How to Splurge Without Breaking the Bank

I’ve written plenty of articles about the importance of saving money and spending less than you earn. But when it comes to writing about spending money and having a good time – well, you have to look a little harder.

Please accept my apologies. I never meant to be such a wet blanket.

The conflict between splurging and frugality

One of the first personal finance lessons I ever learned came from my dad. He told me he’s never seen a Brinks truck follow a hearse. He’s right, you know.

Sometimes we owe it to ourselves to splurge a little. After all, what’s the point of working if we can’t derive a little pleasure from the money we make?

The truth is, in the same way that all work and no play makes Jack a dull boy, all saving and no spending makes Jill a depressed girl. Very very depressed.

Splurging isn’t only an essential part of our financial life, it’s critical for keeping most of us happy. (Well, at least for those of us not lucky enough to have a Xanax prescription.)

Part of the problem for many folks is that they equate “frugality” with miserly living. But in reality, that’s truly a perverted understanding of the word. In fact, frugality should be more appropriately thought of as a technique for smartly managing our money.

How to splurge the right way

I love buying music for my iPod. Even though I know how to save money on iTunes, over the course of a year, I figure I still spend close to $1,000 on new music. The wife and I also like to splurge on the occasional weekend getaway at a posh resort. But it’s all good.

The important thing to remember is frugality and splurging are not mutually exclusive. The trick, of course, is to pay for those splurges by consciously reducing expenses in other areas. Here’s how we do it…

1. Our home. We minimized our monthly mortgage payment by purchasing a nice-but-small home that was well under our budget. We also decided to stop making extra principal payments on the mortgage.

2. Our cars. We drive older, well-maintained, fuel-efficient vehicles to avoid monthly car payments.

3. The kids’ education. We send our children to public schools.

4. Our lifestyle. We maintain an otherwise minimalist lifestyle. In addition, we constantly strive to reduce the impacts of our money leaks. And we’re not afraid to buy used items as often as we can.

It also helps to budget for some of those bigger splurges. For example, we set aside a place in the budget each year for our annual family vacation. By doing so, we ensure that we save a fixed amount of cash every month to cover the expected expenses of our trip.

When it’s OK to live it up

Merriam-Webster defines a splurge as “an ostentatious expenditure.” Even so, if your financial house is in order, there’s no reason to feel guilty splurging every once in a while. If you’ve already built up an emergency fund, are saving for retirement, and have eliminated all of your credit card debt, then by all means, go ahead! Treat yourself to something that will bring a little joy to your day.

Just be sure when you do splurge, you do it in moderation.