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.

Related Articles
  1. Stock Analysis

    How Expensive Is Whole Foods, Really?

    Learn about Whole Foods Market, Inc., and discover how Whole Foods pricing actually compares to that of other grocery store operations.
  2. Budgeting

    The Hard Way We Pay For Convenience

    Convenience is a luxury. However, any cost-conscious individual should be aware of these ridiculous ways we pay for convenience and how to avoid them.
  3. Mutual Funds & ETFs

    Top 3 Consumer Cyclical Mutual Funds

    Obtain information on, and analysis of, some of the best performing mutual funds that offer exposure to the consumer cyclicals sector.
  4. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  5. Investing News

    This is the Fastest-Growing Consumer Complaint

    There’s no way to guarantee that your Social Security number won’t fall into the wrong hands. Here are some ways to make yourself less of a target.
  6. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  7. Budgeting

    Top 7 Money Saving Tips for Eating Out

    Discover seven money-saving options available to consumers who are looking to partake in the luxury of dining out while cutting down on cost.
  8. Economics

    What's the Velocity of Money?

    The velocity of money measures the rate at which money goes from one transaction to another in an economy.
  9. Investing News

    3 Stocks to Play a Falling Unemployment Rate

    Three stocks to consider as the unemployment rate falls.
  10. Economics

    What are the Four Ps?

    The four Ps of the marketing mix are product, price, place and promotion.
  1. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  2. Are Social Security payments included in the US GDP calculation?

    Social Security payments are not included in the U.S. definition of the gross domestic product (GDP). Transfer Payments For ... Read Full Answer >>
  3. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  4. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. How much does seasonality affect the net sales figures of companies, such as retailers?

    Seasonality affects both sales and net sales figures of companies in different ways. For some companies, seasonality has ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!