Gene Caballero learned a hard lesson when he bought himself a Tesla, thinking it would be “the perfect upgrade” — and then discovered that it was hard to find an apartment in Nashville, Tennessee with sufficient electric vehicle chargers.
“It’s become a headache constantly worrying about access,” says Caballero, who is a co-founder of lawn care platform GreenPal. “I wish I would have stuck with something more traditional.”
Ashley Carroll, CEO of business consulting firm Operations House in Philadelphia, spent $12,000 to join an upscale country club in the area. She hoped she and her husband would be able to make friends and do some networking. “This was a treat for us,” Carroll says.
In reality, they went to the club twice and both times it was mostly empty. They ended up canceling, losing their deposit and joining smaller, more meaningful local groups.
“That $12,000 could have funded a year of business retreats or simply padded our emergency fund,” Carroll says. “Instead, it evaporated with zero return.”
One of the nice things about making a good salary is that you can afford the occasional splurge — but not every purchase is a winner. Here’s how to be smart about your indulgences.
Why you might have buyer’s remorse
Regrettable purchases share some common themes: You didn’t plan for it, you bought it during an emotional high, it’s hard to resell, or it doesn’t fit your lifestyle or goals.
Alexandra Rooney, a certified financial planner in Greenwich, Connecticut, sees these patterns all the time. One of her clients, for instance, recently considered buying a million-dollar rental property that was five hours away.
“She’s got considerable wealth, but she’s not equipped to be a handyman,” Rooney says. “It’s not a good fit for her in the lifestyle phase that she’s in right now.”
Not every purchase you make will be a slam dunk. But if you’re going to treat yourself to something fancy, here are some tips on how to still like yourself in the morning.
Budget with splurges in mind
“High earner” and “budget” may not go hand-in-hand in your mind, but budgeting is still important, especially if you’re planning to indulge yourself. As always, it’s crucial to cover your needs before your wants.
“Once you’ve allocated [income] to all the necessities — the food, clothing, rent and the savings — then if there’s a surplus, we can talk about that surplus,” says Glenn Downing, a CFP in Miami.
What he advises clients, Downing says, is to make a rule for windfalls. For example, steering a third to savings, a third to retirement and a third for fun.
Rooney suggests that clients buy luxury items with money in the bank — not expected income. While we might plan for spending on an annual basis, “we don’t want to spend money we haven’t received yet,” Rooney says.
Otherwise it’s easy to feel like that purchase is already covered, she says, which means new money that comes in could get used for something else. Some of her clients even set up a separate account to use for big purchases.
“It’s having that long term annual plan and almost saving up for it,” Rooney says.
Reflect before you spend
Consider all the angles of the thing before you buy it. Downing often has conversations with his clients who want to buy a second home for vacations or other real estate.
“At what point does it make sense for you to own something rather than just renting something when you get there?” says Downing, who walks clients through all the logistics: Who will maintain the property? What if there’s an emergency? If you want to rent it to vacationers, does local law allow it?
Rooney reminds her clients that they should be comfortable using the luxury purchase they’re making. “If you buy a mink coat and you don’t feel comfortable wearing it, what was the purpose in buying it?” she says.
One client of Rooney’s committed herself to hundreds of thousands of dollars in cruises without ever having been on a cruise. In the end, the client lost about $10,000 in deposits when she realized she wasn’t a cruise person.
“The marketing we’re fed these days is extremely effective,” Rooney says. “It’s crucial to coach clients through how they feel after spending money, and helping them understand themselves before they sink too much into a luxury item.”
Assign meaning to your money
Jack Heintzelman, a CFP in Boston, has clients think about the deeper meaning in their splurges. “Take a moment to say, ‘What is important to me?’” he says. “And then put the dollars toward that.”
That focus can prevent what he calls the “spiral,” when one luxury purchase leads to another and another. “The key is not about doing everything that is nice,” Heintzelman says. “It’s about what is important to them and going deep on that level first.”
Rooney remembers a client whose job involved frequent plane travel, and his company offered free first class transport — but the client turned it down to fly private.
“It was such an enormous cost to the overall plan,” Rooney says. “Why spend meaninglessly for something that’s really not adding to the bottom line for you?”
When you’re a high earner, “you can do anything you want but you can’t do everything, and you can’t do it all at once,” Rooney says. “Where are those dollars more impactful and where will you find the most joy?”
