Splurging vs. Overspending: Exploring the Right Ways to Splurge

Splurging on indulgences may not seem like a smart way to spend your money, but there are times when splurging can actually be good for your wallet.

If you’re trying to reach financial goals or increase your bank account, you might go on a spending diet and only spend money on necessary items. This is certainly a way to reach goals; but at the same time, denying yourself also increases the risk of frugal fatigue. And when you hit frugal burnout, there’s a chance that you’ll overspend later on.

The idea is simple — treat yourself here and there, and you can reduce spending cravings and stay on budget. But while spoiling yourself can be a healthy financial trick, you shouldn’t confuse splurging with overspending. Overspending refers to spending money that you don’t have, while splurging is spending money because you can.

It’s a common misconception, and some people assign the same meaning to both terms. In the end, splurging has its benefits, yet there’s no benefit to overspending. Overspending complicates finances and you might struggle to make ends meet each month, at which time you might rely on credit cards to get through the month.

The trick is striking a balance and knowing the differences between the two. And once you have a clear idea of what it means to splurge, you need to figure out the right ways to spoil yourself.

1. Don’t use a credit card

When splurging, the idea is to spend money you have, not money that you don’t have. And when you splurge with a credit card, there’s a greater risk for overspending and ending up with credit card debt. You may prefer ‘not’ to carry cash, but paying with cash is an excellent way to stay within a reasonable budget. Besides, using a credit card can increase your debt, and too much debt can lower your credit score.

Since “your credit score is a key factor in determining the interest rates you pay for auto loans, mortgages, credit cards, apartment renting, and more,” according to www.lexingtonlaw.com, limiting credit card use makes good financial sense.

2. Take care of bills before splurging

Don’t splurge until you’ve assessed your bills and expenses. To avoid buyer’s remorse or feeling guilty, pay all bills before splurging. This way, you can evaluate your disposable income to make sure that you can afford whatever purchases you make.

3. Set a budget

It’s important to be responsible when splurging. Therefore, establish a splurge budget. This will vary by person depending on how much you have in disposable cash. Some people can afford to splurge $50 every month, whereas another person can splurge $100 without breaking the budget or going into debt.

4. Splurge on inexpensive items

Some people associate splurging with buying expensive items. And although you can spend your splurge budget on anything you like, you can get more for your money buying inexpensive items. For example, rather than spend all of your budget on one item, think cheap and get four or five items for the same price.

5. Don’t make hasty purchases

Ideally, you don’t want to regret a purchase. Therefore, don’t make any hasty decisions. Think about items that you would like to splurge on, and then weigh the pros and cons of each item. For a splurge to be worthwhile, consider buying things that have long-term value.

6. Splurge on experiences

Some people only splurge on material things, such as clothes, electronics or household items. However, splurging on experiences can create memories with your friends and family. For example, take your extra money and visit a new amusement park, or enjoy another adventure, such as parasailing or jet skiing.

7. Treat yourself

It’s okay to spend your extra money on things for the home, but it’s also okay to treat yourself to a little fun. Sure, you can use your disposable income to make repairs like fixing a small hole in your wall. But unless you’re planning to sell your home in the near future, minor repairs can wait. You work hard. Therefore, if you want a new pair of shoes — buy them and don’t feel guilty about treating yourself.

8. Let your splurge budget accumulate

If you have a modest splurge budget, you might never afford higher priced items. There’s a simple solution — let your splurge budget accumulate for a few months and slowly save up to buy more expensive items. For example, if you want to purchase designer sunglasses that cost $200, and you’ve established a $50/month splurge budget, simply hold off splurging for four months.

9. Don’t splurge with friends

When you’re splurging, it might be best to shop alone — unless of course you’re bringing along a frugal friend. By splurging with others — especially big spenders — these people may have a different financial mindset, and they might encourage you to spend outside your budget.

10. Don’t feel obligated to splurge 

Having a splurge budget doesn’t mean that you’re obligated to spend. In other words, don’t shop just because you can. Think about the things you really want or need. And if you can’t think of anything worthwhile to purchase, save your splurge budget until later.

11. Look for sales

There is no rule that says you have to pay full price when splurging. Remember, the goal is to get the most items or experiences for the money. And to accomplish this, you might have to wait for sales and discounts, or look for other savings.

12. Splurge for free

Redeeming your credit card reward points or cash back bonus is an excellent way to splurge without spending any cash, or very little cash. If you have enough points accumulated, you might be able to redeem these for cash, gift cards, airfare, hotels and other merchandise.

13. Splurge on others

If for some reason you can’t think of anything to splurge on, consider helping others or donating money to a local charity. There is more happiness in giving than receiving, and knowing that your cash will assist someone in need can bring true satisfaction.

Splurging might be healthy for your financial soul, but there’s a wrong and a right way to have fun with your cash. Remember to evaluate your budget, spend what you can afford, and don’t forget to splurge on experiences or others.