Splurging too often on almost anything is usually a recipe for trouble. Splurge on ice cream sundaes, and you’ll wind up with a whole host of health problems, not to mention clothes four sizes larger than you have now. Splurge on tequila, and you’ll wind up wrecking your liver and quite possibly waking up in a gutter.
The same is true for your money. If you go gangbusters, buying everything you think you want every time you think you want it, you’re going to end up in the gutter for other reasons. That’s because you’re eventually going to outspend your income, live beyond your means, and be unable to pay for your necessities.
If you read just about any financial advice about treating yourself to life’s indulgences, you get the picture: no can do. It’s time to learn how to stop impulse buying before it damages your financial health.
Cut what you don’t need and focus on what you need. Ask yourself tough questions about what is necessary and what is luxury, and make decisions about how to live below your means and about saving first before spending.
Where people get into trouble (I know from my dealing with some clients in this very situation) is they want and want and want, and some think they deserve it. They feel their income levels can keep up. But here’s the thing: no matter what your income, most of us can’t keep up with overindulging, impulse buying, and frivolous expenses that seem to satisfy us in the short term at the expense (literally) of our long-term well-being.
We aren’t entitled to successful lives; we have to earn them just like the rest of the world.
Here, however, is where I want to twist things around like a Chubby Checker fan. I want you to indulge. I want you to use your wealth to enjoy life. I want you to follow your passions. And, if a $300 pair of shoes gives you such rich and deep life satisfaction, then buy the $300 pair of shoes.
The catch is (there’s always a catch, right?) that you must manage the indulgences, you must prioritize your purchases, and you must be able to assess the difference between what you are deeply passionate about and what you think you are. I’m guessing it’s not the $300 pair of shoes when it comes down to it.
I could fill an entire book telling you that if you want to be the millionaire you think you deserve to be–and the one that you can be at an early age–you must save, save, save, invest, invest, invest—and not deviate from this process. You will do that, and you need to do that. But I will also tell you that real wealth isn’t always about the number at the end of your portfolio; it’s about how rich and satisfying your life is.
You shouldn’t feel handcuffed by your goal to save and invest. In a way, it’s a little bit like going on a diet. Yes, you could eat fish and vegetables for every meal, but once in a while, you need to let loose a little. For me, I like to indulge with frozen yogurt with berries or fresh fruit from time to time.
That’s the key phrase: “from time to time.”
If you splurge on your diet all the time, you’ll compromise your health. Do it with your money, and you’ll compromise your wealth. But the occasional dive into a bowl of chocolate—literally and metaphorically—isn’t what does the damage.
You should feel free to use the money you’ve earned to cross things off your bucket list, to make memories with your family, and to do the incredible things that life has to offer. And that’s exactly what I do. I make sensible choices when it comes to everyday expenses, not wasting money on store-bought lattes and taking full advantage of sales and specials when I buy commodities like suits or cars. But I also don’t scrimp when it comes to making sure my family and I are living the lives we want. So we take trips together, we spend time at the shore in the summer, and we’re building memories in the process.
For example, on my 50th birthday, my family and I traveled to Germany, where we bought my wife a car that she’d always wanted. It’s a better deal when you travel to buy this car, because of the incentives that the manufacturer offers. We rented a beautiful apartment with breathtaking views of the Matterhorn in the Alps. I even fulfilled one of my lifelong dreams of skiing in the Alps. It was a trip that I will remember for the rest of my life—and one my family will remember too.
So I don’t have one regret about spending money on that trip, because I don’t do those things all the time and the money spent was well worth it because of the dividends it paid in terms of family connection.
But it’s not just about trips and travel. You can find ways to reach the same goals of splurging and creating memories for your family.
One tradition our family has is that every year, during the week before Halloween, we host a pumpkin-carving party. It’s a contest in which thirty or forty people come over and carve pumpkins. We cater the party, and we hire a world-class classical guitarist to play the background music and set the stage for some fun conversation and a good old-fashioned pumpkin carving competition with great prizes! It’s a special day for my family and friends, and it doesn’t cost all that much money, just the cost of food and hiring a musician. In a yearly budget, it’s just pennies.
Those are the kinds of things that have no monetary value—but they’re the ones that last a lifetime. The point is, it doesn’t have to be the Alps or pumpkins that you do. But it should be meaningful to you and your family. That, in my opinion, is the most strategic way to splurge.
