst and fills you with sugar. Tap water will take your thirst away, without damaging your health, and for a fraction of the price. So, yes, soda is ridiculously expensive, whenever water is available.

Is a game console expensive? Sure. But it all boils down to how much do you end up using it. If you are sure you will end up playing for years to come, then it's probably good value for your money.

An example of wrongly spent money on entertainment: My friends and I went to the cinema to see a movie without checking the reviews beforehand.

It was so awful that it hurt, even with the discount price we got. Ultimately, we all ended up remembering that time and laughing about how wrong it went. So it was somehow, well spent, since I got a nice memory from that evening.

A purchase is appropriate if you get your money's worth of utility/pleasure.


Three

Console and computer gaming, and commendation of the latter

There are few arguments for buying a console instead of upgrading your current computer (if needed) except for playing console exclusives. It seems unlikely that a handful of exclusive games can justify purchasing a non upgradeable platform unless you can actually get many hours from said games.

Previous arguments to prefer consoles instead of computers are that they work out of the box, capability to easily connect to the tv, controller support... have been superseded by now. Besides, pc games can usually be acquired for a lower price through frequent sales.

More about personal finance and investment

  • Welcome to Money.SE. As I write this, you appear to be in the midst of writing a short novel to answer this question. It seems well thought out, but after you're done, you might visit the top posts here and see the typical length of both the questions and answers. Too long, and you'll have few who will read the entire answer, thus the acronym TLDR. In my opinion, an answer running more than a full page on one's monitor is getting too long. – JoeTaxpayer Apr 12 '15 at 13:23
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    I agree with your reasoning entirely. The question is fully answered with the first part. However, I thought it would be useful to expand further for other matters at play in this question. I'll try to keep the third and latest part as short as possible. Thanks for the heads up! – Calculus Knight Apr 12 '15 at 13:27
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    @tachibana hey thanks for the answer. While it is long it cover everything I was looking for. The other answers fall into the same "Just Save for it" category. I guess making a responsible purchase involves doing research as well. – T. Thomas Apr 12 '15 at 14:31
  • I'm truly glad it was useful! Since you liked the answer, you might find the (just added) bottom link useful in the future. It covers personal finance and investment in a very insightful way. – Calculus Knight Apr 12 '15 at 15:14
  • @Tachibanaian - links you posted appear to be 'spammy' and I've removed them. I know Mr Money Mustache, and his writing is excellent. Other promotional links should be avoided. – JoeTaxpayer Apr 12 '15 at 18:25
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In the course of one's spending, it's not tough to find things that are going to be that expensive. A median income is in the $50K range in the US. The diamond folk advertise that one should spend 3 month's salary on an engagement ring. Even with a decent income, I spent zero. My wife was practical, not interested in jewelry, and wanted a big house. The money went to the downpayment. The house cost 2.5 years salary at that time.

A car, even used, will cost some month's salary.

If that $50K earner is saving, has an emergency account, and is on track with their financial long term goals, a week's pay can buy a nice sized TV.

A nice vacation can cost a week's pay to a month's pay.

Your question is great, although it shows a concern that's typical very early on in one's career. There are related question here about "how can I spend more?" They tend to come from someone living on a student budget that now has an adult's income from a desirable job. The answer is to sit down, list your monthly spending, properly budget a decent portion for savings, and see how much you have for frivolous spending. Keep in mind, it's easier to sock it away now. No house, no kids, etc. When we were first married, we lived on my wife's income (in effect) and socked mine away. The house tightened the budget, as did the kid.

In the end, the PS4 is less about the $400 than it is about the rest of your finances.

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