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Wednesday, November 09, 2011

Ask Orthonomics: Is This Expense Justified

I received an interesting inquiry which I will present (abbreviated below)

Dear Orthonomics,

We are a family of six living in Israel with a monthly, post tax and post pension/savings plan income of approximately 16,000 NIS, (as per my exchange calculator approx $4300) give or take. Monthly expenses range between 17,500 and 19500 NIS I am in school and he works in the HiTech field. Prior to returning to school, monthly expenses were between 500 and 1000 NIS below our income . Our mortgage is our only debt and we pay approximately 3500 NIS per month.

Our children are in private school and the youngest is in private daycare. Returning to school has entailed additional childcare expenses. We don't have some of the more common luxuries, nor do we return to chutz l'aretz. Our grocery bill is relatively high, varying between 5000 and 6500 NIS/month.

Regarding savings, we have several hundred thousand NIS in savings and other investments. Half are in low risk investments. We draw several thousand NIS from liquid investments to cover the shortfall while I am in school. After graduation, we hope to add another 6000 NIS post tax to household income.

Now that I'm entering a more professional environment, I would like to put together a better wardrobe. I have one custom $1000 sheitel that is 10 years old, snoods, and scarves (my normal covering). I'm interested in purchasing a new sheitel and I have my eye on a 5300 NIS sheitel. I expect to enjoy it for 10 years.

My husband has concerns as to whether one wig will last so long and thinks in light of the current financial situation unnecessary expenses should be avoided. Our clothing budget for the past 12 months is approximately 7500 NIS, mostly children's clothing and good special sized shoes.

My question: is a 5300 NIS wig purchased for "mental health" justified.

Dear Readers,

Thank you for a writing. I can understand your dilemna as you begin to enter the working world. The situation in short is that you are currently drawing around $2500 a year on $26,000 of savings while you complete school. Your situation is not long term, nor untenable, especially as you continue to contribute to mandatory pensions.

It seems to me that buying a $1400 sheitel won't make or break the bank and there is something to be said for looking and feeling great while you are on display during clinical work. However, I tend to agree with the sentiment that it is best to hold off on unnecessary purchases, especially because you don't know what the future will bring post-graduation. The unknown is scary.

My suggestion, when faced with a luxury purchase that you really, really want is to seek alternatives. Perhaps there is someone selling a hardly used sheitel (happens all the time here) and you can score something wonderful for $500 or less. Perhaps there is a sheitel gemach and you can trade in your old sheitel for one in nice condition.

Since this is an area of contention, I think the default is to hold off the purchase and seek an alternative that works for both of you. I'm a big believer in coming to a solution that both husband and wife are comfortable with. I'd work to seek an alternative that fulfills the mental need in a way that is much less expensive (I do understand the need to sometimes have a wardrobe 'face lift'. And, you can even work to cut back an expense here or there to help cover the cost of the new-to-you sheitel, even though you are already frugal.



tesyaa said...

The one reason I'd say it might make sense to buy the sheitel is that it is something used every day. Yes, there might be something available used, and that's a good avenue to explore. But for an everyday item that will be used, not sit in a closet 90% of the time, I'd be more lenient. So often people spend the big bucks on simcha dresses or shoes that they will wear literally once. The wig is not a luxury item in that category.

Think how much men spend on ritual items (sefarim, tallis, esrog, tfillin when they need to be replaced). Yes, a wig isn't a true religious need if a scarf or a cheap hairpiece can be worn, but this couple is religious, right? It's not just a question of the wife feeling good about her looks, but feeling good about her religion. If subconsciously she feels she can't look her best because of her religion, she might start to resent some aspects of frumkeit. And that would not be good for the marriage or the family's spiritual state of mind.

The Husband said...

Thanks for posting this; I really look forward to feedback. Just one correction regarding the numbers:

Income: 16000 NIS/mo
Expenses: 17500 NIS - 19500NIS
Shortfall: 1500-3500/mo: $350-$1000/mo, (around $8000/year average)

Savings were "a couple hundred thousand"; I'd rather not get too specific, but let's say somewhere in the range of $100K. So about 1/3 of this will be invested in my wife's education.

