How to Splurge Wisely
Your Urge to Splurge
This article originally appeared on LearnVest.com.
There’s something about the word “splurge” that just feels indulgent—it rolls slowly off your tongue in a decadent drawl, and evokes imported truffles and designer shoes. It’s a decision for immediate luxury, albeit often laced with a tinge of guilt.
There’s no room for such frivolity in the responsible world of financial planning, right?
Wrong. Most financial experts and social psychologists will tell you that splurges are not only allowed, they’re necessary and healthy to achieving financial happiness, because the pleasure they provide promotes a better relationship with our money–and, let’s face it, is one of the ways money makes our life more enjoyable.
The key is figuring out how to do them right, so that your splurges don’t detract from your goals, and your dollar goes far in returning pleasure.
Yes, we’re going to tell you how to best maximize your “Splurge ROI.”
We Get Used to What We Have
The key to mastering splurges is to first understand human nature. We are subject to a pesky psychological phenomenon called adaptation: essentially, we get used to what we have. This is commonly referred to as the hedonic treadmill: the concept that even if we acquire better circumstances—more money, a bigger house—we will quickly return to the level of happiness we had prior to these acquisitions, and will require more to get that same surge of satisfaction again. This explains why study after study shows that more money does not equate with more happiness.
Splurges Make Us Happy
It’s not worth trying to beat adaptation—we can try to stall or fight it, but in the end we always lose, according to a study by researchers Daniel Gilbert of Harvard University, Elizabeth Dunn of the University of British Columbia, and Timothy Wilson of the University of Virginia. This is why you may try to stay excited about your new job, iPad, or vacation as long as you possibly can, but eventually the sheen will wear off. And you will need a raise, a new model, or a better trip to get you feeling excited again.
Adaptation isn’t anything to feel badly about—it’s human, and apparently unavoidable. The best bet is to, well, adapt to adaptation. We should accept it as a part of our reality, and in fact, we can capitalize on the fact that we can give our own happiness a boost with periodic indulgences. In fact, these spurts of delight are what keep us going through life’s less stimulating plateaus (like working and, um, sticking to a budget).
Splurge Small—and Frequently
Since we “adapt” to pleasure so quickly, smaller, more frequent splurges are better investments.
Temporal breaks allow us to readjust and experience a jolt of delight again.
Spreading out our joyful treats not only allows us to experience pleasure more often (who can say no to that?), it can actually save us money. This is because our pleasure doesn’t increase in exact proportion to the size of the splurge.
For example, several studies cited by Gilbert, Dunn and Wilson show that eating a 12-ounce cookie isn’t twice as pleasurable as eating two 6-ounce cookies; it’s less. Similarly, in another study, those who received an 80-second massage, followed by a break and another 80-second massage, experienced more pleasure than a group who received a straight, uninterrupted 180-second massage (and were willing to pay twice as much for it!). Notice the happier massaged folks received less massage time (only 160 seconds) compared to the less happy group.
Instead of a major spa day every few months, try a mani-pedi every couple of weeks. Instead of treating yourself to the cute $100 top with your paycheck, see if a $30 tee one week and $50 sandals the next give you a little bump of pleasure twice that month instead. Try a few smaller vacations a year as opposed to one major dream vacation every couple of years.
Consider breaking your splurges down into smaller segments throughout the month (or year), spend less on them total, and see if your happiness–and wallet–notice a difference.
Splurge vs. Mindless Habit Spending
Is that daily latte a worthwhile splurge? There’s a difference between splurging and mindless habitual spending. The key is that your splurges should be purposeful and give you great pleasure in proportion to what the budget-friendly option would provide.
For example, a daily latte might be a worthwhile splurge if you choose it mindfully, savor the nutty aroma and every creamy sip, and it really makes a big difference to starting your day compared to a free home brewed cup of coffee. It’s not a worthwhile spend, though, if it becomes a mindless habit that you’re not actively thinking about—or enjoying.
In addition to splurging smaller and more frequently, here are additional tips for splurging well:
Splurge in control: This is the most important foundation for splurging: splurging should always be done within a budget! We recommend setting aside a portion of your discretionary expenses every month for splurges. If you budget for splurges, they are less likely to get out of control.
Splurge for free: A recent study showed that those who master the art of savoring are happier in life. Ironically, those who are wealthier are less skilled at savoring. Savoring is the ability to enjoy and be present in the simple (often free or inexpensive) sensory experiences in life: the brilliance of a sunrise, the smell of a flower, the warmth of a furry dog. Think about indulging in free splurges as often as you can.
Splurge towards others: Consistently time and again, studies show that spending on others makes us happier than spending on ourselves, even though most people find this counterintuitive. The benefits of giving to others have been documented on a neural level in MRIs—even those forced to give money away showed activation in brain areas typically associated with receiving rewards. Consider using part of your splurge budget towards gifts and charity—you’ll be happier for it.
Now, go forth and splurge well.