Splurge Right: Spending for the Most Happiness

Kelli B. Grant
Friday, September 11, 2009

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This article is part of a series related to being Financially Fit

Broadly speaking, the recession has taken a toll on consumer spending. Americans saved roughly 5% of their disposable personal income in June, up sharply from the year-ago period, according to the Commerce Department. And although the latest reading of the Consumer Confidence Index came in higher (54.1) than economists had expected, the measure remains well below the benchmark for a nation of healthy spenders (90.0).

Saving is important for your bottom line, but it’s equally important for your psyche to splurge every once in a while, says Kit Yarrow, a professor of psychology and marketing at Golden Gate University in San Francisco, whose book “Gen Buy” assesses the motivations behind consumers’ purchases. “It’s like a charge to the brain,” she says. Done right, indulging in an out-of-the-ordinary purchase can relieve stress and help motivate you to get through a tough time.

To be sure, there’s a lot of unhealthy splurging. Some consumers hobbled by the recession have been overindulging as a distraction, says Matt Wallaert, a behavioral psychologist and the lead scientist for budget site Thrive. “People are hitting this place of hopelessness,” he says. “They’re saying, ‘I lost my job, I know I can’t find another one soon. The heck with it, I’m going on vacation.’”

For others, sweeping cutbacks have brought new scrutiny to the rare splurge. “People have actually thought about for the first time in a long time what their juiciest splurges are,” Yarrow says. “It’s no longer just a rationalization of excessive spending.”

Of course, the ideal splurge is largely subjective. Some people prefer vacations; others prefer the latest gadget or a day at the spa. But there are some key attributes that make some purchases more satisfying than others -- no matter how much you spend.

We talked to psychologists about five factors that can help maximize the positive feeling you get from your next splurge.

Budgeting

“A healthy splurge, almost by definition, is one you saved for,” says Paula Peter, an assistant professor of marketing at San DiegoStateUniversity’s College of Business, where she teaches courses on consumer behavior. Budgeting forces you to assess the purchase beforehand reducing the odds that you’ll feel guilty or remorseful afterward.

Planning also extends the excitement and good feeling -- you can look forward to the splurge, as well as appreciate it during and after.

Daily impact

A splurge that you’ll use regularly or positively improves your daily life is one that’s almost always worth making because it generates repeat appreciation, Yarrow says. For example, you’d likely feel better about purchasing a lipstick or handbag that can be used daily than you would about a new shirt to wear once every few weeks. By the same measure, someone who works from home might splurge on a great office chair. A person who cooks nightly would be happy about a good chef’s knife.

Just don’t make the mistake of conflating a regular impact with a regular purchase, Yarrow says. If a splurge becomes routine, you’ll need to build on it somehow to maintain that mental charge. A monthly massage might morph into a full spa day adding stress to your budget.

Motivation

Do you have good reason to indulge? “Splurging without a specific reason is much more likely to result in negative emotions,” says Joseph Cilona, a Manhattan-based clinical psychologist. Tie the purchase to a specific achievement or an event worth celebrating. That way, you’ll think about your promotion every time you sit down to watch a movie on your new flat-screen TV.

Another person

Studies suggest there’s something to the adage that it’s better to give than to receive. A 2008 analysis of spending habits conducted by HarvardUniversity and the University of British Columbia, Vancouver, found that people who spent some of a windfall on others were happier afterward than those who used the money on themselves.

Memory

Experiences such as a vacation, concert or golf outing have been found to be more satisfying than the fruits of a trip to the mall, Wallaert says. Thinking back on a purchase, consumers tend to remember the high and low points and the end. “With an item, the high point is buying it, and the end point is either you lose it or it breaks,” he says. An experience is also more rich in sensory detail than a tangible gift, and it offers a lot of salient memories. Even the low points of a splurge experience retain value as stories for friends.