A friend of mine and her husband are shopping for a new couch. They’ve found the one they want, and they can’t bring themselves to buy it because it costs $23,000.
Twenty-three thousand dollars. For a couch.
My first thought was that this was a ridiculous amount of money to spend on something you sit on to watch Netflix. But I kept chewing on it, and I’ve changed my mind. I think it’s a great example of how to approach big ticket purchases once you’ve reached financial independence.
My Own Couch Track Record
For reference, I’m not exactly a high-end furniture shopper.
I’ve bought two couches in the last three years. The first one was $1,200, brand new. The second was a retro couch I found for $600, and then I spent another $600 driving it home from Palm Springs. Yes, the road trip cost as much as the couch. No, I don’t regret it.
So between the two of them, I’m into couches for $2,400. My friend’s couch costs almost 10 times that.
Looking at it from where I sit (on my $600 couch), $23,000 seems absurd.
But I’m not the one buying it, and it isn’t my bank account.
Compare the Price to Your Net Worth, Not Your Gut
I’ve been trying to be less judgmental about how other people spend their money. One thing that helps is looking at a purchase as a share of someone’s net worth, instead of comparing it to what I would pay.
So I didn’t tell her she was nuts (even though I was thinking it). I asked her this instead:
“Think about your net worth. If $23,000 went missing, would you even notice?”
She didn’t even hesitate. “No. Not at all.”
So I texted her husband: “Buy the couch.”
He wrote back with a laugh. “You’ve clearly spoken to my wife.”
A price on its own doesn’t tell you much. What matters is how big it is next to everything else you have. Here’s what $23,000 looks like as a share of a few different net worths:
- $200,000 net worth: 11.5%
- $1 million net worth: 2.3%
- $3 million net worth: about 0.8%
- $5 million net worth: under 0.5%
It’s the same couch at the same price, and a completely different decision depending on who’s buying it.
If your net worth is near the top of that list, spending 11.5% of it on furniture is a bad idea. Don’t do it. But if you’re already financially independent, a purchase that’s less than 1% of your net worth barely registers. Your portfolio probably swings more than that on a slow Tuesday, and you didn’t even notice.
You’re Not Choosing Between the Couch and $0
The more we talked, the more I learned. They’d actually found another couch they liked. It was $5,000. They just didn’t love it.
That changes the math.
When we think about big ticket purchases, most of us compare the (outrageous) cost of the item to zero. Spend $23,000 or keep $23,000? Put that way, keeping the money wins almost every time.
But they’re buying a couch no matter what. The real choice is between the $23,000 couch and the $5,000 couch, so the couch they love really costs them an extra $18,000.
And a good couch lasts a long time. If they keep it for 20 years, that $18,000 works out to $900 a year, or about $2.47 a day.
We’ve all heard about the latte factor. Funny how it never comes up when it’s arguing for spending more. Two and a half bucks a day to sit on a couch they love every night for the next 20 years sounds pretty reasonable to me.
Also, when you settle for something you don’t love, you tend to replace it sooner. Then you’ve paid for two couches instead of one.
The Same Problem, but at 35,000 Feet
All of this reminded me of a recent conversation with my husband, Carl, about our flights to Japan.
Next year we’re going on FI Friends Travel’s Japan Journey, and the girls are coming with us. It’s a 12 to 17 hour trip to get there, and the tour starts the minute we land. There’s no day to recover.
If we show up exhausted, we’re going to sleep on the bus and miss half the stuff we flew across the Pacific to see.
Earlier this year we flew to Amsterdam, and we were able to upgrade to lie flat seats on United. We got off the plane feeling like people, which is not how I usually feel after an overnight flight.
But upgrading won’t work for Japan. The lie flat seats on those routes usually sell out before anyone on the upgrade list gets a shot. And we can’t move our dates around to find better availability, because the trip has to fit the girls’ school schedules.
Carl wanted to sit in economy. Which, to be fair, is a very FI thing to want. Economy will get us to Tokyo.
I said no. We’re all sitting up front, because we can easily afford it. Four of us, a really long flight, and a tour that starts as soon as we land. That’s exactly when it makes sense to spend the money.
