Splurge budgets keep you from overspending on impulse

Wise Bread (via Lifehacker) recommends creating a “splurge budget” to keep yourself from overspending on impulse.

My family does this. It works.
Call it whatever you want–they’re calling it a splurge budget, and Dave Ramsey calls it “blow money.” I think I like “splurge budget” a little better. The idea is to set aside a reasonable amount of money every month that you can spend on whatever you want. Then you don’t feel deprived.

We instituted ours as a line item on our family budget about mid-year last year, and I wish we’d done it a lot sooner. Because let’s be honest. If you don’t, then one of two things happens. Either you sneak purchases in under the radar and harm something else, or you tough it out but feel hostile.

I’ve heard some people say you should have to spend it every month, but to me, that defeats the purpose of “however you want.” This month, I used the last couple of months’ worth of splurge budget to buy two Samsung SSDs to upgrade a couple of aging computers. Since my monthly splurge budget is $100, I needed three months’ worth to get the job done.

One month I spent a chunk of it on LEDs and Hot Wheels cars for my train layout.

I have no idea how my wife spends hers. That’s the idea. She spends hers how she wants–I suspect most of hers goes toward jewelry making supplies these days–and I spend mine.

I’ve spent most of the past year spending mine on computer upgrades. I’m very good at nursing old technology along and keeping a computer useful and relatively usable long past its usual life expectancy–you could say I literally wrote the book on that–but I was cutting corners that I shouldn’t have been cutting. My most glaring problem: My UPSes were out of date and had dead batteries in them.

It’s taken nearly a year, but I don’t feel deficient anywhere anymore.

The whole idea behind it is to not have rules, but here’s what I did with mine. I set up my own sub-budget with this system, because $100 a month isn’t enough to do everything I’d like to do all at once. So I made a plan, cutting up my needs into sub-$100 chunks or chunks that I could save for in a small amount of time and addressing them month by month. When I decided I wanted a new computer, I bought $60 worth of memory one month and carried $40 forward. The next month I bought a $120 CPU/motherboard bundle, gained a usable computer, and carried $20 forward. The next month I bought a $110 SSD to complete the computer.

Now, nothing would have stopped me from just carrying two months’ worth forward and buying it all in one month, but this way it felt like progress. I didn’t have everything I wanted right away, but I bought that memory, and then on the first of the month I bought that motherboard and put together a computer using salvaged parts to complete it until I could get the SSD, which turned out to be the next month.

The plan changed a little along the way. I tried to address whatever piece was bugging me the most at the time. Or if I found a great deal on something, I’d change the order around so I could get more for my money. I initially planned to put off that SSD purchase, but it just so happened that I found a sale that month. It made more sense to spend $110 that month than to pay $150 for a comparable SSD a couple of months later. Planning long-term left me the flexibility to take advantage of the occasional bargain while staying focused on what I was ultimately trying to accomplish.

Now that I’ve addressed my biggest deficiencies, in another month or so I’ll probably adopt a more willy-nilly approach, unless I find something else that can benefit from some long-term planning. The biggest rule, after all, is that you make the rules and can change them at any time.

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