How To Splurge (Smartly) Without Racking Up Credit Card Debt

Natalia Lavrenkova /

It’s totally fine to treat yourself to a big purchase from time to time, whether you’re booking a tropical spa vacation or buying your dream handbag. But you shouldn’t equate making a splurge purchase with taking on credit card debt, because with the right planning, you won’t have to. In this “Financially Savvy Female” column, we’re chatting with Vincent Birardi, CFP and wealth advisor at Halbert Hargrove, about how to make a splurge purchase without landing yourself in debt.

Ask Yourself 4 Questions Before Making a Splurge Purchase

According to Birardi, there are four key questions you should answer before considering making a big purchase.

1. Do you have an adequate emergency fund?

Before splurging on a major purchase, ensure that you have enough emergency cash savings. Your emergency fund should have at least three to six months of your average monthly expenses.

“These funds should be used for unanticipated expenses, such as out-of-pocket expenses triggered by a medical issue, instead of a big purchase that’s perhaps otherwise optional,” Birardi said. “Do not commingle emergency savings with savings earmarked for longer‐term goals, such as big purchases.”

2. How critical is this big purchase?

Determine if this purchase is a must-have or a nice-to-have. For example, buying a reliable car for your commute is a must-have, while booking a vacation is a nice-to-have.

Make Your Money Work for You

“That’s not to diminish the joy taking that trip would bring, but rather, it’s about prioritizing future goals accordingly,” Birardi said.

3. What’s your ideal timeframe for making this big purchase?

“It comes as no surprise that the longer you can wait, the greater the opportunity [you have] to save accordingly,” Birardi said.

4. What are your options for affording this big purchase?

“Can you save adequately in the time leading up to your preferred purchase date? Specifically, do you and can you generate sufficient cash flow to fund your big purchase savings plan?” Birardi said. “To answer this, you’ll want to review both your monthly budget as well as any anticipated cash flows in the near future.”

If you see that you can afford to pay for a splurge with nonemergency savings, while still keeping up with everything else in your budget, go ahead and book that nice-to-have, once-in-a-lifetime trip.

Planning Ahead Is Key

Knowing how much you will need to save and making a plan for saving this money over time is the key to splurging without taking on credit card debt — and all the added interest that comes along with it.

“Don’t be seduced by the emotional benefit that may come from making a big purchase and thus rush into this purchase,” Birardi said. “Instead, plan, plan and plan some more to avoid taking a wrecking ball to your finances.”

Make Your Money Work for You

You may face some bumps along the way, so be prepared to delay your splurge purchase if need be.

“Be flexible,” Birardi said. “Life will throw curveballs, so give yourself optionality in your planning — consider multiple planning scenarios.”

If you’re planning for a really major purchase, such as a new car, a home or your child’s college education, it could be worth it to seek professional help.

“Partnering with a certified financial planner is a great way to help ensure you’ve adequately constructed a viable savings plan for your big purchase,” Birardi said.

GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.

More From GOBankingRates


See Today's Best
Banking Offers