When it comes to managing your finances and building wealth, some people feel that any type of splurge is automatically a bad thing. In reality, though, splurging can be beneficial to your overall financial health when done in the right ways. How can you splurge in the right way? Here are five tips to follow.
1. Include It When Planning
Splurging doesn't necessarily equate to impulse buying or last-minute decisions. Impulse buying can be financially hazardous and not very meaningful, but you can also plan for splurges. This planning ranges from creating separate goal accounts (like savings or a new car) to including more wiggle room in your monthly discretionary spending budget.
2. Use It as Motivation
Do you struggle with certain aspects of financial planning? Perhaps you're working toward a goal, such as paying off a particular debt or maxing out your retirement contributions. If so, a splurge after reaching a goal can be a force for good by helping you motivate yourself.
3. Align It With Your Values
Good splurges—even impulse purchases—are distinguished from bad splurges, in part, by how well they align with your values. If you want to free up time to spend with your kids or to earn a higher income, splurging on a house cleaner can be a good splurge. However, splurging on a new car with a high monthly payment may not align with those values. And it's likely to not bring value to your life.
4. Know When to Stop
As with any spending, perhaps the most important thing is to know when to stop. Smaller splurges, like your morning coffee run, may not impact your finances much. But if your splurging grows, creating interest-bearing debts or taking away from important parts of your budget, it has stopped being a good splurge. It's time to take back control.
5. Pay Yourself First
The adage to pay yourself first means putting aside money for your future before you spend on the present (or the past, via debt). If you automate things like retirement savings, taxable savings, financial goal planning, and bills, splurges will be better managed. You can spend on those impulse buys and wants without worrying about their future effects.
Where to Start
Ready to get started managing your splurges? Want help finding the right way to use them, pay for them, and choose them? Begin by meeting with a qualified wealth management planner in your area today.
Contact a local wealth management planning service to learn more.