The Art Of Financial Trade-Offs: What Do You Value Most?

September 01, 2017

Last week, I found myself debating the best course of action for watching “The Money Fight” between Conor McGregor and Floyd Mayweather (spoiler alert: Mayweather won, to no one’s surprise). I’m a big fan of mixed martial arts (MMA), but for those who aren’t as into it, the appeal of the fight was that the biggest star in MMA (Conor McGregor) accepted a challenge from the biggest star in boxing (Floyd Mayweather) to go head to head in a boxing match, for what turned out to be Mayweather’s 50th win and last fight of his undefeated career.

I’m not a Mayweather fan (mostly because he glorifies a lifestyle of excessive spending, which is OK if you’ve earned $1 billion in your career like he has, but not great advice for most of his fans), so I was rooting for McGregor to win by early knockout. Despite the odds being stacked heavily in Mayweather’s favor, both men stood to win several million dollars.

In the fight world, this is a big deal. And, for me, it presented a challenge of how I wanted to watch the match — a challenge of both finances and fun. I had a few options here:

  1. Stay home and buy the pay-per-view at ~$100.
    Pros:
    – Watch in my PJ pants and eat/drink whatever I want.
    – Ability to adjust the volume to be whatever I need it to be.
    – No line at the restroom or waiting for a drink.
    Cons:
    – Unless I invited friends over and they brought food or beverages or chipped in for the PPV cost, this could be my most expensive option.
    – If something spectacular happens, there is no crowd yelling, which is part of the joy of watching with a crowd.
  2. Head out to a local pub that is showing the fight.
    Pros:
    – I can control the cost by limiting the number of cocktails and food I consume.
    – The bigger the crowd, the more entertaining the “oohs” and “aahs” and “OHMYGOD’s!” are.
    Cons:
    – It would be very crowded, so may be tough to get a table.
    – I’ve gone to watch big fights before and never gotten a table, and standing at the bar all night isn’t my favorite activity.
    – It could be a long night, so chances are that I would order food and a few beverages that could raise the cost close to the PPV cost.
  3. Skip the fight and read a good book, catch the highlights online the next day.
    Pros:
     – I get to read a classic and check it off my list.
    – It could be a nice, quiet night and I probably wouldn’t stay up till 1AM.
    Cons:
    – I wouldn’t get to experience the adrenaline rush and joy that I get when I see a great night of fights (although I find boxing incredibly boring after a decade-plus of watching MMA).

Making the trade-off

The trade-offs I had to make here, and that you probably face at times, had to do with several factors:

  • Cost vs. experience
  • How to spend discretionary dollars
  • Evaluating “needs vs. wants”
  • Probably a few others

At times, budgetary concerns are the deciding factor; other times, the fun and experience factor is what decides it. What I had to do in this situation was determine what my end goal was and then set a spending limit for my choice.

What I decided

I went with a hybrid of immersing myself in the experience while trying to limit my spending: I ended up going to a local pub with some friends, but first I made dinner for the kids and myself at home. That way I didn’t run up a big tab at the pub on food, but still got to see the fight without spending $100+.

I’m curious – how do others make this type of trade-off? I’d love if you would share your thoughts with me on Facebook or via Twitter.

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Let’s Get Ready to Rumble…

May 24, 2016

I may have mentioned in prior blog posts that I am a huge boxing fan. There really was no choice. From the time I could crawl, I remember sitting in my dad’s lap watching boxing with my brothers and loving every second of it. (Unfortunately, I loved it a little too much and my teacher once called my parents about a boy I practiced my left hook on – mind you, he did dare me.) My earliest memories of television are watching Michael Buffer introduce the boxers and give his famous tagline,  “Let’s Get Ready to Rumble.”

When summer starts coming and the expenses start mounting, I often think of Michael Buffer’s tagline. Summer time is a rumble between my finances and ever-mounting increases in expenses. Initially, I just noticed that money was tighter in the summer time, not really being able to figure out why. After I discovered the power of creating a monthly spending plan and tracking my expenses over a number of years, I noticed a certain pattern began to emerge in my family’s spending and I was able to prepare for the increases in expenses.

Summer Camp – I live in the south so my kids are done with school and free daycare (public school) at the end of May. Even though they have after-school care and school activities, summer camp is still more expensive. If this sounds like you, consider contacting your daycare about sibling discounts, reductions based on income or early registration. Second, research the summer camps not only for the best fit for your children but for the best value. Consider using last year’s childcare expense as a starting point, divide it into 12 to get a monthly average and contribute that amount to a dependent care flexible spending account (FSA) if eligible so the funds can come out tax-free to pay for your childcare expenses.

Vacations – Make sure your summer vacation does not follow you for the next 6+ months in credit card expenses by saving for it now. Honestly assess your finances to see if you can afford to get away on a vacation or if an inexpensive staycation is a better financial fit. Consider using a  travel budget calculator to estimate your travel expenses. To come up with the amount of money you may need to save for your vacation, divide the estimate by the number of pay periods you have. From there, it’s a matter of setting aside the funds until your vacation.

Utilities – Depending on your climate, you may find your utility bills creeping up. I live in Atlanta and I find my electricity skyrockets in June. If you have a pool, your expenses may go up due to water and pool maintenance. Your water bill may also increase due to lawn care. Review your statements from last summer to estimate your costs for this year and look at where in your budget you may need to cut back to make up for the additional cost.

Holidays – I find Memorial Day, the Fourth of July and Labor Day to be expensive holidays because we typically do a day trip or a lot of activities on those days. Consider thinking through what activities you want to do. Will you be flying or driving? Will you need a hotel? Will you be eating out or munching on picnic foods?

Write down what you think the expenses may be. Add 10% for extras. Then break down the amount by the number of pay periods you have until the event and start saving.

Parties –  If you are like our family and love to cook and feed people then summertime gives you plenty of opportunities as well as expenses. All of a sudden, the patio furniture may need to be replaced and a new grill may be “needed.” Plan for the food and estimate the costs. Then divide the costs by the pay periods you have until the event to estimate how much you may need to save.

Gas:   Typically gas prices go up in the summertime. There’s not much you can do about the increases, but you can look on apps like gas buddy to look for cheaper gas. You can also use some of the fuel economy tips from the U.S. Department of energy like driving the speed limit or removing unneeded items from your truck or using cruise control to make your car more fuel efficient.

Consider thinking about the things you want to do and start saving for them now. One great idea I heard was to create a “summer sinking fund” that you use to save throughout the year so you have a pool of money available for upcoming summer expenses. Saving now, even in small amounts, will a long way into taking out the worry of summer expenses.