Updated on 03.22.16

The Strategic Splurge: Saving for the Stuff You Really Want

While some people are frugal by necessity, others are frugal by choice. Instead of making careful financial decisions and living within a tight budget just to get by, they’re frugal because, in their minds, it just makes the most sense.

That’s why I always say that frugality, when chosen and not forced, is a lifestyle decision. When you have plenty of money to spend but you choose not to, your decision is about more than dollars and cents; it’s about value and the lifestyle you hope to achieve.

No matter how much you earn, there is value to be had in spending your money – and saving it – in a way that aligns with your long-term goals. Plus, there is an inherent value in the energy we expend to earn each dollar. I mean, we all work pretty hard at our jobs, right? When you stop and think about it, wasting your paycheck is a lot like wasting the hours you spent slaving away to earn it.

Of course, living a frugal lifestyle isn’t just about being less wasteful. In my opinion, the best thing about living a frugal lifestyle is the freedom it buys. When you spend less than you earn, you can save a much larger chunk of your monthly income — and that can translate into greater career flexibility and freedom from financial anxiety. It also means you can probably afford some tactical splurges here and there.

Even though I’m pretty darn cheap, I love a good splurge. But first, I save for them.

Five Steps to Save Up for a Strategic Splurge

Of course, it isn’t always easy. Even when you’ve got wiggle room in your budget, a big “splurge” can take months or even years to save for. That’s perfectly okay of course, and it can even increase the excitement once you reach your goal. But it helps to have a strategy to prepare.

Whether your splurge is a family trip to Disney World, a newer car, or a serious upgrade to your home, the way you go about it can drastically improve your results – and shorten your savings timeline.

Once you’ve got some extra money in your monthly budget to save for what you really want, here are some of the top strategies to consider:

Create a savings plan… and follow through.

When you initially decide on a big splurge, it helps to get some research out of the way. Start by figuring out roughly how much your desired splurge should cost – both now, and by the time you’ve got the money saved up.

If it’s a vacation or a new car, a bit of online research should give you a general idea. The same goes for a home upgrade: A quick online search can help, although you may need to call in an expert or contractor for a more accurate estimate. Remember that prices change by season and over time — so don’t count on an off-season travel deal being available at the same price during peak travel times. Likewise, if your time horizon is more than a year, expect the price to nudge upward along with inflation.

Once you know how much you need to save, it’s time to create a plan to make it happen. What dollar figure do you need to stash away? And, by when?

Once you have answers to these questions, create a savings timeline that makes sense on paper and in the real world. If you want to save $5,000 for a trip to Hawaii, for example, and plan to go in fall of 2017, you’ll have 18 months to save up: $5,000 divided by 18 months = $278 per month.

Make your bank transfers automatic.

Once you know your monthly or weekly savings goal, you’ll need to make sure you get that money into your savings account. One way to go about it is to make your savings automatic. Contact your bank and ask for an automatic transfer on a specified day of the month — like payday — then let your bank do the heavy lifting.

Once you make the transfer automatic, you’ll have to build a budget without those extra funds. However, the fact that the money is transferred without any effort on your part means you’re a lot less likely to spend it. By making transfers automatic, they’ll be “out of sight and out of mind.”

Open a targeted savings account… and don’t touch it!

Speaking of bank transfers, it helps to have a special account set up to receive them. By opening a targeted savings account just for your “splurge,” the money you save is less likely to fade into your regular savings and get consumed by something else.

Many online bank accounts are easy to open, charge few or no transaction fees, and offer better-than-brick-and-mortar interest rates. Some, like Capital One 360, even allow you to set up separate savings goals within one account.

By opening a targeted account, you can easily watch your money grow to its full potential, month by month. But once it starts growing, you have to keep your hands out of it!

Make strategic cuts – and bank the savings.

Want to save faster to afford your splurge sooner? If the amount of money you can feasibly stash away for your splurge isn’t as much as you’d like it to be, consider taking a scalpel — or even an ax — to your monthly budget and making some serious cuts.

Not only should you avoid paying for some things altogether, you may be able to whittle down your budget further with a couple of strategic sacrifices. Consider cutting the cord to cable, for example. Or, start hacking away at your grocery budget. Whatever you end up cutting, just make sure that extra money goes into your targeted savings account.

Stash bonus money before you spend it.

Most Americans have a tax refund coming their way in the next month, and others have already received one. Meanwhile, some of us get annual bonuses at work, commissions, or financial incentives for reaching company goals. Plus, there are always those months where income is higher than normal, either due to overtime, an extra payday during a five-week month, or even a raise.

Whatever your “extra funds” may be, make sure not to waste them! When you’re trying to reach a savings goal, the best thing you can do is hide that money from yourself as quickly as you can. Stash it away in your targeted savings account, then keep your hands out of the cookie jar. The sooner you have the money set aside for your splurge, the sooner you’ll get to enjoy it.

The Bottom Line

When at its most powerful, frugality can serve multiple purposes in your life. Not only can a frugal lifestyle help you sleep better at night by providing you with more financial security — it can also help you afford the things you really want in life.

Still, it pays to be intentional with your savings. By creating a plan, opening a targeted savings account, and having the discipline to follow through with it, you’ll get to enjoy your splurge without going into debt or worrying about whether you can afford it. You can, because you chose to save for it.

How do you save for the “splurges” in your life? Do you have a targeted savings account for a special goal?

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