To splurge or not to splurge? That is the question, and it’s not an easy one to answer – especially when rewarding yourself is one of the most common ways to celebrate meeting a financial goal.
So, is there a way to reward yourself for being responsible with your money without hindering your goals? Here are some expert tips to help you get this balance right.
While research on the ‘splurging habits’ of New Zealanders is lacking, a recent report by US financial services company Merrill helps throw some light on people’s emotional response to achieving financial goals.
The survey found that 56 per cent of Americans like to reward themselves, with 48 per cent buying clothes, shoes or jewellery; 48 per cent taking a vacation; 40 per cent eating at a nice restaurant, and 24 per cent indulging in spa or beauty treatments.
New Zealand stats may differ, but at the core, probably not so much. The truth is, celebratory splurging is part of human nature – and like many things in life, moderation is key.
Money is a means to an end. But while paying off debt or having more money in the bank are rewards in and of themselves, a little personal reward can add that extra kick of motivation to stay on track.
Moderate splurging is about the emotional payoff, and making smart decisions based not only on your long-term goals, but also on your day-to-day wellbeing.
It may sound counter-intuitive, but according to Tom Hartmann from the Commission for Financial Capability, treating yourself can be a “secret” for saving.
For example, if you have identified spending areas where you can cut down on your expenditures, but don’t want to deprive yourself of something that makes you feel happy, Hartmann suggests to replace it with a less costly alternative.
“With some of the money saved, treat yourself right away so you don’t feel deprived. Reward yourself!” Hartmann says. “Keep doing it until you’ve moved on from your old spending pattern and you’re in control of your choices.”
As New Zealand Herald’s financial writer Diana Clement puts it, having “me money” in your budget helps keep it realistic and gives you something to fantasise or dream about.
“That fun money might only be enough to splurge on a couple of beers or a new nail polish. But the anticipation and joy of that purchase will be far greater if it’s budgeted for,” Clement writes.
Plus, she adds, having a set amount of money allocated can help you curb your impulse buying and, most importantly, take the guilt away.
According to personal finance writer Christy Bieber, these key questions can help you determine if your splurges are the right responses to meeting your financial goals:
“Make sure you’re using common sense,” Bieber says. “If you binge on big purchases after meeting small goals, you can undo all the good you’ve done — kind of like going out for a huge meal after you’ve lost a kilo or two on your diet.”
As an interesting article from Clevergirlfinance.com points out, it’s important to spend your “me money” on things and experiences that are of value to you: “The more in-tune you are with spending money on the things you value, the less likely you are to feel discontentment which in turn can lead to overspending.”
And of course, don’t overstretch your budget to keep up with the Joneses: “If you are rewarding yourself, do it because you really want to and you are going to be happy about what you spend your money on – for you.” It’s good advice.
As Insurance advisers, we can help you protect your financial future so that you have more flexibility to choose where to spend your hard-earned money.
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Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.