What’s the Difference between Splurging and Wasting Money?

Couple at a fancy dinner

We all make mistakes with our money. We’ve spent when we should have saved. We bought cheap and paid for it. We bought expensive and regretted it.

The tighter the budget, the more painful our missteps. But when is a misstep really a misstep and when are just being a little too hard on ourselves? To understand that line, we must first understand what it means to splurge.

What is a splurge?

Besides being a word that looks like it’s spelled wrong even when it isn’t, splurge gets a bit of a bad rap. Because the act of splurging usually involves spending a significant amount of money, it can feel like a bad thing. After all, if you’re reading this you probably don’t have infinite money, so spending any amount likely causes a slight twitch in the corner of your eye, and spending a lot may provoke a full on panic sweat.

By definition, however, to splurge is to simply indulge in some luxury. And while you may not feel like a “luxury” is something you can afford at the moment, the actual act of splurging is neither good nor bad. Buying an expensive dinner at a nice restaurant can be a splurge. Finally taking that dream vacation is a splurge.

Splurging can actually be a very healthy part of your day-to-day personal finance. The key is to recognize the difference between healthy splurging and just wasting money.

What makes a splurge healthy?

There are three core factors to healthy splurging:

Splurging should always be budgeted

First and foremost, you need to be able to afford your splurges. Whether it’s a latte at Starbucks or the latest and greatest 4k/3D/holographic/no-screen TV, it’s never a healthy splurge if you don’t have the money for it.

Now, it’s not a requirement that you plan for every splurge. Splurging can be spur of the moment (a sudden decision to take your partner out for dinner and a movie) and still healthy. You just need to make sure you’re spending money that’s already been accounted for in your budget.

To that end, it’s also important to remember that just because you have enough money on hand at the moment to make a particular purpose, that doesn’t necessarily mean you can afford it. If buying a new laptop means you can’t make your rent payment at the end of the month, you actually couldn’t afford it.

Splurging should always align with your values

That might sound a little high-minded if we’re just talking about splurging on a breakfast sandwich from the fast food joint at the end of your street, but it’s true across the board.

Remember, you have a limited amount of money and it has to do a lot. It has to keep you fed, sheltered, clothed, and appropriately warm. It also needs to keep you happy. No, money doesn’t buy happiness, but how you spend the money you have can go a long way towards supporting your priorities, interests, and goals.

To put it another way, self-care is important. Depending on your personality and personal values, fancy meals and expensive vacations can be crucial elements of your happiness. If watching TV helps you unwind after a long day, then a big, ridiculous TV is the kind of splurge you’d value.

The only guideline here is honesty. It’s your money and you can spend it any way you like. But the more honest you are about what makes you happy, the more likely you are to never feel like your big investment wasn’t a waste of money.

Splurging can be convenient, but don’t splurge just for the sake of convenience

Finally, the last barrier between perfectly healthy indulgence and potentially regretful money wasting is convenience. A splurge can be convenient (and there’s certainly nothing wrong with making life easier), but it’s when we splurge entirely for the sake of convenience that we run the risk of throwing money away.

When you pick up takeout for dinner every night, even though you have a fridge full of groceries, simply because you don’t feel like cooking, you’re splurging just for convenience. Again, it’s your money and you can toss it around however you like, but when you weigh the splurges that connect to your joy and purpose against the ones that saved you 20 minutes, you’ll likely feel like the latter weren’t quite worth the money.

Tagged in Smart shopping

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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