I did not include my mandatory pension and severance contributions; I'm still independently American enough that I'm trying to only rely on my own retirement savings, but I do have those. I also have some other uniquely Israeli investments (kupat gemel, for those who know what that is) which is currently about 100K NIS ($30K) in tax free savings, but not available to us for a few years (but as it's long term, not emergency, savings, that doesn't matter)

Bethami said...

the letter writer notes that her normal covering is scarves and the like. she's also living in israel.
i'd like to suggest that wearing scarves and hats to work is very, very accepting in professional fields here. i don't want to disparage or diminish her emotional need for a sheitel - i understand the need to look nice - but its not the same as in the US where it really makes a difference. i work in high-tech, one of the most "secular" of industries, and there are many women at the various companies ive worked at in hats and scarves. i think she's mistaken that she needs a sheitel for *external* professional reasons - although she may still need it for personal reasons.

rachel said...

I agree with Bethami.
Maybe a compromise is to buy a cheap one until the 6000 nis income comes and use it 2-3 times a week as a "I want to feel better alternative".

Nephew of Frum Actuary said...

Get it as a "first day on the job" present. That way you will know that it can be covered.

Hi said...

I have to agree that with other posters that being in Israel makes the difference. Although it's technically never a necessity, as there are other ways of covering hair, but in America, it can be argued as a necessity for professional purposes. You just don't have that argument in Israel. She should either make do with a cheaper sheital for now, or none at all. She doesn't need it for work the way she would in the US.

Miami Al said...

I think that this situation is emotional, not financial.

Reading between the lines, their savings was no double built over a time, no doubt through frugality and sacrifice. Fully one third of that savings is being invested in the wife's education. While education is a human capital investment and really should be thought of as "ours" in the mental balance sheet, it's clearly being perceived as hers. Given the situation, a $1000 luxury to "feel good" about entering the professional world post-school isn't a huge deal, she's going to spend more than that on a professional wardrobe. However, there is an issue here that is far more serious.

Husband and wife saved up a bunch of money, a HUGE chunk is being invested in wife's education, husband is nervous at their burn rate. Wife wants a "mental health" reward to psyche herself up for post graduation work. Husband seems frustrated.

Each time my wife has switched jobs (and to a lesser extent, that I have), we've gone and bought new clothes for the new job... keep in mind Miami is a different work environment than greater-NYC, not even the bankers where pin stripe suits to work, unless they are visiting from the NY office, new environment, etc.

I think that it is a very good idea to have top notch clothing when it comes to interviewing and making a good impression on the job site. However, the husband is clearly nervous about it.

My suggestion would be:

1. It is NOT approved as "mental health" - you spent 1/3 of your family's liquid savings on your education, that was a family sacrifice for your career, you should appreciate that and the risk your husband is taking with you.

2. It is reasonable if you feel that that is important for your to look professional. However, you aren't there yet, you are still in school, right? When are you graduating? When are you interviewing for jobs? When do you start work.

Here is my suggestion:

1. Find a cheap "temporary" solution, restyle your current sheitel, buy a used one, etc., so you can look good for interviewing and putting things together.

2. Get nice interview clothes together so you can look your best.

3. Line up your post-education job. If the job is sufficiently lucrative, your husband will feel good about the investment in your education, you'll feel good about the new job, and go get yourself the new sheitel for new job.

Best to let the income lead the expenses. Even if you "waste" a few hundred fixing up/buying your temporary sheitel, that is less significant than avoiding mental anguish that you are spending the new income before it arrives.

When my wife landed a new job, there was absolutely NO objection to the new wardrobe, I pushed for it as much as her, and we spend about 6-8 weeks of the income differential on the clothing. She felt great about the new job, felt polished and excited to show up, and 8 weeks later, we are well ahead of the game with the extra income, plus she has new clothes that will last a few years (remember, don't have much seasonality in Miami).

Anonymous said...

Like Miami Al's comment.

In terms of an investment in a cheaper sheitel that might be used for interviewing, there are attractive synthetics available cheaply on eBay and other venues. For a temporary need, in which durability is not a concern, some very nice looks are available for under $50! (Don't know if they deliver to Israel):

Disclaimer, I have no relationship to the wig vendors or the Ask Chavi site.

