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spending

How much do you spend on clothes each year?

This year, one of my goals is to spend some money on building a professional wardrobe. But I’ve noticed I tend to purchase items from fairly expensive stores like Banana Republic, J.Crew, and Anthropologie. I find the clothing looks better, lasts longer, and fits better. And that’s okay, I just need to realize that I likely won’t be able to buy as many things on my wish list as I want to.

Apparently we are supposed to keep our clothing budget to 5% of our overall spending. At least, that’s what Bridget said. And that seems reasonable. So I did a bit of calculating to see where I stand with my spending this year.

Aaaaaaand wow. My clothing budget represents 14% ($1,226.14) of my discretionary spending so far in 2013. Or 3.5% of my gross annual income to date. Yikes.

That’s actually a lot higher than I thought it would be. But I bought a suit, and significantly upgraded my work wardrobe. So it’s not like I have no idea what I’ve been spending my money on. Still. It’s pretty eye opening when you calculate the numbers.

clothing

Which basically means I’m putting myself on a clothing shopping ban. You may recall I put myself on a clothing shopping ban for the year of 2011. Well, I’m going to do the same thing, except I’m imposing this ban until the end of September. That’s 3.5 months without buying any clothing. I can probably do it until the end of the year, but I’ll take it baby steps at a time. :)

Oh, and I’ll still be allowed to alter and repair the clothing that I currently own – because the suit that I bought earlier this year? It’s too big for me now. :| Which is great because it means I’ve lost a bit of weight, but bad because that’s a brand new suit! I’ll have to get both the pants and blazer taken in.

How much money do you spend on clothing each year?

How many hours did you work to buy that?

A few weeks ago, I blogged about considering the cost-per-use for items that you buy. As most of you know, with the cost-per-use concept, you take the purchase price of an item, and divide it by how many times you think you will use it. For example, when I buy a pair of black flats for work, I will likely wear them 3 times per week, for 2 years. So (52 weeks) x (2 years) x (3 wears per week) = 312 times before I buy a new pair. If my shoes cost me $75, that’s about $0.24 per use.

Another way to help you determine whether something is worth buying or not, is to figure out how many hours you will have to work to purchase that item. It can be a serious eye opener. I used this approach a lot when I was a teenager making $8 an hour. When I realized I would have to work two full days in order to pay for a university application fee, I asked for my hours to be increased. And when I broke a heel on a pair of boots, I calculated that it would cost me 12.5 hours of work just to replace them – so I spent the equivalent of one hour of work getting them repaired instead.

Today, I use the same method when I’m thinking about buying a big-ticket item. For example, in 2011 I worked approximately 60 hours each week (60 hours x 52 weeks = 3,120 hours total). I earned around $80,000, which means my hourly salary (before tax and deductions) was $25.64. After tax, my true hourly wage was around $18. So when it came time to making the decision to get adult braces, the $6,980 price tag meant that I would have to work 387 hours just to pay for them – or nearly 6.5 weeks. Yikes.

I go out for lunch with co-workers almost every Friday. This costs me around $10. After taxes, my true hourly wage is around $23. Which means I have to work less than 30 minutes to pay for that meal. To me, it’s worth it.

My mortgage is $1,070 per month, which ends up being about 46.5 hours – or less than 1 week of work for me, after taxes. That’s also worth it.

Then there was a gorgeous dress I saw online at Anthropologie, but it was $300. And as much as I loved it, I couldn’t justify the 13 hours of work it would cost to pay for a dress.

You get the idea. Obviously this method, much like the cost-per-use method, has its pros and cons. But I really do find it helpful to break down how many hours I have to work for something to see if it’s worth it.

So the next time you have a few minutes, take into consideration your wants vs. needs. How much of what you are spending on a regular basis is on needs – like groceries, rent, insurance, and utilities? And how many hours are you actually working each week just to pay for the stuff that you want?

Asking yourself these questions is important, and taking the time to calculate how many hours you have to work to afford something is a really great exercise in the value of a dollar. A dinner out with friends every week might not seem like a big splurge, but if you’re making minimum wage, or you can’t pay your bills, or you are drowning in debt, or you’re working overtime just to make ends meet (so that you can continue buying stuff), maybe it’s a good time to evaluate what you can truly afford.

Is the lifestyle you’ve built for yourself worth the hours you put in?

Do you ever calculate how many hours you have to work to buy something?

Do you think it’s a valid method to evaluating purchases?

Do you have a store credit card?

We’ve all been in this scenario before: as you approach the cash register to pay for your purchase, the clerk tempts you with an additional 20 per cent off your purchase if you sign up for their store credit card. And even though you know you don’t need another credit card, and you rarely ever shop at the store, you can’t help but waiver just a little bit. After all, everybody likes saving money, right?

Store credit cards can be enticing, especially when they offer a deep discount on the initial purchase, a rewards program for frequent shoppers, or a “no payments” plan for a certain time period.

When I was 19 years old, I applied for a Sears card with a $500 credit limit. As a promotion, I received $10 off my first purchase, which might not seem like a big discount, but to a teenager making minimum wage, it represented over an hour’s worth of work. I also earned rewards for my spending – I’m pretty sure it was 2%. To me, this was the dream scenario. Not only did I work at Sears (and was able to get an employee discount, plus first-hand knowledge of sales), but I was also excited to have my own credit card. It made me feel grown up.

I thought I would be able to handle such a small credit limit, and I told myself if I ever made purchases on my Sears card, I would pay off the balance immediately at the cash register. But when Christmas came that year, I ended up maxing my Sears card in order to buy presents. And it wasn’t until four years later that I completely cleared the balance and canceled the card.

The Sears card was my first and last experience with a store credit card.

Related: What loyalty cards do you carry in your wallet? 

If you are a frequent shopper at a store, and are able to keep a zero balance every month, a store credit card can be a good way to save money. But for the rest of us, here are four reasons (from my own personal experience) why store branded credit cards are not a good idea:

High interest rates

Most of the time, a store-branded credit card will have an interest rate that is much higher than a regular card – with rates generally between 20 to 30%.

Additionally, store credit cards will often have a very tiny minimum payment, usually under three per cent. My Sears card had an interest rate of 29.90% and a minimum payment of $10 or one per cent of the new balance – whichever was greater.

Low benefits

You usually won’t benefit from the rewards program associated with a store-branded credit card unless you are a frequent shopper.  For example, the Sears card offered a $10 gift certificate for every 1,000 Sears points earned. At a rate of 2 point for every dollar spent, there are plenty of no-fee credit cards available with similar, and more flexible rewards systems.

Forced to shop in one place

When I had my Sears card, I felt more of an urge to shop there because I knew I could put my purchases on my store credit card. Even if I could have found what I was looking for at a better price somewhere else, I didn’t have the cash to buy it at the cheaper price.

Your credit score

Even if you pay your balance in full every month, many different things can affect your credit score, and that includes opening and closing credit accounts. Receiving a small discount by opening up a store credit card is not worth the potential headache and problems you could run into if your credit score prevents you from getting a good mortgage rate in the future.

What has been your experience with store-branded credit cards?