Occasionally, even experts in budget management suggest that it’s acceptable to indulge in a splurge every now and then.
For Jen Smith, one of the hosts of the “Frugal Friends Podcast” and co-author of “Buy What You Love Without Going Broke,” responsible splurging meant investing in expensive hurricane-proof windows for her home in St. Petersburg, Florida, a region prone to severe storms.
“It’s a matter of safeguarding our home, and we had saved up for it,” she explains.
Determining when to splurge on a costly purchase can be challenging, and Smith herself initially felt guilty about it.
Her podcast co-host and book co-author, Jill Sirianni, points out that part of the difficulty with splurging is the misconception that you have to be either a saver or a spender, when in reality, everyone spends and saves in different ways.
The key, according to Sirianni, is knowing when to embrace each aspect of your financial tendencies.
If you’re grappling with the decision of whether to save or splurge, here are some questions to consider before making a decision:
Does the purchase fit within your budget?
“Having a budget in place enhances our awareness of how we spend money,” says Gerald Grant, Jr., a financial advisor at Equitable Advisors in South Florida.
Grant recommends keeping the budget simple, with categories for essentials and “wants,” and then closely monitoring your spending to ensure it aligns with your financial objectives.
Will splurging save you time?
If spending a little extra can save you time or energy, the benefits may outweigh the costs.
For instance, in addition to her recent window purchase, Smith also chose to hire a home cleaning service once a month due to the overwhelming task of cleaning her house and rental property.
“I’ve decided to invest in this service and take this off my plate, and it feels like a weight off my shoulders,” Smith shares.
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Are you investing in quality over quantity?
In certain situations, like when purchasing clothing or toys, opting for a cheaper option may result in a lower-quality product that doesn’t last long, as Sirianni points out. Paying more upfront can mean a longer-lasting item, ultimately saving you money.
“We prefer to prioritize quality over quantity,” Sirianni emphasizes, even if it means spending a bit more initially.
What are your spending triggers?
Certain triggers can lead us to overspend, and Sirianni suggests examining those triggers to avoid them. By doing so, we can make more deliberate choices when faced with the decision to save or splurge.
“Conduct a 90-day transaction inventory. Gather your bank and credit card statements in one place,” she recommends.
Identify where you’re spending the most money. When do these spending instances occur? Who are you usually with? Is there a common location where spending takes place?
For example, if you find yourself making impulsive splurges late at night, try refraining from shopping during those hours.
“Identify the patterns and habits, then formulate a plan,” Sirianni advises.
Does the product or service align with your values?
When contemplating a purchase, Smith often evaluates the decision through a non-financial lens: her values. For instance, she aims to support local, women-owned businesses, and the cleaning service she hired falls into that category, making the choice easier.
“I’m reinvesting in the community rather than stress-shopping on Amazon, which takes money away from my local area,” she notes.
Can you save up before indulging in the splurge?
Similar to Smith with her window purchase, Sirianni also set aside savings before her significant splurge, which was a European vacation with her spouse and friends.
“We spent more money than my younger self would have been comfortable with, but I had saved specifically for this purpose,” she explains.
She utilized a “sinking fund” — a dedicated, regularly-funded savings account — to accumulate funds for the trip.
“We had around $5,000 set aside for this trip, so we were able to spend that without any guilt or shame,” she adds.
Grant encourages the same prioritization of saving before splurging. Saving in this intentional manner can be a part of an overall budgeting strategy.
He recommends creating separate savings accounts distinct from regular savings to easily track the purposes of different accounts.
Otherwise, you might end up spending those funds before they are needed for the intended purpose.
“It’s not extra money, but funds you’re setting aside for expenses that have yet to occur,” Grant emphasizes.
Get started with budget planning
Check your current spending across categories to see where you can save