When your focus has been the creation of a healthy financial portfolio and protection of any wealth it generates, spending it can be difficult. Many diligent savers and investors worry about spending money on unnecessary items and so-called splurges. But is there a middle ground between wild, uncontrolled splurges and a good kind of splurge? There is. Here are a few traits of the right kinds of splurges.
1. Good Splurges Are in the Budget
Because most people think that splurges are sudden whims or last-minute choices, they don't always equate them with good budgeting. But a good splurge can and should be part of your budgeting process. How you do this depends on your own budgeting methods. It could be an account earmarked for some sort of splurge item, a monthly budget line item for spending, or a sinking fund you can draw from when a splurge arises.
If you are the type to splurge on a moment's notice, work with your financial planner to integrate this into your budgeting.
2. Good Splurges Are What You Value
If you decide to spend more than you need to or on something you don't actually need, make sure you don't regret it later. One big regret is if the splurge doesn't fit your ethics, values, and interests. Splurging on a monthly wine membership can be a good splurge for a wine aficionado. But if you're splurging just because your friends like good wine, it doesn't fit with your own values and interests. It's probably not a good splurge for you.
The best way to ensure that your splurges align with what you value is to understand what your values are. A wealth management expert can help you analyze your spending, saving, and financial goals to help you understand what they say about you.
3. Good Splurges Have a Reason
Why do you want to make a splurge? Consider your motivation first. Is it just because money is burning a hole in your pocket, so to speak, or because you're traveling with high-spending friends? Or is there a solid reason that this will add value to your life?
If a self-employed entrepreneur can file their own tax forms, for example, they may still want to splurge on a tax preparer. If that splurge is to free up time they will spend on more important parts of their business (or with the family) or could result in more tax deductions, it could be a good splurge. If they just don't like the task, convenience may not be enough of a reason to spend.
Where to Start
Want help better managing your splurges? Whether your problem is hesitance to spend extra money or spending too much, a financial planner or wealth management professional can help. Make an appointment today to learn how.