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When Overspending Is Smart

Neal Frankle

Believe it or not, there are some situations when spending more than you earn is clever. Granted, there aren't many cases when this makes sense. It is far better for most of us to focus on getting out of debt as quickly as possible. But in the following three cases, running a personal deficit could be brilliant.

1. Launch Your Career

It doesn't matter if you are fresh out of high-school and looking for a job without a college degree, a recent college graduate, or a veteran of the workforce trying to change careers, it can be genius to work for peanuts when you first start out. I failed to heed this advice when I was just out of college and paid the price.

I took a dead-end job that I hated because it paid $300 more a month than the next offer. Sure, the extra money came in handy. But I wasted two years of my life there before I realized that it was time to move on.

Conversely, the best career move I ever made was to leave my salary position and start my own business. My income took a huge drop at first, but over the long-run it's paid off in spades.

If you can get your foot in the door of a great profession, don't let low pay for entry-level positions stop you. Just make sure that you have a very good idea how long it will take to advance to the next level and that you have enough money to ride it out without raking up too much debt.

It makes no sense to go this route if you aren't pretty sure that the situation will turn around after a certain time. Getting back to the example of starting my business, I knew that if my entrepreneurial idea didn't pay off within 12 months, I'd go back to work for someone else.

Make sure you have similar boundaries.

2. Acquire Skills

I am not a fan of racking up huge debt to attend undergraduate school. But if you have an opportunity to acquire special skills over a short period of time that will allow you to cash in, go for it. And if you don't have the money to pay for school and/or you won't have any income during the time you are learning your new trade, that might be even more reason to jump on it. Yes...borrow the money and do it. Go to your friends, family, or even tap into social lending companies like Lending Club.

A good example of this would be trade school. If you can spend several thousand dollars to become a highly paid trained landscape architect or air traffic controller, for example, why not? You'll earn that money back in less than a year. This is a great investment in yourself.

3. Travel

Sometimes spending more than you earn on travel is fine. Now, before the frugal police fly out to Los Angeles and arrest me, let me explain by sharing a true story.

Claudia earns $24,000 a year as a part-time stylist. Her son and I begged her to take a $5,000 trip to the Mediterranean with her best friend Jeanette a few years ago . Her husband died in 2005 and she hadn't done any traveling since. She was convinced that she could not afford it. Why were we so convinced she could afford it? Simple: Claudia had a $500,000 investment fund that she wasn't tapping into. It just sat there.

Spending 1 percent of her capital once in a while is not a problem. In fact, it's a problem not to use that money because that's what it is there for.

Many times people don't really understand how to convert their assets into income and as a result the fail to enjoy life to the fullest.

Have you ever spent more than earned and found it to be a good move? What were your circumstances?

Neal Frankle is a Certified Financial Planner in Los Angeles and an avid blogger at

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