Time To Treat Yourself Financially– When, How, and Why

I’m guilty. With about 60 blogs under my belt, I’ve primarily focused on how to make money – either through personal finance or career advice. Make it, save it, protect it. But when can you spend it? You have to shell out some of your hard-earned cash on daily living expenses, but what about some of the fun stuff in life? When can you take that vacation to Minot, buy that Mazda Miata, or just have a fancy dinner out at Dave and Buster's? Let’s dedicate this week’s blog to the best part of having money – enjoying it!

It's important to treat yourself. Perhaps getting those nasty black warts on your back removed?

When Not To Spend

Before we get too far down the line, I do want to make it clear that spending frivolously is not for everyone. If you are paycheck-to-paycheck, have substantial amounts of non-mortgage debt, or simply don’t have enough income to get by, you should be careful with your money. Focus on getting yourself into a better financial circumstance so you have some breathing room. Make sure you are paying (in full and on time) for your basic expenses (housing, food, utilities, insurance, etc.) and putting away enough money to meet your retirement goals. Then, any excess money can be spent on fun stuff. Please note my diction – can be spent, not should or must be spent. Any excess money that can be invested (for future use or retirement) will give you financial security and flexibility down the line. Think of it this way – if you hold off on spending money today and can invest it in the stock market (at 7% rate of return), you will essentially double your money in 10 years! Or, think of it this way – whatever you wanted to buy today, you could theoretically get for "free" in 10 years. Keep in mind – a financial struggle doesn’t have to be a lifetime sentence. If you can hang tight while you work through difficulties, you’ll enjoy the fruits of your labor in the future.

Don’t believe me? One of my great readers – “Russ” – told me about his financial struggles. He was helping family pay bills, but couldn’t stay on top of his finances, and had to declare bankruptcy. After some careful planning and discipline, Russ was able to retire as planned, owns his home, and has enough in savings to live comfortably. Proud of you, my man!

How To Spend

So let’s talk about the ways you can spend that money. First, think through the considerations. How much can you reasonably spend? What do you want to spend it on? Is it a one-time expense or recurring? Because this can all vary on a case-by-case basis, let me provide a real-life example. Last year, I bought a used car. I had been driving a 2013 Hyundai Sonata, with 130,000 miles, and severe hail damage that had nearly totaled it out a few years ago. It was embarrassing. Starting a new job where I needed to drive to meetings, I needed something more presentable. Better yet, I wanted something that made me look cool – as cool as a 39-year-old father of two could. As careful with my money as I am, I didn’t think a new car was worthwhile, so I started looking for used cars. I had a budget it mind, and found the ideal car for me: a 2016 Audi A6 with 53,000 miles under its belt. Dark blue interior. Nougat brown leather seats. 2.0T 252 hp engine. I was in love.

So back to the questions. How much could I reasonably spend? Considering I saved the cash to pay for it outright and am taking care of all other expenses while maxing out my 401(k), I felt comfortable with my spend amount. Is this what I wanted to spend my money on? Yes! While my inner Scrooge told me I should just buy another basic car, my mid-life crisis receptors fired away! It had 53,000 miles on it, but it was in great shape and drove like a dream. I couldn’t drive a vehicle that resembles a golf ball any longer. Is it a one-time expense or recurring? It is essentially a one-time expense - and although general maintenance costs are higher with more expensive cars, it is within my budget. While I dedicated an entire blog series to cars and how they’re a waste of money, I really couldn’t drive the bucket of bolts and divots any longer. Having a good car to drive gives you some confidence that you’ll make it to your destination safely… and not be embarrassed when you arrive! So was this splurge worth it? For me, yes. But we are all different, and what you choose to splurge on is up to you.

Why You Should Spend

Saving your money is important to your overall financial prosperity. Is spending – essentially the opposite of saving – your enemy? Overspending can derail your long-term financial goals. But let’s say your ticking off the checklist I mentioned at the beginning of this blog: bills are paid, retirement savings goals met or exceeded, and you have extra money. Can you get yourself some designer shoes or spend a long weekend in the mountains? Yes! And you should. If you are working hard to earn your money, taking care of necessities, you deserve to reward yourself. Enjoying your success will keep you motivated to continue on the path. Burnout is real. People are quitting their jobs left and right https://www.cnbc.com/2021/06/09/4-million-people-quit-their-jobs-in-april-to-find-better-work.html , either to find other employment or retiring early. I would think some people are doing so without being financially secure to do so and as a result of pent-up frustration with the daily grind. Rather than retiring early or looking for greener grass, what if all you needed was some retail therapy or good, long vacation? Spending $10,000 on a two-week vacation or $5,000 to refresh your wardrobe seems excessive. But, if you’re making $80,000 a year, and it would recharge your batteries so you could work another year or two, isn’t it a good investment?

The biggest consideration with spending on non-essentials is the outcome. Recognize the connection between your spending and the enjoyment, good memories, or improved quality of life derived from the money spent. Did your purchase give you a temporary thrill or long-term satisfaction? Was it worth the cost? What else could you have spent the same money on that would have produced a better experience? A red flag is recurring spending – constant, habitual spending on goods or services that don’t produce lasting results. An example would be going to a mall every weekend and buying a new outfit every week. The law of diminishing returns comes into play – did the thrill of buying the first outfit match the thrill of the 32nd? Spending for the sake of spending is, in fact, a recognized disorder https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1805733/ of the U.S. National Institute of Health.

Well, that’s a fun way to wrap this blog about how it’s okay to spend. Getting back to the more positive sides of things, you can absolutely spend your money on trips, gadgets, luxury items, or whatever you so choose. Just make sure you’re taking care of your other personal finance obligations first and spend on the items that will bring you the most happiness!