Why ‘Treat Yourself’ Spending Might Be the Smartest Thing You Do This Month
It’s no secret that the trick to building wealth is investing over time — and that entails saving money you might otherwise want to spend.
But while it’s a good idea to focus on the long term when investing, you want to refrain from saving so much that you end up “revenge spending.” The term refers to splurging after a period of restricting, like if you limit your spending strictly for six months, but then go to the mall and make several impulse buys that undo much of your hard work.
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Treating yourself from time to time shouldn’t make you feel guilty, as long as you do it in moderation. In fact, this type of spending can actually help you stick to your long-term plan better, thanks to the psychological benefits.
The benefit of a ‘treat budget’
It takes discipline to make spending decisions that support your long-term savings goals. Allowing yourself a reward in the form of guilt-free spending can help you stay consistent. So while spending money on non-essential items may not feel like a financially savvy move, it can prevent a large impulse buy in the future that wasn’t accounted for in your budget. Those big purchases may come about if you feel like you have been depriving yourself on your financial journey.
If you spend a little bit each month, you may also have extra motivation to make more money and get rid of unnecessary expenses. For example, cancelling a monthly subscription fee may mean you can give your treat budget a boost. Ensuring that you set aside some money for fun each month can remove the sense of feeling deprived as you move toward long-term financial goals.
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How to use a 'treat budget'
To spend on your non-essentials responsibly, you'll need to determine the size of the budget and put a plan in place.
Define your ‘treat budget’
Your “treat budget” is a small amount of money that you set aside for guilt-free spending, like dining out with friends or buying a new book. It will vary for each person, depending on your income, savings and goals.
The 50/30/20 budget allocates 30% to “wants” and can be a helpful guide.
Create an action plan
Once you establish how much you want to spend each month, determine what makes sense for you in terms of how to spend it. You can even create a list of things you would like to buy with guilt-free money and space out the purchases throughout the year. For example, maybe you want a video game and you save up your treat budget for three months to buy it.
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Another option is to simply spend on what you want without planning — as long as you don’t spend more than what’s in your budget. Setting aside money for guilt-free spending lowers the risk that you’ll make a substantial, unplanned purchase that will hurt your future savings.