To keep your finances in check, don't buy what you can't afford,
say the experts. You save up. You build an emergency fund, max out
your 401(k) contributions and never resort to carrying a credit
But when is it OK to break the rules and follow that little
voice that urges you to throw caution to the wind? For Karen
Treat, the chance to take her family of six on vacation with her
extended family to Key West, Fla., was too tempting to pass up. "It
cost a small fortune, which meant I had to dip into our savings, so
I had major reservations," says the New York City school teacher.
"In retrospect, it was a blow to our finances, but I don't regret
it one minute because my mom died a few years later, and we have
the memory of that fun time with her. You can't put a price on
Saying yes to spur-of-the-moment spending gets a little more
complicated when you factor in a tough economy, however. "Through
the recession and a few subsequent years, the level of money
anxiety was high and that corresponds with certain behaviors.
Namely, the majority of people didn't buy a new car or go on a
family vacation, or buy new appliances," says Dan Geller,
behavioral economist and author of the "Money Anxiety Book.
At some point, people start to feel they deserve some
compensation for all of the financial sacrifices they've been
making. After all, you only live once (or as they say, YOLO),
right? We turned to financial experts to discuss how to handle
those YOLO moments without ruining your finances.
Start with a spending decision checklist
Before you start dusting off that unused, zero-balance credit card
for a splurge, ask yourself a question, says Denise Winston,
financial expert and author of "Money Starts Here! Your Practical
Guide to Survive and Thrive in Any Economy." "Ask yourself, 'Why do
I want this so badly?' Is the emotional urge to splurge based on
something going on in your life? Are you trying to impress someone
or keep up with the Joneses?"
In other words, what will this purchase do for you, and is it
something you can live without? You may regret forking over $500
for that Coach handbag long before it's disappeared in the back of
your closet, says Winston, whereas an experience you paid for might
be worth every penny. In general, material things depreciate over
time and are more likely to cause buyer's remorse than a purchase
that resulted in wonderful memories or some other intangible
Next question: "What is the worst-case scenario?" While you may
plan to pay off the debt you run up, says Gail Cunningham, vice
president of public relations of the
for Credit Counseling
, "Part of your decision-making process should be to consider the
ramifications if the plan falls through. Look at the worst case,
and if you can live with that, then it's probably OK to take on the
That being said, you need to know yourself and approach this
question honestly. Will you be able to pay off the debt or
replenish the account you borrowed from in a responsible manner?
"We're all well-intentioned," says Cunningham, "but it's pretty
serious when you're using money that you don't have, or tapping
into money you do have, such as retirement savings."
Consider this perspective:
How many hours do I need to work to pay for this? "This is a
game-changer in terms of how you think about your finances," says
Winston. Think about the total cost of your purchase and divide it
by your take-home hourly pay rate. You might find that you'd have
to work 20 hours to pay for a new tech gadget; would it still be
How will this purchase alter your budget? Before you pull out your
credit card or dip into your savings to go for a big-ticket item or
experience, live as if you were paying back the debt for two to
three months, says Winston. In other words, put aside the monthly
amount it would cost you in an account. If you can handle the extra
expense, the purchase probably won't cause too much havoc. And,
bonus: By doing that trial run, you'll have saved some money to put
toward the initial purchase.
But, those moments ...
While the tips above are a great guide for any financial decisions
that arise, let's go a little deeper and take a look at some of
those YOLO moments -- when your heart or others around you might
encourage you to seize the day.
Whether you're invited to a high school reunion in your hometown, a
destination wedding or find out that your grandmother's health is
in decline, sometimes the desire or need to travel doesn't sync up
with your budget. As long as you're not having trouble paying your
bills and have some money socked away in a rainy day fund, you can
book your trip; just downgrade it a bit, says Geller. "See if you
can find a bargain, a deal, something that will give you
what you want, but not full-blown carte blanche to spend," he
That approach helped convince freelance writer Amy Buttell to
say yes to her friends' last-minute invitation to join them on a
cruise. "I had reservations about spending the money because I
already had a trip scheduled to London to see my son the next week
and London isn't cheap," she says. Because it was a great deal and
to escape the awful winter weather in Erie, Pa., however, Buttell
decided to pay for part of the cruise from her current income and
put the rest on her credit card.
"For years, I had kids at home so I couldn't do anything spur of
the moment. Now that I have an empty nest, I think it's important
to take advantage of these opportunities as they come up," she
Treating yourself or your kids
Doing something pleasurable keeps you going and keeps you
motivated, says Cunningham. "If you've done a good job saving, you
can put some of it toward you." For instance, if your favorite
musician is doing a farewell tour in your town and you'll be upset
if you miss it, then why not go for it?
When it comes to the kids, however, they have a lifetime of
experiences ahead of them, so don't fall into the YOLO trap and
feel obligated to splurge on every big item or event for them. If
you're going to pay for the Sweet 16 party because "she's only 16
once," you can't then also foot the bill for the senior class ring,
the limo for the prom, etc., says Cunningham. "Consider this a
teachable moment for the child that he or she can't have it
Of course, this is also the perfect opportunity to suggest that
the child earn some money to put toward those extras. "When a child
has some skin in the game, it enhances the experience, and puts the
kibosh on any sense of entitlement," says Winston.
Because you only live once, you don't want to feel unhappy at a
dead-end job. But career advancement can be costly, whether it's
attending an industry conference that only comes around once a
year, taking a course or building a professional looking
"Make financial decisions with your head, not your heart," says
Cunningham. If you're confident the investment will pay for itself
in the form of higher earnings or better opportunities, or if you
can find a way to supplement your endeavor (see if your employer
will pay for some or all of it, or if there's a related tax
credit), it could be a good move for you.
Can't afford it? Get clever
Just because you don't have cash on hand doesn't mean you're doomed
to a life of frugality. "There is 'camouflage cash' hiding in that
paperwork on your desk, and stuff around your house," says Winston.
You can sell items, use your credit card rewards or maybe even
trade something with someone to get what you want without going
The next time you're tempted to seize the day, live in the
moment or shout out the YOLO mantra, remember that spending
tomorrow's money -- money that has yet to be earned -- can put you
on a slippery financial slope, says Cunningham. "Of course
spending money we don't have with a promise to pay is the essence
of credit, and is something people do every single day," she
adds. "Some just do it better than others."
Take steps to prevent bipolar card splurges