When we put our financial future ahead of our current desires, it may seem that any indulgence is a sign of weakness. But indulging in the occasional luxury can help keep us on track with our financial goals. The trick is to make your indulgences conscious and to consciously work and save for them.
Having a plan for spending a little money helps to ensure that you are saving for the future without restricting yourself too much.
Before you take this as a licence to spend everything you have worked so hard for, pause and reflect on a little indulgence that would make your life easier but without breaking the bank. Use the following methods to help you make a plan.
1. Decide where to spend.
Determine your priority categories and make a plan to relieve some pressure. Some experts advise cutting out all discretionary spending, such as getting coffee twice a week. If coffee is a habit and doesn’t add much to your day, cut it out. But if that coffee is what you need to help you get through the week, it’s okay to keep it in your budget and savour it.
Enjoy that latte without shame, but then look for other parts of your budget where you can cut back. If you want to keep the coffee on the way to work, start packing your lunch instead of eating out, or use the bike or bus to get to the office. Set your spending priorities and find other ways to economise so you can enjoy a bit of gratification.
2. Create your own subscription plan.
Many of the luxury services available today use a subscription method where you pay a small monthly fee that is applied to any purchases you make that month. These services can be a great way to rebuild your wardrobe (especially if you’re returning to the office after a year and a half at home) or to give yourself another little treat, but you don’t need to keep paying the monthly fee all year round.
When you have used your subscription for a couple of months, put it on pause and deposit that fee in a savings account. You can use that money to fund some of your little treats, freeing up other funds to add to your investment budget or set up a small savings account specifically to come back to the subscription when or if you need it again.
3. Maximise your cash back.
Set aside the rewards you earn from your cash back or points credit cards and use them to fund a special treat now and then. As we mentioned in our episode on expensive hobbies, planning to use these points specifically for something you like or for little mood boosters is a great way to lift your spirits and keep your financial plans on track.
You can also redeem miles or points to upgrade to a budget travel experience, such as flying first class instead of economy or staying in a fancier hotel for the same price as the economy option.
Monitor ways to increase the points you can earn throughout the year. New user bonuses or reaching certain spending amounts in specific categories, such as gas or groceries, can add up to points. But keep in mind that you have to pay your balance in full each month. Cash back points don’t come close to the interest charges you’ll pay when you carry a balance on your credit card.
4. Be flexible.
Satisfy your need for a little luxury in unconventional ways. Instead of travelling during the holidays or summer, when everyone else is doing it, consider travelling off-season or to places that aren’t on everyone’s list. You can also take a day trip to explore your city or state, without flying or staying in a hotel.
If you like designer clothes, have fun going to local consignment shops or browsing websites on the hunt for good deals. Consider clearing out your wardrobe and taking your gently used clothes to the shop (or sending them to the online shop) to help you make room in your wardrobe and maybe even earn shop credit for future purchases.
5. Find the balance
Luxury isn’t something we can do every day; otherwise it wouldn’t be a luxury, but with a little forethought and attention, we can include small details that help us live the good life while still meeting our financial goals
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