You’ve been great about saving and not going on a spending spree, but every now and then, it’d be nice to loosen the budget belt a little. Ever feel that way? It’s healthy. In fact, some experts say that splurging or spending freely on something you don’t need can be good for you.
Financial expert Kyle Winkfield put it this way:
“When you splurge responsibly, it’s like a successful diet with built-in cheat days. With any great budget that’s successful, you build in a splurge. It’s your cheat day.”
So, can you cheat with a splurge and not blow your budget completely? If you plan for the splurge with a “fun money” account and stay within your budget limits, it’s doable. Everyone has the urge to splurge, especially as the holidays approach. Nevertheless, smart spending is still within your grasp. Read on to find out how to splurge on a budget.
1. Use Credit Card Rewards
Using the money you’ve already spent to buy a little something extra is genius. “If your credit card offers rewards, check your statement and add up the available rewards points,” said consumer finance expert and Freedom Financial Network vice president of sales and Phoenix operations, Kevin Gallegos. “Visit the rewards website — your splurge area — to see what you can get by converting rewards into gifts, cash or gift cards.”
People with cash-back credit cards typically earn about $25 a month in rewards, estimated one 2010 study. And if you use your card for reimbursed business travel and expenses, you might earn a nice-sized reward for your purchases.
Especially nice are the cards that offer discounts to your favorite stores, like Chase’s Amazon.com Rewards Visa Card. It rewards you 3 percent cash back at Amazon.com. Redeem your points, and you can fund some holiday shopping and pick up a little something extra for yourself, too.
But don’t go into credit card debt by getting a credit card for the sole purpose of earning points; only get a new cash-back credit card if you don’t have any credit card debt and you can pay off the monthly balance.
2. Go Big After a Little Research
If you’ve saved your splurge money for a big-ticket item like a TV or laptop, practice smart spending. “You’ll be able to score the best deals on major items with good research,” Gallegos said. “If you are choosing a high-dollar item, check reputable online review sources like Amazon and CNET. Then, use comparison-shopping sites such as PriceGrabber, Pronto or Shopping.com to find the best online prices. Finally, search for coupon codes online at sites, including RetailMeNot, FatWallet and DiscountCodes.”
Comparison shopping alone can save you significant dollars. PriceBlink, a browser add-on, alerts you as you online shop if there’s a lower price available elsewhere on the web. Sites such as Offers.com track product pricing over time, which “can help you decide if the splurge is a good one,” said Offer.com’s Kerry Sherin. Add a coupon code, and you could save even more on your splurge. Coupon code offers can range from free shipping to 25 percent or more off purchases. For purchases more than $100, that 25 percent can add up to significant savings.
To really amp up the savings, however, fill your virtual shopping cart with your intended purchase and abandon the sale. Many online retailers will email you a discount offer for the abandoned items to nudge you to make the purchase.
3. Spend Money on Small Items
Control the urge to splurge on items you can’t afford by buying small items that feel splurge-worthy. “To gain the feeling of purchasing something special, do so on little things,” said Gallegos. “Maybe it’s purchasing a $5 bar of handmade soap, a small amount of an expensive spice for holiday baking, a top-quality chocolate bar or a craft beer.”
Benjamin Glaser, features editor at DealNews.com, added, “Smaller luxuries can still make a big difference in how you feel. Fine cosmetics, bed linens, good razor blades, and yes, quality toilet paper, are all affordable treats that will leave you feeling like a million bucks.”
When you’re working toward achieving long-term budgeting goals, splurging can take a back seat. But buying a little something that makes you feel special can diffuse the feeling of “I never have any fun!” that could lead to a big budget blowout later. Even personal finance guru Dave Ramsey agreed. “When buying stuff that you really need, it’s okay to spend a little extra to avoid financial, or even physical, pain in the long run,” Ramsey wrote on his blog.
4. Buy Experiences Instead of Material Things
Research cited in The Wall Street Journal suggests that people are happier when they spend money on experiences rather than material goods. According to San Francisco State University associate professor Ryan Howell, “people think that experiences are only going to provide temporary happiness, but they actually provide both more happiness and more lasting value.”
An evening with friends, a vacation with family or a date night with a spouse all count as experiential splurges with a high return on happy memories. And, these experiences don’t need to derail your budget.
So, splurge on taking a day off to spend with your family, planning a special holiday dinner with loved ones or attending a concert to see your favorite band. As an added bonus, another study — this one published in PsychologicalScience.org — found that just the anticipation of the experience can be more exciting than buying a material item.
5. Buy at the Right Time
Many experts say certain months offer better deals on some products. For example, some of the best things to buy in October include air conditioning units, a new car and outdoor equipment. If your practice smart spending and buy your splurge item when it’s at its lowest price, you’ll probably feel better about spending the money.
For an everyday example, let’s say you’re itching to splurge on a fancy homemade dinner. With some pre-planning, you can usually buy what you need to make the meal more without spending a lot and still feel like you’re treating yourself. According to TheGroceryGame.com CEO, Teri Gault, holiday sales at grocery stores offer an average of 67 percent savings on steaks, whole rib roasts, shrimp, lobster and champagne. She said December is a great time to stock up on all these items so you’ll have them handy year-round for your next meal splurge.
Sticking to a budget doesn’t have to mean you deprive yourself every day. Allow yourself a cheat day every now and then to stay on track. Just plan for your splurge, make it proportional to your budget, don’t go on spending sprees, and you’ll avoid morning-after regrets and overspending fallout.