When It’s Okay to Give Yourself Permission to Spend More

When it's okay to give yourself permission to spend more

Say you’ve recently leveled up financially. Maybe you’ve landed a great job, earned a promotion at work, or received a windfall of money. Even though you can technically afford to move out of your apartment with roommates, should you? Or would it make more sense to keep living like a broke college student? While the general consensus is that you should keep the same standard of living to pay down debts and save for long-term goals, when is it appropriate to increase your spending and undergo lifestyle inflation? Here’s when it’s probably okay to up your spending:

You have a rainy day fund.
If you have an emergency fund, more power to you. But how much is enough? While it’s ultimately up to you and your needs, Louis DeNicola, head of content at Saveful.com, recommends socking away $1,000 into your emergency fund, then focusing on any high-interest debt, such as credit cards and student loans with an APR of over 6 percent. Once that’s taken care of, you can then focus on saving anywhere from 3–6 months for an emergency fund.

Your debt is under control.
And when do you know if you have your debts under control, exactly? While this might vary slightly different depending on the person, a good place to start is to tackle your debts with the highest interest, which are costing you the most. And if you have multiple high-interest debts, one approach to paying them off is the snowball method, which is when you pay off the debt with the smallest amount. Once that’s paid off, you can move on to the next one.

When your debts with high interest are taken care of, you can definitely consider spending a little more on an area of your life that’s worthwhile. If you’ll be paying off your debts for a good long while, would you really want to wait 20 years to move into a larger apartment? 

If you have questions about getting a handle on your debts, if you’re a member of a credit union, you can reach out to your local branch to talk to someone who can help you with this.

You’ve started to save for retirement.
While it may be decades before you enter retirement, by starting now you’ll be able to tap into the magic of compound interest. What this means is that the same amount of money will earn more in interest if you put it into a retirement fund today than if you did it five years from now. While you don’t need to put in a huge amount, make sure you get into the habit of saving toward your retirement on a regular basis.

Your current lifestyle doesn’t match near term plans.
If your frugal ways are starting to get in the way of your happiness, you might be able to justify spending a little more. For instance, while you may have been totally fine not having a car before, maybe you just moved to another city or got a new job in a part of town that’s not conveniently located near a public transit. Or maybe you and your spouse are planning on having a baby, and your current digs are too cramped as it is. If that’s the case, then it might be time to spend money on that big-ticket item and any ongoing expenses that go with it.

It will boost your well-being and happiness.
There’s a big difference between the momentary high you might get from an impulse purchase versus a purchase that will add to your happiness in the long run. If you’re having trouble figuring out if it’s worth it, spend some time thinking about your long-term goals. Will spending more in this area of your life be in step with your goals, or are you doing it merely to keep up with the Joneses?

“If you want to change something—purchase a newer car, put a down payment on a home, or take a great vacation—a significant income change is a great time to assess those goals and how much closer you are to meeting them,” says Cristina Guglielmetti, CFP®, and president of Future Perfect Planning. “The key is to make mindful changes that will make you truly happy, and not to, say, suddenly start eating a lot more takeout just because you can, and let that derail your progress toward your bigger goals.”

While it’s not an exact science, you can gauge whether or not it’s time for an upgrade in your lifestyle by just asking yourself a few simple questions. If you have some of your financial ducks in a row, you can give yourself the green light to ramp up your spending in areas where it can make a difference in your overall wellbeing.