A Personal Guide to No-Guilt (Fun) Purchases

Effectively managing your personal finances largely involves living within your means and saving/having enough money to meet your basic living needs and other important financial goals, such as saving for a college education for your children, paying off debt, or purchasing a home. Many times, we get advice about not going out to eat, watching movies at home, thrift shopping, and other tips about "living responsibly." While this advice is very practical and may save us tons of money in the long run, the truth of the matter is: being responsible isn't always fun. And sometimes, we just want to have fun!

Don't fret. There are many ways to still live responsibly while having fun and purchasing the "wants" in our lives. Personally speaking, I have a bit of a boot fetish. When my favorite retailers for boots bring in new styles, I start to get a little weak with my budget. However, I have learned not to feel guilty about my "want" purchases. You can do the same, by following two key principles.

Whenever you receive income, allocate it towards your basic living needs and financial goals FIRST. This means paying the mortgage and utility bills, and putting aside your pre-determined savings amounts for your various goals from your regular paychecks and any other cash windfalls. When I browsed online for boots and saw two beautiful pairs that I just "had to have," I had to think about my goals (as well as how much I had currently spent for the month). Each pair of boots cost about $100, which I didn't think was a terrible price, but unfortunately, my budgeted amount of "fun funds" had already been spent for this pay period. That means the only way I would have been able to get those boots at that moment would have been to put it on my credit card.

A few months ago, this would not have been an issue for me at all. I would have whipped out the plastic, put in my $200 shoe order, and been happy-at least for a little while. Later, though, I would have looked at my credit card statement and been filled with regret, since one of my financial goals is to pay off my consumer debt. I would not have had a way to pay off that amount in its entirety and my credit card debt would have just continued to increase. I decided not to make the purchase.

You may have to go through the same type of thought process, but for those with not that great of a memory on the spot, there is a way to be able to make purchases without thinking.

Create a separate account for "unnecessary" expenditures. I previously mentioned my playful moniker for this money-my "fun funds." I have intentionally created an account (at a completely different bank from where I maintain my main checking account) for money that I can spend on whatever impulse I want. It is only a small amount (for now), based on what I can afford after my living expenses and financial savings goals. This amount is directly deposited each pay period. It is set up at a different bank so that once I run out of funds, I can't easily transfer more money into the account from my regular checking or savings accounts.

By following these two key principles, you can be well on your way to having fun again-buying your lattes, going to movies and concerts, and buying boots-all without feeling a bit of guilt, and all without messing up your long-term financial plan.