By: Andrew Rosen, CFP®, CEP®

This week’s blog is for those of you that aren’t “spendthrifts.”

You know who you are–the “nervous Nellie” types. Those who are always afraid to make that big purchase. I find a lot of people out there fall into this category. In many instances, being a little conservative with spending is a healthy thing.

But is there a point of going too far? Can you really be too frugal?

Yes, you can. Let me explain.

The Decision Making Process

I can relate to those nervous Nellies–I am one as well. That’s right, Andrew Rosen gets scared when making that big ticket purchase, too. No matter how many people tell me not to worry about it, I’ll still worry.

Usually, the decision making process for me looks something like this:

Andrew: “I should buy that thing. I can afford it.”

Andrew: “But what if an emergency comes up? Or, what if I lose my job?”

Andrew: “Don’t be silly, you aren’t going to fire yourself!”

Andrew: “True, but what if you never get a new client again? What if all your current clients decide to go to the company down the street?”

Andrew: “Well that’s just being ridiculous.”

Andrew: “But it could happen.”

Andrew: “I suppose you’re right. I’m not going to buy that thing.”

And scene!

I’ve seen this scenario play out with many clients, as well. I try to convince them they’re in a great financial position and that they can afford that big purchase. I’ll model it out, I’ll have their spouse on my side, and yet, I still sometimes can’t convince them.

The last thing I turn to is my ace in the hole.

That Different Voice

As you can see from above, there are many voices in my head. However, sometimes I need to hear advice from a voice NOT in my head. That’s when I turn to one of my partners, David Levy. He’s helped my comfort level at giving clients advice to help their peace of mind (especially when they are struggling with the choice whether or not to make that big purchase). Long before David got me comfortable giving this advice, I’d still mention it to clients. It’s my duty to help them see both sides of the coin.

However, it wasn’t until a few years ago when I was looking to make a big purchase myself, that he turned the tables on me. I had run the numbers ten different ways and clearly I could make this purchase. I then turned to David and asked his thoughts. I went through my modeling and spreadsheets. I gave him every excuse not to buy, despite the fact that the financials showed it wasn’t going to be an issue. Then he said the one thing that pushed me over the edge: “Andrew, the worst case scenario is that your fears come true. Even if that does happen, you can always sell it.”

He’s right!

It was so obvious, yet so brilliant.

Instantly the fear washed away. I realized if things do go to hell in a handbasket (never understood that saying), I can always reverse it. I can always turn around and sell this mistake.

If you’re like me, you’re already playing the conservative card. But, almost any situation can be undone without a catastrophic loss. Therefore, I went and made that purchase and never looked back.

My advice

When in doubt, think about the worst case scenario. What you would have to do to “undo” the situation? What is the cost financially to reverse? Weigh that against your family, emotions, or mental health. If the answer is anything less than catastrophic, than go ahead and purchase away.

Here at Diversified, LLC, we like to model out these circumstances with clients and talk them through logistically. Since modeling only gives half a story, I like to turn to actual advice and experience to add definition to a decision. That’s when the best answer is derived. One part math and one part psychology.  

In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. Andrew loves helping others by spreading his knowledge on finance, investments, and the pursuit of happiness/fulfillment. He writes nationally recognized, weekly blog posts on these topics and is a regular contributor to Kiplinger. Andrew has been published in The Wall Street Journal, Barron’s, Financial Advisor Magazine, US News & World Report, USA Today, CNBC, along with many other publications.

For more information or to book a consult with Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.

Andrew Rosen, CFP®, CEP®
Kyle Hill, CFP®
David Levy, CFP®

Financial planning and Investment advisory services offered through Diversified, LLC, a registered investment advisor. Securities offered through Securities Service Network, LLC, Member FINRASIPC. Some associates of Diversified, LLC are registered representatives of Securities Service Network, LLC, a registered broker/dealer, 9729 Cogdill Road, Knoxville, TN 37932. (800) 264-5499.