Can Spending $10,000 on a Wonderful Couch Make Perfect Sense?

  1. How Your Income Source Affects Your Budget Decisions
  2. What Are Your Job and Time Really Worth?
  3. Disclaimer
  4. About the author

How Your Income Source Affects Your Budget Decisions

A young woman with her head on a dog’s back, both laying on a couch.
Photo by Karolina Grabowska from Pexels:

I was scrolling through Medium’s Money topic as I do most days when I ran across a piece by Matthew BoutteWhy spending passive income is radically different than spending earned income.”

Wait what?! What’s that subtitle?

Or, why I might consider spending $10,000 on a couch


Spending $10,000 on a couch?!

Hmmm… This better be good!

Boutte’s Interesting Idea

In that piece, Boutte proposes a different way of looking at your spending based on your income type.

He paraphrases the Financial Independence movement’s tenet that money represents your “life force,” since you spend time bringing in that money.

For example, if your hourly income is $50, buying a $10,000 sofa means you’d be “spending” 200 hours on it. That’s 25 full-time days or five full-time weeks of work!

If your hourly income is $25, that increases to 400 hours, 50 days, or 10 full-time weeks!

Worse, you can’t simply divide your income by your annual work hours. You should also consider:

  • Time spent getting ready for work
  • Time spent getting to and from work
  • Time spent after-hours responding to work calls, emails, text messages, etc.
  • Work-related expenses (e.g., office-wear, dry cleaning, commuting, etc.).
  • Taxes!

If you calculate all these, your hourly income may be less than half of what you’d naively think, and the hours of “life force” you spend are twice as many!

However, Boutte says, “…passive income… comes regardless of whether you’re awake or asleep, at your desk or on a beach in Thailand. So it isn’t really trading your life force… if I splurge and spend a month’s worth of passive income on a $10,000 couch, it’s not that big of a deal — next month will bring its own passive income. But if I trade $10,000 of earned income for the couch, that’s 400 hours of my life that I’m never getting back

Does Having Passive Income Really Mean Money Isn’t Time?

Boutte’s idea is interesting, but…

Money is fungible, so having some passive income doesn’t automatically make big splurges workable.

Here are a couple of scenarios where Boutte’s conceptual framework breaks down, and one where it survives.

Scenario 1: Your income includes passive and earned income

Say your annual expenses are $50,000, your (after-tax) earned income is $30,000, and your (after-tax) passive income is $25,000.

In your baseline situation, you have $5000 excess annual income that you can invest to increase your portfolio (and thus your future passive income).

Then, you see a $10,000 couch that you love. Following Boutte’s notion, you buy it out of your passive income, thinking this avoids spending your “life force” on it.


Your $5000 excess income just turned into a $5000 income deficit!

How do you close the gap?

If you were able to easily scale up the passive income, you’d have already done so. This leaves working for the missing money, so buying that couch does spend down your “life-force.”


Scenario 2: Your income is all passive, but in balance with your spending

Again, assume your annual expenses are $50,000. This time, however, let’s assume your annual (after-tax) passive income is also $50,000.

Could you spend $10,000 on a couch without “life-force” concerns?


Spend $10,000 on the couch and you again leave a $10,000 “hole” in your budget.

Here too, we can safely assume you’d have already scaled up your passive income if you could, so to close the budget hole you’d need to work enough to generate the missing income.

Another fail.

Scenario 3: Your income is all passive, and far exceeds your ongoing spending

This time, assume your annual expenses are the same $50,000 but your passive (after-tax) income is $75,000 a year.

You decide to splurge on a $10,000 couch, increasing your annual spending to $60,000 for just this year. Since you have a $25,000 annual excess of passive income there’s no need to work to cover the $10,000 purchase.

Finally! Boutte’s idea works!

The Bottom Line

Having some passive income is certainly better than having none, and clearly, the more passive income you have relative to your spending level, the better.

However, unless your passive income exceeds your expenses by a good margin, or you can scale it up as needed (in which case, why haven’t you?), don’t count on it as a way to avoid the “life-force” (or work-time) impact of a big splurge.

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This article is intended for informational purposes only, and should not be considered financial, investment, business, tax, or legal advice. You should consult a relevant professional before making any major decisions.

About the author

Opher Ganel has set up several successful small businesses, including a consulting practice supporting NASA and government contractors.