It is frustrating to watch a low-budget team perform poorly--It is worse to watch a mid-budget team like the Reds play poorly and waste money on what seems to be redundancy in the roster (see Castro, Juan, etc.). It would seem that allocating money wisely through contracts is essential for success (unless of course you have a budget upwards of 120 million to work with).

My question is: Are there groundrules which a GM of a lower to mid-level spending club can/should consider when formulating a philosophy of spending & payroll? I think this is an important question to consider as the Reds appear hellbent on riding the fence between contending and rebuilding--
I propose three, not earth-shattering, but basic rules for spending (feel free to add areas which I've missed):

1) Spending is relative to your division. You don't have to be better than every team in Baseball, just better than the immediate competition.

2) Only pony the big bucks for quantities which are in high demand, and then only when the attributes of the other areas of your team are of a sufficient quality themselves to render said team competitive. Otherwise, save the money--Sign higher quality draft-picks, spend on scouting/ international development. (Much has been made of payflex, I wonder whether org. have "philosophyflex" that allows them to change they way they allocate money based on the circumstances.

3) Avoid long-contracts like the plague--Never ever ever ever sign any player to a deal which approaches 7-9 years. Even if you have to pay more for a 4-5 year deal for a marquee player, chances are the inflating market is still going to make it look like a good deal in 5 years--Even better IMO to pay more for production you KNOW you are likely to get over the next 3 years, than to pay a cut-rate for production you're likely NOT to get in years 4 and beyond.