Just as a diet can get too restrictive and verge into harmful habits, so too can restricting spending. Pursuing passions and having a social network doesn’t need to be expensive, but it shouldn’t be something you forgo to save another few pennies. Financial analysts say that a financial splurge can charge the brain, so long as you stay within your limits.
Anyone who has faced a significant debt hurdle can tell you, the suggestion to batten down the hatches and save every nickel is far short sighted. Sure, those who’ve paid down significant debt, will tell you can pinch every penny and stretch every scrap, but only for a week or two. Over the long run, those too on restrictive budgets end up bugging out and making poor money decisions. It’s not too dissimilar from those on restrictive diets being left alone in a room with free cake: sooner or later, there’s a sticky mess everywhere. But the similarity between dieting and budgeting is more than just the belt tightening on details. In fact, planning for splurges can help both with your waistline and wallet. So how does it work? Here are a few ideas for plan sponsors to incorporate into their financial education programs.
Behavior scientists have concluded that there is a link between food and finances. The same strategies people use to cope with uncomfortable feelings or stress can pop up in brownies or in sweaters. And that means a binge based on a stressful situation can be expressed either by overbuying or by overeating. Many binge either on food or on shopping because they feel like they aren’t allowed to ask for their needs, and when something becomes overwhelming, once they start a soothing strategy, like noshing on a bowl of cereal, they simply can’t stop. They’ve let the fear or anxiety reach a level too high that it feels uncontrollable. Those behaviorists even coined the phrase “financial bulimia” for those shoppers who buy everything in sight, and then have to spend hours compensating for the binge – whether that is by returning items, gifting them, or giving them away. Those behaviorists also suggest a simple solution – let yourself have needs and wants. In fact, you might even plan for those wants and let yourself enjoy the planning.
The idea behind planned splurges, or “cheat days,” is to acknowledge having needs and wants so that you don’t feel like you are missing out on life or feel that you are constantly punishing yourself. And even those who don’t overspend can benefit from financial splurge days. Just as a diet can get too restrictive and verge into harmful habits, so too can restricting spending. Pursuing passions and having a social network doesn’t need to be expensive, but it shouldn’t be something you forgo to save another few pennies. Financial analysts say that a financial splurge can charge the brain, so long as you stay within your limits.
So how to you plan for a cheat day or splurge? Begin with the budget. For those dieting, looking at days when your week can take a splurge works the best. That means not planning a splurge the day before Great Aunt Bertha’s 90thbirthday party, where you have to forgo cupcakes for the burger you had the day before. For budgeting, the same holds: planning a splurge on antique records the day before the company’s fundraising auction party won’t feel like a positive experience. If you have an event coming up, plan the splurge or possibility for a splurge into events in your social and work life.
Unlike diet splurges, financial splurges have longer lasting impacts. Many financial experts suggest that to truly enjoy the financial splurge, you do have to save for it. The length of the saving is irrelevant, but the plan to save and purchase makes you less likely to feel guilty down the line. Also unlike food, having a splurge be on an item you use daily – a work bag, pair of shoes, or accessory, can increase the value of that item, and remind you of the times you did indulge. Another alternative is to tie the splurge to an event, like a birthday or achievement.
At its heart, the idea of the splurge is to amp up the idea of taking care of yourself while also reducing impulsivity. One great balance is to create a splurge fund for rainy days. Splurges can be on luxuries, like incredibly made shoes or that really great watch, but it can also be something you do regularly. Always getting a fancy coffee each time you go grocery shopping can be a great planned for splurge. The best splurge, of course is specific to you. The enjoyment of best most comfortable earbuds will be lost on someone who doesn’t listen to music frequently.
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