The Wife said...

Both my husband and I are aware that the need is more emotional then anything else.

As for looking for a cheaper alternative, it is the more rational approach. However I need to take my personality into account. I will not be happy with anything else. I saw something that I look and feel great in, an alternative just wont cut it and will be a waste of money because I will not be happy with it.

My feeling is that since we do have a decent size savings, that when there is a very strong want, (yes, I am aware that its more of a want than a need) we can 'splurge' on something that I will enjoy for a long time.

tesyaa said...

Wife - your 10:03 comment is self-explanatory. This sounds like a personal matter to be decided between you and your husband, and there's not much commenters can add, based on your explanation (you have a strong want, you will not be satisfied with an alternative). Why bring this to Orthonomics? It's not like there is an objectively right answer.

You understand that you will be drawing down your savings and feel you can afford to do so. Your husband is reluctant. It sounds like one party will have to compromise. It's not easy, but it's also not brain surgery. Once you two make the decision together, though, there should be no recriminations going forward. Marital strife over a sheitel IS too high a price to pay.

The Husband said...

Thanks too all for your comments so far.

I just want to add two points.

1. My wife is truly an excellent person, and in almost 10 years of marriage, this is the first financial thing we've disagreed over! It's b"H not a Shalom Bayis question (if it was, I'd spend the money is a second, although I'd also be wary of a situation where a purchase can affect shalom bayis!)

2. We decided to solicit input from this fiscally responsible crowd to get some feedback whether they think (a) I'm being too frugal at my wife's expense (the original letter noted that of our ~7500NIS/year clothing expenses, less than 10% was mine personally) and (b) whether the amount proposed is reasonable for a want vs. need

To clarify a bit regarding times: my wife will be starting some "fieldwork" in a few months, but will have 2.5 more years to go until graduation (getting more hands on and less classroom time as the years go by). However, this work is all unpaid (in fact, we pay, as part of tuition.

Dave said...

Your income is currently below your expenses.

I'd defer unnecessary luxuries until such time as that is changing.

You don't know that you won't have a more pressing need for that money before your income/expense line turns positive in a couple of years.

I agree with the suggestion that you make it a graduation present -- a tangible reward for the end of the educational process. Especially because at that point you'll have a much lower risk in using savings to pay for it.

JS said...

If I understand the situation correctly, you have at least (and probably far more) than $100k in savings and various investments. You're funding (or fully funding) pensions and also contributing to voluntary retirement accounts.

Due to your wife being in school (tuition plus no income from her) you are now spending around $8k a year more than income and therefore drawing that from savings.

She wants a sheitel and she wants it now (she doesn't want to wait).

Honestly, it's not the end of the world to go out and buy it. Would it be better to wait and make it a "Congrats on graduating and landing that job!" gift? Sure. But, this isn't a wholly rational situation, it's mostly emotional. If she doesn't want to compromise or wait and it doesn't kill you inside to give in here and dip into savings a bit more, then go for it. If she can wait or it's gonna eat you up inside, then wait.

You're coming from a strong financial position. Even though you're drawing down savings, it's being done in a thought-out and planned manner. You still have a nice cushion for any temporary disasters or setbacks.

My only warning would be not to make a habit of it and view it as a one-time expense, not a new way of living.

I think a larger concern is whether you'll continue to be able to save after your wife graduates and finds a job. Are more kids on the horizon? More expensive schooling? If you're gonna be heading into more situations of expenses exceeding income that's something to think about. If you foresee your new combined incomes as always allowing for more savings, not such a big deal.

I think that's the bigger question here. You have a lot saved up - what's the new goal now that education is going to be paid for. Early retirement? Bigger house? Kid's school? Weddings? That's the bigger issue - not a $1k one-time expense.

Sometimes people save and save and save and don't even really know what they're saving for anymore.

Miami Al said...

Is this expense "justified"? Absolutely not, it's totally not, it's a personal indulgence. Wife wants this to look good and really feels that this is the best way for her to do it.

Wrapping it up in "justification" is silly.

She wants it, it will make her feel better about herself.

Can you afford it? It seems so, you have the savings, she's in school to do better financially in three years, your savings seem sufficient for it.

