When to Splurge and When to Save

Sometimes, even budgeting experts say it’s OK to splurge.

For Jen Smith, co-host of the “Frugal Friends Podcast” and co-author of “Buy What You Love Without Going Broke,” responsible splurging meant buying costly hurricane-proof windows for her home in St. Petersburg, Florida, an area with a history of bad storms.

“It’s for the safety of our home, and we saved for it,” she says.

Deciding when to splurge on an expensive purchase can be tricky, and even Smith admits she initially felt guilty about it.

Her podcast co-host and book co-author, Jill Sirianni, explains that part of the challenge of splurging is that “we’ve been sold a binary that you’re either a saver or a spender, but in reality, we all spend and we should all be saving.”

The trick, Sirianni says, is knowing when to embrace each tendency.

If you’re trying to decide when to save or splurge, here are some questions to ask yourself first to help you make an optimal decision:

“Starting with a budget will increase our awareness around spending money,” says Gerald Grant, Jr., a financial advisor with Equitable Advisors in South Florida.

Grant suggests keeping the budget simple, with categories for essentials as well as “wants,” and then tracking spending closely to make sure it aligns with your financial goals. If you have a budget, it’s easier to decide whether or not to splurge on something because you can check to see if it fits into your larger plan.

If spending extra money can save you time or energy, the payoff can be worth the cost.

For example, in addition to her recent window purchase, Smith also decided to hire a home cleaning company once a month. Cleaning her house, along with the rental property she operates, had become overwhelming.

“I am finally ready to spend this money and take this off my plate, and it feels good,” Smith says.

In some cases, such as with clothing or toys, purchasing a low-cost option can translate into a lower quality product that doesn’t last long, Sirianni says. Paying more can mean the item lasts longer, ultimately saving you money.

“We love to aim for quality over quantity,” Sirianni says, even if that means paying a little extra upfront.

Certain triggers can push us to spend more than we planned, and Sirianni says studying those triggers can help us avoid them. That way, we can make more intentional choices when it comes to the save-or-splurge decision.

“Do a 90-day transaction inventory. Collect bank statements, credit card statements. Get it all in one place,” she suggests.

From there, figure out where you are spending the most money. What time of day does the spending happen? Who are you usually with? Does spending happen in a common location?

If you find you’re often making regrettable splurges late at night, for example, try avoiding shopping in the evening.

“Figure out the patterns and habits, then make a plan,” Sirianni says.

When Smith is trying to decide whether or not to buy something, she often tries to look at the decision through a non-financial filter: her values. For example, she wants to support local, women-owned small businesses, and the cleaning service she hired fits that category, so moving forward was an easier choice.

“I’m putting money back into the community versus stress-shopping on Amazon, which takes money out of my community,” she says.

Like Smith with her windows, Sirianni also saved up before her big splurge, which was on a European vacation with her husband and friends.

“We spent more money than my younger self would be OK with, but I had set this money aside,” she says.

She used a “sinking fund” — a dedicated, regularly-funded savings account — to save up for the trip.

“We had about $5,000 set aside for this trip, so we were able to spend that without guilt or shame,” she says.

Grant advocates for the same savings-first approach when it comes to splurges. Saving in this purposeful way can be part of an overall budgeting plan.

He suggests creating separate savings accounts outside of normal savings so it’s easier to track the purpose of different accounts.

Otherwise, you could end up spending that money before you need it for the vacation.

“It’s not extra money, but money you’re putting aside for expenses that haven’t yet occurred,” Grant says.