When to Splurge and When to Save: Financial Experts Weigh In

When to Splurge and When to Save: Financial Experts Weigh In

We asked financial experts when it’s OK to go a little crazy – and when to hold back.

By Judy Koutsky

Some people are spenders and some are natural savers. While the ultimate goal should be saving, it’s OK – and necessary – to splurge sometimes. Even those on a tight budget are allowed to make splurges. The key is to be smart about it and get the most bang for your happiness buck. “Knowing when to splurge and when to save is like dieting,” says Stephanie Genkin, a financial planner in New York City who teaches classes on money and happiness. “It's unrealistic for most of us to say we're never going to eat ice cream or pizza ever again. Life is more fun when we can enjoy these splurges once in a while. [The] same principle applies to money splurges. There's a time and a way to do it.”

1. It’s better to splurge on experiences than material things. “Research shows that splurging on an activity with others – like a birthday party for your husband or a long weekend in Paris with a friend – will bring you greater joy than buying an expensive handbag or dress,” says Genkin. Why? One reason is that we get pleasure out of anticipating and planning big trips or adventures. So even before we've actually splurged on the thing we are going to do, we feel happy. Then there’s the enjoyment of going on the trip, having the party, or participating in the class. Afterwards, we continue getting pleasure out of telling others about the highlights of these activities. And of course having lasting memories of doing things with loved ones deepens important social connections.

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2. Save on things that don’t give you a lot of pleasure. There are so many things we buy with little or no thought; for these expenses, it’s better to go cheap and save the money. “If you buy breakfast on your way to work every morning, think of how much that costs you a month and whether it's worth it,” says Genkin. “Could you grab a yogurt from the fridge and drink free coffee at the office and do something better with the money you saved? How about that expensive cable package? Do you really watch all the channels or is it worth switching over to a cheaper plan?” Look at where you’re spending your money and if it’s done more out of habit, think of how you can cut back and save in those areas.

3. Don’t skimp on really important things, like insurance. Having decent health insurance is important, says Katie Brewer, a Texas-based certified financial planner. Also, things like sufficient life insurance and disability coverage are worth the investment. Not investing in these things could really cost you later.

4. Splurge on someone else’s expertise. If your toilet breaks, it’s worth it to splurge on a plumber to get it fixed, rather than trying to figure it out yourself or getting a DIY book. Same with doing your taxes: If they’ve become more than you can handle, hire an expert to get it done correctly, says Brewer, since it will probably save you money in the end.


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Judy Koutsky is the former Editorial Director of KIWI magazine, a green parenting publication. She was also Executive Editor of Parenting.com, AOL Parent and BabyTalk.com. Follow her on Twitter @JudyKoutsky.

Image ©iStock.com/svetikd

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