Should you get it?

Absolutely, it's an affordable luxury that means a lot to your wife, you should get it for her.

However, stop trying to justify it, it's NOT justified, it's a personal luxury. Enjoy it as such. Don't treat it as another bill, than you'll resent it, you should be thrilled that she is happy and looks good.

Also, stop rationalizing it about "10 years" that will make the husband resent it when, in three years, with more money coming in, you want to upgrade.

There is nothing wrong with life's little luxuries, it's the "justifying them as needs" that causes resentments.

When times are tight, we only pay for needs (and no, new $200 shoes are NOT a need). When things are going well, we spring for the luxuries that make us happy. Making this a need is the worst of both worlds, you'll resent it, and not enjoy it.

JS said...

The last point that Al makes is a good one. Recognize when something is a luxury and treat it as such. Don't try to justify it or dress it up as a necessity.

If you do that you run the risk of a lot of disappointment and anger down the line.

For example, if you say "I'm going to buy this expensive sheitel, but it's OK because it will last me 10 years and I won't need a new one till then" then what happens when it gets ruined or you just don't like it anymore or it doesn't live up to your expectations? Better to just say "I'm buying this because I like it and I want it." You can then reevaluate what you want to do down the line if it no longer makes you happy in a more rational manner. In the first situation you get into an argument about how you "promised" it would last 10 years. In the second you just look at whether you have the money for another luxury when it comes time to replace it.

You see this all the time. Someone buys nicer clothes and says it will help in the workplace, but salary doesn't go up. You upgrade a regular TV to an HDTV because you're currently "wasting" money since you can't see the HDTV channels that are already part of the cable package. Buying that higher quality oven will allow you cook more easily. The more expensive shoes will last longer than the cheaper ones.

Any or all of these justifications may be true, but if they're not you're just setting yourself up for disappointment or an argument.

There's nothing wrong with the justification being "happiness" assuming you can afford it.

Anonymous said...

I'm sure this is a real letter from a real reader, but it seems like this post is an attempt to divert attention from the previous (now deleted) post. When a post is deleted and no subsequent item is posted, the name of the deleted post shows up in blogrolls and some searches.

This is just slightly weaker than the typical Orthonomics post.

Avi said...

If you were both working and income exceeded expenses, of course you'd buy it.
If you were permanently earning less than your expenses, of course you wouldn't buy it.
So... the issue is how do you approach a temporary time when expenses exceed income? It sounds like your approach is to be as frugal as possible, and treating this "in between" time as a luxury-free zone. Except that she saw this sheitel and she wants it BAD. Will it break the bank? No. But it will break the pattern of postponing luxuries. So I have two tests: if you buy it, will that open the floodgates to pricey coffees and new clothes and a new iPhone? If you run into financial troubles later, will this become a point of contention? If the answer is yes to either question, don't buy it. If the answer is no to both questions, enjoy your new shaitel.

Orthonomics said...

Anon-Not an attempt to divert attention. This has been in my email box since Oct 17.

I took the JP post down because the more I read, the more I am blown away by the whole things. I want to put up the post, perhaps with some updates. I'm still hoping some more information comes to light.

Anon1 said...

Are there less costly, but still presentable, sheitlach available that have the same career functionality? This has to be investigated thoroughly before buying a dress-for-success sheitel.

Mark said...

JS - Sometimes people save and save and save and don't even really know what they're saving for anymore.

Good point. Some people don't save at all (or hardly save) and later don't realize why they can't seem to purchase things that become necessary over time, or at least not be able to purchase them without using credit and paying interest. And other people save regularly without specific goals in mind for those savings. Those specific goals are usually broken into 3 categories, short-term (like saving $100 each month for about a year to purchase an iPad), medium-term (for example, saving $500 a month for 5 years to purchase a mini-van), and long-term (saving regularly over a 40+ year career for retirement). And, of course, all savings is a method to mitigate risk, all sorts of risks, job loss, health issues, unexpected home maintenance, etc.

