The art of a financially-responsible splurgeYou're itching for a shiny new car. A beach vacation is just what you need to combat an all-too-stressful past few months. A high-power blender would make it so much easier to eat healthy. And you can have them! Here's how to get what's important to you without destroying your budget or going into debt.
1. Think ahead
Focusing on the future doesn't have to cause an anxiety attack—and it's also an opportunity to dream. And dream we do. Before you write your budget, take a moment to think about what may soon change in your life. How do you see your career developing? Are you planning to have another child? Will you make a big geographical move? Although we can’t predict everything in life, most of us have some sense of where we see our lives moving. Knowing this and understanding how it will affect you financially will help you create a thoughtful budget to live by.
2. Prepare a budget
First thing's first: Pour yourself a nice glass of wine to make this process a little less burdensome. Then start by figuring out three things: your monthly expenses, including bills and lifestyle costs; your monthly after-tax income; and your savings goals.
Understanding how much money is going in and out of your bank account each month and where that money is being spent will help you determine where you can cut back and how much you can reasonably save without making major quality-of-life sacrifices.
“Budget strategically so that you have money to spend on what you love,” says Linda Descano, president and CEO of Citi’s Women & Co. “A much-needed vacation or an amazing handbag that you’ve been coveting may seem like a splurge, but if you make it one of your short-term savings goals and are able to make some small sacrifices along the way, you may realize that there’s room to invest in your happiness in ways that won’t wreak havoc on your budget.”
3. Make sure your savings are in a strong place
If you're already saving—good for you for being ahead of the game. If not, making sure that you're covered for the future will release a large part of the guilt that comes with overindulging from time to time. To get on the path to a solid nest egg, first take a look at your monthly expenses and see if you can cut back on the frivolous stuff (switching from store-bought to packed lunches can save you $140 a month). Then, look for new sources of income you might not have considered, like, for example, setting up an Etsy shop for all those weekend D.I.Y. projects. Finally, figure out a monthly savings goal that makes you feel like you're working towards the number you eventually want to hit, but doesn't make you feel too cash-strapped. Have this magic number automatically withdrawn from your bank account every month and put aside into an online savings account.
4. Be market-conscious
You've worked really hard to save, and now's the time to make sure you get the biggest bang for your buck. Just like you'd research a position's average salary before negotiating, or check out various local schools before choosing one for you kids, look into the marketplace for your splurge. If you’re looking to buy a home, wait for a buyer’s market when interest rates are low and inventory is high. If you want a killer pair of boots, purchase them at the end of the season when they'll likely be on sale.
5. Determine the true value of your splurge
Your husband might think that spending an entire paycheck on an amazing coat is absolutely crazy, but if the item brings you happiness and value, you'll be the winner of that argument. “When it comes down to it, a responsible splurge has to be truly irresistible,” says Lisa Alcalay Klug, author of Hot Mamalah: The Ultimate Guide for Every Woman of the Tribe. “That’s usually the case because it serves many important purposes, doesn’t feed a mere impulse, and isn’t purchased to impress.
The key to a responsible splurge is planning ahead, which may mean asking yourself some hard questions about your financial situation. But when you're honest with yourself, you can you develop a budget you can stick to and that will allow you to ultimately pay for your big-ticket item guilt-free.
Caroline Wright is marketing manager at Manilla.com, a platform that helps you manage your finances, utilities, daily deals, travel and rewards programs, and subscriptions—all in one place. Caroline is also a regular contributor to Yahoo! Finance, Good Housekeeping, Woman’s Day, and The Motley Fool.
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