How to Not Let that Silk Robe Get You In to Debt: Paying for Luxuries

A few days I received a very interesting e-mail asking what my strategy would be in the scenario where a woman would like to be “able to actually afford a stunning new outfit rather than repurposing clothes” and the right organisation/approach that “ would definitely help more women strike the right balance between enjoying today and thinking of their future”

Therefore, I am writing this piece specifically keeping female students and women in mind.

paying for_luxuries

In his essay, “Regrets on Parting with My Old Dressing Gown”, the French Philosopher, Denis Diderot wrote how a gift of an exquisite dressing gown lead him in to dissatisfaction about all his other possessions and he began replacing them with expensive ones , spiraling him in to the depths of consumerist debt. He further wrote,  “I was absolute master of my old dressing gown, but I have become a slave to my new one …”

On the other hand, while some of us have student debt to pay off as well, the concept of living out of suitcases while you make the monthly payments, was never really appealing to me.

So the message got me thinking how do you plan out a spending on luxuries chart while building your wealth, paying off your debt or trying to keep out of debt?

To start with, an integral part of building wealth or having money to spend on luxuries is to prioritise/ develop goals, save, invest and EARN AS MUCH AS YOU CAN while diversifying your income sources for a blanket of security!

And to begin the process, here are a few steps you can take:

Organise, Delegate and Automate:

Identify all sources of current income and expenses, sit with them and hack away the stuff that seem unnecessary and useless and are eating away large or small chunks of your money each month.

Identify assets vs. liabilities. Assets include your house,  jewelry, savings, retirement accounts and liabilities include your debt.

The next step is to organise and delegate: You can use a free tool like the net worth calculator from Personal Capital and check out their various features that would allow you to help you calculate your net worth and plan out your bill paying and investment strategy.

Increase your Per Hour Rate and Develop a Skill that Gets You the Latest For FREE:

The income from your regular job is pretty much fixed and you can only go as far as allocating sum x and sum y for so and so purchases. Here’s where the concept of a secondary source of income comes in. If you have a side business like freelance writing or blogging where the rates (and the income) are in a constant flux, with a bit of hard work, patience and dedication, you can scale up your per hour rate. Combining this income and waiting for the perfect deals online or offline, you can work up a pretty cool relationship with your money and also buy what you like without having to wait for that sum to accumulate by way of your regular income.

Another way would be to develop a skill that allows you to get the stuff you want (which can be clothing, make-up, skin care products) without having to shell out anything for it. Sounds interesting? One of my current, recurring clients runs a popular beauty and fashion blog. I regularly get sent products from both new and established brands to review. Sometimes, the cost of a product for which I might have to shell out one or two hours of my time (to write on) is 18 -45 times the per hour rate of my first job right out of college (which was a decent paying one in itself).

Capitalizing on a skill or a passion and proving your worth can quickly escalate into a profitable situation where the stuff that you want to try out or own can pretty much be yours to keep.

Reduce general splurges by interspersing and keeping a track on Month-wise usables:

Rather than purchasing everything expensive, you can combine expensive and non expensive pieces. For example, if you are in a warmer climate, you can put more of your money towards good shoes, jeans and a wrist watch and go lower (expense per piece wise) on cotton tees or funky jewelry (the jewelry will quickly lose its colour and get corroded in the humidity).

Rather than having to deal with a disorganised wardrobe or stores, and having to buy a product unnecessarily because you cannot find the ones you have already purchased, organising your wardrobe and stores can go a long way in helping you save money.

At the end of each month, you can actually organise and photograph stuff that you will use over the next month and keep everything else away. So this way you don’t have a constant urge to shop or the feeling that something is amiss in your wardrobe/stores.

Also by keeping the Diderot Effect in check, this deals with the fact that a situation may arise where you upgrade everything without having the means to maintain it or pay for it. So when you are still a student or are starting out, it makes sense to not upgrade everything all at once but to go slow and steady in this regard.

Let passive income pay for Luxuries:

That trendy dress you want for a Friday night party? It can be yours without your having to blow up a pay-check or being guilty of improper prioritization leading to a financial mess later on (this can be mounting consumer debt or lack of proper financial planning).

Okay, a little background on me. I am in my early twenties, have a MS degree and I practically got all of my education for free. I left my well paying job because of boredom and the feeling of stagnation and now I am a full time writer and own a small business. While I was working and had a fixed salary, I devised a strategy to pay my rent through passive income on the money I had earned, saved and invested during my late teens and early twenties so that I would not have to depend on a 9 to 5 job to pay my rent. Later I devised a strategy to introduce and develop multiple sources of income, and allocate them sequentially in to paying for utilities, necessary expenses, travel and emergency fund and finally, various investments. This takes planning, hard work and dedication. Currently, I have around 10 different sources of income and would not flounder if I lose a few of those. And paying for that trendy dress? I let my passive income (from my original rent strategy) pay for it and the other small luxuries that make life exponentially interesting!

These hacks can make sure that you can splurge on that wardrobe when you want without really having to blow your balance or keep yourself starved or deprived 😉

Get a free app like Personal Capital to track your income, investments and spending like a pro!

Tell us how you pay for luxuries or the strategies you employ to build wealth and pay for fancy expenses without giving up your morning latte!

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