When you’re trying to figure out how to balance between living within your means and spending on life’s luxuries, my biggest recommendation is to prioritize (as a family) what’s important to you. While I can’t give you the answer that works for you and your family, I do think the most value comes from when you choose experiences, memories, and stories over stereos, jewelry, and four-digit bottles of wine.
After all, what is the point of developing wealth if you can’t spend it in some of your prime years? This chapter is about how to find that sweet spot between establishing and developing a plan for financial security and also making sure that, well, you live a little (maybe a lot!) too.
Don’t Wait Until Retirement to Start Living
One of my goals is to help you reach your financial goals some five or more years earlier than you might typically be able to do, and if you follow my strategies, you can make that happen. That said, I don’t want you to think that the sped-up time frame means you need to morph into penny-pinching mode, waiting to live your life until you reach all of your financial goals. I do admire people who decide to live it up in retirement—those people who travel or do it up once they reach a certain age and have financial stability. There’s nothing wrong with following that path if that’s what you want to do.
But I have a slightly different point of view about the way you should approach doing the things you want in life: do it now. Don’t wait until you’re 65 or 70. Why? You’re very likely in the prime of your life—body-wise and brain-wise. And heck, we know all too well that you can never know what your fate may be, and there’s no guarantee that you’ll even make it to that 65 or 70-year-old benchmark with a sound mind and body.
For example, my dad died at eighty-seven years old, and in hindsight, I felt he died too early. I wish I knew he was going to go downhill fast. If I had, I would have tried to maximize even more of the experiences he had with his children and grandchildren when he was in his sixties and seventies. I don’t want to pepper you with “carpe diem” pleas, but that’s exactly what you need to do. You need to be smart about your money, but you also should not have a “wait until tomorrow” approach to doing the things you’ve always dreamed of. You can do it now, you should do it now, and you’ll be happier if you do it now. Don’t settle for the status quo.
Explore, dream, make plans, and follow through (within your budget).
Create a (Tangible) Bucket List
You know that bucket list that’s been swirling around in your head?
You know, the one that says you want to take a safari in Africa, drink wine in Napa, spend a month one summer at the beach, or learn how to play the piano, guitar, or ukulele? Write it down. All of it. I don’t care if it feels more outlandish than a poodle in a purple dress. Put it on the list. Better yet, make it a family affair and have everyone get together to talk about their bucket-list items. When you get them all in one list, discuss each item—why you want to do it, what it means to you, and when you’d like to do it.
Whether your list is four things or four hundred, your next step is a crucial one: prioritize them.
Now you don’t have to rank them from one to 99, but you should group them into different categories based on a timeline:
- What you want to do tomorrow
- What you want to do next year
- What you want to do within the next five years
- What you want to do long term
This timeline gives you a sense of prioritization among your short-term financial goals and long-term financial goals so you and your family can agree on common areas.
Remember, having those common goals and values is what helps you plan and strategize financially. But I will also say this: as the breadwinners in your family, you as parents should take the lead and even feel comfortable mandating those goals.
Why?
Your time is limited and your kids will have their own lives to fill their bucket lists. So if you want an active vacation of sightseeing and your kids would rather be at the beach, it’s okay to take the lead. One, they’ll appreciate that they’ve seen the world (even if that appreciation comes some years later), and two, as the parent you have earned the right to take control of the family ship.
Every decision doesn’t have to be a one. You do this because life throws lots of curveballs your way and you don’t want to wait to fulfill your dreams. I will also say that you should be as specific as possible when writing down your lists.
Don’t just say you want to travel; say you want to go to see the Northern Lights in Iceland.
Don’t just say that it’s important to buy a motorcycle; say you want a Harley-Davidson Superlow 1200T.
Being tangible doesn’t lock you into that destination per se. It’s not as if you’re signing a contract, but it does help you start to plan and figure out what it will cost to help you live life large—right now.
Do The Research To Make Your Dreams Come True
Now that you have your list, you and members of your family have your job, which is to do your research. Find out how much your bucket-list items will cost you (that smartphone is about to become very handy in this “search party process”).