Then a Friend Told Us About ZIPAIR
A friend mentioned ZIPAIR, a budget airline that flies from the West Coast to Tokyo. It has lie flat seats for roughly half of what United charges.
And this is where the couch logic works in the other direction.
Our choice was never lie flat or $0. We’re going to Japan either way. At first, the choice was United business class at around $30,000, or Economy for $11,000. ZIPAIR gave us a third option: lie flat seats for around $17,000.
That’s a $13,000 difference for the lie flat seats, and both options get us the thing we actually care about: getting off the plane rested. Budget airlines usually charge for things the big carriers include, so it’s worth comparing the total cost. (And we upgraded to add food to our trip.) But the main thing we’d be paying for is the same.
If we’d been comparing to zero, we’d never have noticed any of that. Lining up the real options shows you what the extra money actually gets you. For my friends, the extra $18,000 gets them the couch they love. For us, the extra $13,000 on United gets nicer food and a fancier lounge. Nice, but I’m not sure it’s $13,000 nice.
But that’s not even what I’m really comparing the cost to, because the Economy seats are $11,000. We’re really only paying $6,000 more to land rested and ready to go. (And I am fully aware that I just used “only paying $6,000 more” in a sentence and said it seriously. Remember, we’re talking about things we can easily afford.) We’re no longer being cheap for the sake of being cheap. We’re prioritizing our enjoyment of a Japan trip
I’m not saying you should always buy the expensive thing. I’m saying you should know what you’re paying for.
How to Think Through Your Next Big Ticket Purchase
If you’re financially independent, or getting close, here’s how I’d work through the next purchase that makes your frugal side twitch.
- Figure out what you’d buy instead. Unless you’re really deciding whether to buy the thing at all, your other option isn’t $0. It’s the cheaper version you’d actually get.
- Look at the difference. The real cost of the nicer one is the gap between the two prices.
- Spread it out. Divide that gap by how many years you’ll use it. A couch you’ll sit on for 20 years is a different decision than a dress you’ll wear once.
- Turn it into a percentage of your net worth. If it’s well under 1%, your financial plan will be fine.
- Be honest about what the extra money gets you. Something you’ll enjoy every day? Pay for it. A fancier label? Skip it.
- Look for a third option. Ask around. Sometimes there’s a choice that gets you most of what you want for a lot less money.
When You Should Not Buy the Couch
Now, the fine print.
“Buy the couch” is advice for people who can easily afford it. If you have high-interest debt, you’re still building your emergency fund, or you’re just getting started, please don’t buy a $23,000 couch. If it would push back your FI date in a way you’d actually feel, the $5,000 couch is a perfectly nice place to sit.
Same goes for buying something mostly so other people will notice. If the only reason you want the expensive one is to impress the neighbors, that’s a pricey way to feel insecure.
Sometimes the right answer is to buy the couch. Sometimes it’s to buy the $5,000 couch and invest the difference. It depends on where you are.
Why FI People Struggle With This
I think I know why my friend was stuck, even though she knew she’d never miss the money.
Most of us got to FI by saying no. No to new cars, no to expensive vacations, no to the $23,000 couch (and probably the $5,000 one too). Saying no worked, and after a while it became part of who we are.
But the habits that get you to FI aren’t the same ones that help you enjoy it. At some point the goal changes from building up money to actually using it. If you could absorb a $23,000 purchase without blinking and you still won’t buy something you’d enjoy every day, that’s not discipline anymore. That’s just habit.
You spent years building this money. You’re allowed to use it.
Bottom Line: Buy the Couch
When you’re looking at big ticket purchases, don’t compare the price to zero. It’s not usually that item or nothing. It’s that item or the cheaper one you’d actually buy instead. The $23,000 couch or the $5,000 couch. The $30,000 flight or the $11,000 flight.
Figure out the real difference, then hold it up against your net worth and how long you’ll use the thing. If you won’t miss the money and you’ll enjoy the difference every day, the decision is easy.
Buy the couch.
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