One of the questions that often pop into my inbox is “When is it appropriate to spend my money?”

When people ask, they often want someone to give them a general answer that will solve their problem. They want a step by step guide because they want to splurge but don’t want to jeopardize their retirement.

Sadly, there is no cookie-cutter answer since every situation is different, but what I can do is try to guide you to make the right decision in case you are wondering about this.

Knowing When to Spend is Easy for Some

There are two types of people who don’t have any problems deciding when to spend money: those who spend every penny and those who never spend any money.

1. Natural Born Consumers

These people just seem to have more fun. They are the ones with the new cars, nice house and their kids always seem to be wearing new clothes. It doesn’t matter if they are earning $200,000 or $20,000 a year because they will still be living paycheck to paycheck.

When they see something of interest, they buy it. In recent years, these people have gotten even less responsible because even if they don’t have the cash for the item, they use their credit card. Eventually, debt catches up to them and they are unable to repay the monthly payments. Their dream life is taken away from them and they need to spend years repaying the money that they borrowed.

2. We Cannot Save the Earth But We Can Save for One

Some people never spend any money. It’s almost like they were born without the temptation to spend. Money in their saving accounts is like mail in the post office mail drop – there is only a way in and no way out.

These people can earn a pretty good living and be really wealthy without anyone knowing. In fact, I suspect that some of them don’t even know themselves. They save every dollar they earn and never seem to enjoy buying anything.

For the Rest of Us, It’s Not So Easy

Most of us are either more of a saver or spender but seldom the extremes. We know the importance of saving but we also splurge every once in a while. We like to buy new clothes for our kids but understand that we can’t do this every weekend. We all want to know “When is it appropriate to spend?”

There really isn’t a magical answer but here are some things to consider when you have decide for yourself:

1. Have a Goal and Plan

At some point, we all retire because of physical limitations. We will start relying on our savings with some help from social security. If we plan this right, we will have a very enjoyable retirement. Planning will involve some mathematical formulas but one thing you will know is how much you should save each month. Once you figure that out, you can spend the rest.

2. Learn from Others

You probably have friends that spend too much or friends that never spend enough. Why not learn from them? Instead of trying to always match everything that your “spender” friend buys, why not try to assess whether his purchases make sense? Learning to think about different situations will divert your temptation and help your urge to spend.

On the other hand, if your friend never spends any money and you often wonder how it is possible, why not try to ask for their advice? These people often provide valuable insights into what money and materials really mean and you can probably learn a thing or two about spending and happiness.

3. What is Life Like Without Spending that Money

To determine whether the money is worth spending, I usually try to think of what life is like if I don’t spend that money. Often times, I realize after some thought that I end up just as happy even if I don’t buy the thing I really wanted.

4. Know What Is and Isn’t Important to You

I really wanted the iPad when the tablet came out but I figured that life is actually the same with or without it, so I didn’t end up getting the unit even though I can afford the purchase. On the other hand, I know that moving to a new apartment would make Emma and I much happier, and thus, the decision to spend more money was simple.

Do this exercise enough, and you will know when to splurge and when not to spend.

Tagged as: Saving, Spending, Splurge