One of the most important aspects of effective money management is determining when you should splurge on an expense versus when you should penny pinch. Bearing in mind that what one person might consider an item on which no expense should be spared, another person might consider unimportant and even useless, we explore some examples.
When to Splurge
In general you should splurge on items that are essential to your wellbeing and quality of life, such as those with significant sentimental value and are irreplaceable.
A wedding is an important event, and commemorating the memories of that day is important to most interested parties. Being able to relive the event through pictures or videos is important for many individuals. However, that opportunity can be lost if you fail to invest in a professional and reliable photographer or videographer. Spending a few hundred dollars for these services, instead of using an inexperienced family member or using 'budget' services may be one of the best decisions you make about your wedding.
The pleasure and enjoyment that you get from a vacation can last long after it is over, providing it was enjoyable. Ensuring that you have fun might mean investing some money in the experience. This does not mean that you have to spend thousands of dollars or go outside of your budget. If cost is an issue, you can make sure that the bulk of your budget is spent on items that you think cannot be compromised. For example, you could shop for cheap hotels and airfare, and then splurge on the activities in which you plan to engage.
When it comes to certain articles of clothing, it makes sense to spend a little extra to get the quality you need. For example, if you are going for a job interview, consider that you only get one chance to make a good first impression, and your appearance is a big part of making that impression. Your appearance is also important for other significant events such as weddings. So spending a 'little' extra may be well worth it in the long run.
In some cases, it might make sense to consider these items investments, and the return will be the benefit that you receive from them overtime. However, regardless of the item, you should spend responsibly and stay within your budget. Splurging does not mean spending money that you don't have; instead it can mean reallocating some of your budget to items that you think are more important.
When to Penny Pinch
It usually makes good financial sense to penny pinch, where possible, on perishable items, things that can be easily replaced and those that have little value to you.
Being frugal with food does not mean buying low quality products. You can save money by cooking more often and eating out less. In fact, cooking your own meals is one way of making sure that the ingredients and the method of cooking is what you want them to be.
You can also save on food by growing some items in a backyard garden, if possible. A vegetable garden not only helps to save on cost, but you can also get some peace of mind from knowing that the food is not loaded with pesticides.
Using public transaction when possible can help to reduce your cost for everyday travel. If you choose to buy a car, consider avoiding luxury cars. Not only are they more expensive to buy, but they are also more expensive to insure and maintain. For instance, if something goes wrong with a cheaper car, it would cost less to repair because the parts would be cheaper.
The first set of furniture that you buy may be replaced when you start earning more money, if you get married or if you are able to move to a bigger and better home. Therefore, it may not be practical to spend a lot of money on starter furniture items.
Penny pinching does not mean cutting costs to the point where your quality of life is negatively affected. Consider how cost cutting could affect your experiences.
The Bottom Line
As the saying goes "one man's junk is another man's treasure;" which means what may be of significant value to you may be unimportant to someone else. Assess your personal needs and attitude towards items that you buy, and decide how to manage your spending in a manner that best suits your budget and your needs. Don't be afraid to spend money on things you will use day to day. After all, you want to enjoy the fruits of your labor.