spending money

In preparation for this article, I innocently Googled the search query “average American debt.” In the future, I’ll think twice before I make a decision like this with a full cup of hot coffee in one hand; but after the initial shock and recovery, I found myself coming to terms with an ugly reality. Americans, our financial situation is not good.

The messenger of this not-so-cheery news was a report from NerdWallet, which compressed data from the Federal Reserve and the U.S. Census Bureau to blunt the details of household financial burden into several categories: student loans, auto loans, mortgages, and credit card debt.

Are you sure you’re ready for the truth about how much credit card debt the average American household has? Great, I’ll tell you anyway: approximately $16,748. And student loans? Roughly $50k. Auto loans? Add another $30k. Guys, we’re paying an estimated $1,300 per year in interest on all these loans (including mortgages), and somehow this just doesn’t seem healthy.

The thing is, we Americans exist in a materialistic culture, and there’s never a lack of things to spend money on. Of course, knowing when to stop spending and when to start saving is a crucial skill for financial well-being. But financial freedom is as much about smart spending as it is smart saving, which means that knowing when to allow yourself a little extra will get you far in the game of life.

So, when is it OK to treat yo’self?

1. When it’s an investment in your long-term happiness.

splurge

“Your budget should help you do what you love, not leave you stuck at home, afraid to spend one extra penny,” writes NerdWallet’s Brianna McGurran. In a column published in the Akron Beacon Journal, McGurran explains that your money should be the tool that allows you to make your dreams happen — getting to that place starts with trying to understanding yourself and then identifying the key to your own happiness.

In order to do this, you have to start by asking yourself what really makes you happy, and what you want more of in your life. “Identify the experiences that bring you deep joy, not just fleeting pleasure, and prioritize them,” suggests McGurran. Then, she goes on to say, the sacrifices you make to bring those goals to fruition don’t feel like sacrifices. Instead, they feel like money in the bank, and progress.

And when it comes to actually spending your hard-earned money, you’ll feel justified in your expense because you’re sure that it’s in line with what you truly want. Travel is a classic example of this type of save-and-reward; but it could also apply to a fancy gym membership, or a new musical instrument, or a photoshoot showing off your hard-won muscles. Stuff that encourages you to be your best self does have a place in your life.

2. When it will save you stress in the long run.

stress free

On the whole, overspending definitely causes more stress than it prevents. You may enjoy owning a new outfit you couldn’t resist throwing on your credit card; but if the purchase was outside your means and you’re struggling to make the card payment along with your other bills a month or two later, it wasn’t worth the cost to your well-being.

However, just as avoiding overstretching your budget can spare you unnecessary stress, spending a little extra on something you really love or need can at times be a preventative method as well. For one thing, if you have something you really love, you won’t feel the need to buy as much extra stuff later on. Also, it can save money in repairs, or time, or frustration. And that’s important, too.

For instance, a good quality pair of running shoes is a pretty solid investment in happiness and health later on and in my opinion, worth a few extra bucks. Anytime I’ve chosen a cheap pair, I’ve regretted it.

3. When you have a solid savings account.

saving money

When it comes to larger splurges — let’s say, upwards of a couple thousand dollars — experts recommend having a six-month savings account to fall back on in case of an emergency. This money is the last-resort kind that you can only spend in the worse-case scenario, according to Business Insider. This way, if there’s a death in the family, a medical emergency, or you lose your job, you know you’ll be OK. It’s basically like saying, “I’m a real adult now.”

But there’s also some great cognitive trickery to capitalize on with this goal. During the saving process, you’ll compare any other expenses that come up in these extreme situations, and they’ll almost never seem worth it. When you do have the money saved up, that’s when you know you’re in a good enough position to get creative with how you reward yourself. If you’re set for six months of emergencies, then go ahead: build that swimming pool, buy that private jet — or hey, even walk within a few blocks of a Sephora.

4. When you’re able to be generous with others.

giving

It’s so great to be in charge of your own finances! And it’s a huge luxury. One surefire way to know that it’s time to treat yourself is when you can comfortably support the people and organizations in your life that help make your day-to-day existence a little better, and also buy yourself a Vitamix. #Winning.

Actually, giving is as much an investment in your own health and happiness as it is an investment in those around you. In one article, Happify cites a study where one group of participants spent $5 on themselves, and the other group spent $5 on someone else. Of course, the group that was measurably happier as a result was the group that spent the money on someone else — because oxytocin – but because that feeling of building positive connections is too real. It’s two posi-vibes for the price of one, and thus much more impactful than other straightforward transactions.

Finally, money and budgeting are complicated, and circumstances are different for everyone. There are probably so many ways to justify a splurge, and we’re all guilty of just going for it sometimes, because YOLO, after all. Are you healthy? Do you have the things you need? OK, then it’s not the end of the world. We all mess up sometimes. Don’t be so hard on yourself.