In our “Power Hack” series, we highlight one quick thing you can do to improve your personal, career or money life.
Today, we’re tackling financial vices—specifically, when it's OK to indulge them to avoid feeling money guilt.
Your weekly trapeze class. Your monthly delivery of exotic herbal teas. The guitar lessons that just might help you fulfill that lifelong fantasy of being in a rock band.
We've all got them—expenses that stick out like a sore thumb in our budgets, taking a bigger bite out of our wallets than we'd like. And even though we know they aren't necessities, we can't seem to give them up.
But you may not have to—at least not all of them.
Get started with a free financial assessment.
Get started with a free financial assessment.
So says Adam Baker, founder of Man Vs. Debt, a site he launched to chronicle his journey toward paying off his own debt. In fact, Baker believes that we should allow ourselves to indulge in one "financial vice," which he defines as any regular expense that could be construed as extreme or strange—especially to those who don't get the appeal.
In other words, financial vices are the costs that make your friends raise their eyebrows and ask, "You spent your money on what?" But learning to pick just one such guilty pleasure to indulge can mean the difference between successfully managing your money temptations or succumbing to all of them.
Why It’s Worthy of Being Called a Power Hack
Trying to fund all of your whims can pave a direct path to fiscal disaster. But not allowing yourself to splurge can also be problematic: One Harvard Business Review study found that people who chose to forgo indulgences today felt strong regret about it later.
In other words, being too restrictive is likely to make you feel as if you've missed out on some of life's pleasures later.
Baker's tactic gives you a way to not only evaluate your personal money vices, but it also helps you choose which ones are (and aren't) worth the money—a win-win for your wallet and your personal happiness.
How to Get Hacking
You can start the process by reviewing credit card and bank statements to pinpoint the "vice" expenses that consistently crop up in your budget. Then ask yourself these four questions for each one:
1. Is the vice impulsive? If the answer is yes, it’s probably not worth gratifying. So instead of throwing money at impulse buys, aim to spend on long-term interests and consistent desires. For example, splurging on wine classes because you've always entertained the idea of becoming a sommelier will likely be more satisfying than signing up for an expensive wine tasting because all your friends are doing it.
2. Is it in line with other personal goals? It's probably too late for you to make the Olympic team, but if your advanced water polo class helps you reach your exercise goals, it may be a worthwhile investment.
3. Is it something you can control? This question gets at whether your guilty pleasure straddles the line of being an actual vice—say, gambling, unhealthy alcohol consumption or smoking. After all, you want your financial vice to be a smart indulgence, not a destructive one.
4. Is your significant other on board? Even if the cost is only for one person, you should have buy-in from a loved one. Otherwise, you set yourself up for potential resentment from that individual down the road.
For Baker, the financial vice of choice that matched all four criteria: his Brazilian jiu-jitsu classes. "Martial arts helps my fitness goals, provides me with a fun community of people, and helps me to stay mentally calm while under intense pressure," he says in a blog post for Get Rich Slowly.
Baker also offers a rationale for why such intense screening is necessary—and why you should limit yourself to indulging just one vice.
"Allowing yourself a financial vice can be a huge blessing," he writes. "However, if you aren't careful, over time, your definition of 'vice' may expand to be synonymous with 'anything I want.' " Which, of course, will wreak havoc on your overall money goals.
So start evaluating your own strange spending with his litmus test—and don't be afraid to green-light that oddball obsession of choice.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Unless specifically identified as such, the individuals interviewed or otherwise listed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services and the views expressed are their own. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.