Budgeting advice often focuses on cutting luxuries - and in some cases everything but the bare necessities - from your life. There's no question that's a great way to save money, but for many people it's not a great way to live. After all, part of working hard is being able to derive enjoyment from the money you make. Sometimes, this means treating yourself to something you enjoy, which is often called a "splurge".
And, as dirty as this word is often made out to be in personal finance, there's nothing wrong with a splurge now and then - as long as it adheres to the following simple guidelines. (Learn more about the psychology in Why We Splurge When Times Are Good.)
TUTORIAL: Budgeting Basics
1. You Can Afford It
During a recession, many people come to understand that spending money on things they enjoy isn't always possible. However, if you can pay for a luxury, whether it's a trip to the Mediterranean or a cup of specialty coffee, with cash and still meet your expenses, you're on the right track for having a healthy and balanced financial life. This is creates a good incentive to set up regular savings.
2. It Doesn't Interfere With Your Financial Goals
Saving up for a splurge isn't the only key to being able to pull it off guilt-free. If the money you saved was diverted from saving for a down payment on a house, your kids' college fund or some other important goal you've set for yourself, not only is your splurge getting the way of much bigger achievements, but it is also likely to leave you feeling guilty. Save for your financial goals first - whatever's left can be put toward a splurge.
3. It Makes You Feel Guilty
If guilt is an emotion you associate with a shopping spree there is probably a good reason for it so you shouldn't ignore it. Often, guilt will creep in if you know you've failed to adhere to the guidelines above. That said, some thrifty people feel guilty about spending any money on themselves at all. This is isn't always a healthy way of looking at personal finance. If this is true for you, try looking into what you're saving your money for - if you don't have an answer, or you do it just to avoid feelings of guilt this could point to a larger problem. (Spending behind your spouse's back is a sure-fire way to financial guilt. Read more in Financial Infidelity: Are YOU A Cheater?)
4. You Take It for Granted
There is such a thing as too much of a good thing when it comes to splurging. In other words, if you treat yourself too often or too carelessly, your purchases will no longer feel like a treat. If you are not even enjoying what you are buying, then why are you buying it?
5. You Can Accept It As Optional
Splurges are something that you can include in your budget during times when your income exceeds your expenses (including your savings). Unfortunately, there may be times in your life when this doesn't happen, perhaps as a result of a job loss, illness or other unforeseen event. During such times, it is important to look at where you're spending your money and cut out the things that aren't essential. In this case, your most frivolous splurges will have to be the first to go. Just because you don't really need these things doesn't mean this isn't a tough choice to make, just be sure to avoid falling into the trap of allowing luxuries to be lumped in with necessities. When it comes right down to it, there are very few necessities at all.
The Bottom Line
There is nothing wrong with deriving pleasure from what your money can buy. In fact, it's a healthy part of financial life. Unfortunately, people often take the very natural desire to enjoy themselves too far, and do so at the expense of more important financial goals - or even their financial survival. Being able to afford life's luxuries can make attaining them a little more difficult, but in the end it will allow you to enjoy them so much more - and without the guilt.