How much are violin lessons per month? How much is a trip for four to Antarctica? How much for that backyard hot tub? You don’t need to have exact numbers. After all, costs do change over time. However, you should have ballpark numbers so you can start planning how you’ll pay for them. You can even split the tasks or pay your kids an hourly rate to do the initial research—that’s a win-win situation in lots of ways. This also helps kids get excited about these splurge items (if they’re not initially), maybe even to the point where they want to see if they can contribute to the planning (or paying!) for a tiny slice of the trip too.
Your main goal: When you have that priority list of your top five or 10 things on your collective bucket list, you can now place the price tag next to each item. This gives you the power to take care of the next steps when it comes to actually being able to afford these items: calculating the costs and making the first one or two goals on your list a reality.
Work the Pluses and Minuses of Your Budget
Now that you have the approximate costs of your bucket list items, you can come up with a financial strategy to make your dreams a reality. And it all just comes down to very simple accounting. You have to work these variable costs of your wishes into fixed costs of your monthly or yearly budget, whether it’s going without certain things or shaving a little from what you’re going to earmark for investments.
You simply have to make the numbers balance. Now I would certainly recommend that you don’t compromise your future retirement or monthly dollar-cost averaging budgets. However, where you could shave costs is from your other expenses. Can you find areas to cut that you can then divert to your most important bucket list line item? That’s what will help ensure that you not only have money for your dream expenditures but that you also don’t sacrifice any of your long-term security to get there.
See how this works? If you just say that you’re going to put the Porsche on a credit card, then that’s how you’ll keep the monkey on your back—unable to keep up with payments, then finding yourself in a heck of a mess. Spending on seemingly frivolous things is different from spending frivolously. If you budget right and plan strategically, it doesn’t matter what you spend your money on—if it makes you happy and doesn’t sacrifice your long-term wealth.
This is all about establishing priorities and values. I have clients who live in a modest house (in need of some repairs), but they pay for private school so that their three children can pursue their musical talents. Sue and John don’t have much disposable income, but their kids sing in the Philadelphia Boys and Girls Choir and they’ve traveled to places like Italy and Australia to sing in churches and amazing venues around the world.
Sue and John don’t complain; they’ve decided what their financial priorities are. Some people would call the investment they’ve made a splurge, and that’s okay because they make other financial sacrifices based on what they’ve established as priorities in their lives—and the kids are experiencing something that very few children get to experience. That’s often something you can’t put a price tag on.
Create A Recess Account
Admittedly, trying to budget for bucket-list items above and beyond your regular entertainment items can be daunting–and it might take a long time to build those safari funds if you’re just squirreling away a hundred dollars a month.
Another option for you is to create an entirely different account—one that has nothing to do with your portfolios or your regular budget, where you’re using income to pay bills, save for retirement, and invest. This play account is solely for the big bucket list items (that you and your family agree on).
This allows you to create a budget within a separate account (i.e., if it has $20,000 in it, then you agree that $5,000 will be spent on a trip, $2,000 on the pet llama, and so on).
Now this situation could work best for people who have extra sources of income, be it in annual bonuses or side businesses. I do like this option because when you agree that all of your above-and-beyond fun money is coming from one account, you’re less likely to risk dipping into your monthly account to pay for things you shouldn’t be spending money on.
Again, the key here is that you have to mutually agree on what priorities are and how much you’re all willing to spend on them.
Then, with all the online options at your fingertips, stretch your recess account by using your smartphone or computer to shop around for all commodity-type purchases.
Final Thoughts
Repeat after me: Indulge is not the same thing as impulse. Repeat that back three times. Make it a daily mantra.
I want you to indulge in the finer things in life, and the definition of “finer things” is all up to you. What I don’t want you to do is make decisions by impulse. Impulse spending—giving into immediate and short-term temptations that don’t provide soul-satisfying happiness—is the exact thing that gets you into trouble. Spending on a whim on things that seem like they’re important but aren’t (that diesel-powered blender, perhaps?) is the reason why so many Americans are in debt.
When you see that difference—between indulgence and impulsivity—you can create the kind of wealth I’m talking about. That’s the wealth that exists not only in your portfolio but in your heart as well. If you follow the steps I outlined here—create the list, prioritize the list, design the plan, and make the budget—then you’ve taken away the power of impulse buying while still getting exactly what you want out of life.