This family sounds relatively young and relatively frugal (a 3500 mortgage with a 16,000 income is excellent, though I really have to question spending NIS 6000/month on food, or about 37% of net income!*), and if I had to guess, they are likely saving for the purchase of a vehicle someday (a medium-term savings goal). I would further guess that since they have 4 children (and perhaps might have more someday), they will want to purchase a minivan. So another way to think about the NIS 5000 sheitel is that it amounts to 4-5% of the eventual vehicle purchase price. I mention a vehicle because:
a. They are VERY expensive in Israel and thus require very disciplined savings.
b. When the wife starts working full-time, and the kids start growing up, a vehicle might become more necessary.

Shabbat Shalom to all.

* Spending 37% of ones net income on food is excessive (very excessive) in my opinion. I have no doubt that this family has shabbat guests quite often and are very gracious, but even the mitzvah of hachnassat orchim has to be tempered by the proper husbanding of ones resources. And I also have no doubt that a family of 6 could feed themselves (plus occasional shabbat guests) with a lot less, I know this is fact because there are plenty of families of 6 in Israel whose entire net income is about NIS 6000 or a little higher.

The Husband said...

The food is insanely high, but I have absolutely no idea how to cut it down [note that it's really more like 5K-6K; rarely if ever over 6K (usually tishrei and nissan only]. We generally buy only mehadrin hechsherim, though not the most expensive ones; we don't eat out often at all, or buy a lot of processed foods, but I suppose we do eat a lot; even fruits and vegetables add up (close to 1K/month).

And we do try and host a lot; I consider that to be our entertainment budget :)

Anonymous said...

Don't a lot of Israeli schools include the main meal (lunch) as part of tuition? Or are the kids not school age yet?

If the kids are getting a meat meal at school, a cheap, light dinner like eggs or pasta is fine.

Fruits and vegetables are expensive, agreed.

There are many ways to cut a family's food budget - I'd consult the excellent Cooking Manager blog (based in Israel) for suggestions.

The Husband said...

The kids are in school, but no meals are provided. They're discussing the option; if so, it'd probably be about 10NIS/kid/day. Which is a whole lot cheaper than the amounts they eat :)

Mark said...

The food is insanely high, but I have absolutely no idea how to cut it down

Maybe you can ask a neighbor for advice? Let's say, for example, you live in Ramat Bet Shemesh, you could ask one of your Charedi neighbors with similar aged children that is living on a total of about NIS 8-9,000 including the various subsidies they might receive, and who also only eats mehadrin. Their food budget is probably substantially less than NIS 4000. I bet they shop at the local fruit/veggie stores that have lower prices (and perhaps slightly lower quality produce). Perhaps they eat less meat? In any case, that may be a place to turn to for some advice. Good luck!

Anonymous said...

I'm another one thinking you should cut down on food. We are also a family of six, and when my husband lost his job I managed to cut down food to NIS 3000. This meant no more soft drinks, only plain yogurt, no sweet challahs (now I make my own), no eating out (even pizza and felafel). It can be done - and we use cash only.

Bethami said...

re food bills - are you buying a lot of frozen/canned? a few years ago i found a caterpillar in my fresh broccoli and have been buying only frozen since (to grossed out!!). however after a few years i remembered how cheap the fresh is (and how good) and we've gone back to it, as well as other fresh instead of frozen, and its cut out a lot of our bill.
also - sometimes we buy too much and it goes bad before we can eat it. maybe w a family of 6, thats not such a problem, but see if you are ever not using as much as you buy...
ALSO - try shuk shopping. MUCH, much cheaper for fruits and veggies, and so, so good.

anon said...

We are also a family of 6 living in Israel, using mehadrin hechsherim.
I also work in high tech and post tax etc. bring home only 12K NIS. Our mortgage is about the same as yours, our kids are also in private schools, and our shortfall is about the same as yours. Where is the big difference?
We spend much less on food. I shop at Rami Levi instead of Yesh or Shefa shook. Just that saves me literally a few hundred shekel a week, Also, I am careful to by things on sale, and to use generic store brands. We very much limit use of packaged-prepared food. With the exception of corn-schnitzel for the kids second meal in school, because they won't eat much else.
Food is on average not more than 2500 a month.
Our major expenses are:
private health insurance + life,
pharmacy costs (we have our share of health issues),
arnona(property tax) about 600 nis a month,

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