Money

Here’s how to tell if you can afford to treat yourself today

Aziz Ansari as Tom Haverford and Retta as Donna Meagle on NBC's "Parks and Recreation."
NBC | Getty Images
Aziz Ansari as Tom Haverford and Retta as Donna Meagle on NBC's "Parks and Recreation."

On NBC's "Parks and Recreation," characters Tom Haverford and Donna Meagle participate in an annual "Treat Yo'Self" day where they can buy whatever they want — clothes, fragrances, mimosas, massages, fine leather goods — no matter the cost.

Although the show's last "Treat Yo'Self" episode aired in 2015, the phrase has become synonymous with luxuries and impulse purchases. Do you really need a new watch or another handbag? Who cares? Treat yourself.

But, for obvious reasons, this mindset doesn't always serve your finances. So how can you tell when splurging is worth the cost?

A good rule of thumb is to not let a single purchase exceed more than 5 percent of your net worth, Garrett Oakley, certified financial planner at Betterment, tells CNBC Make It.

This number refers to your liquid net worth, which primarily focuses on the amount you have in cash and investments. If you have a total of $100,000, for example, you don't want to spend more than $5,000 on any one thing.

The occasional splurge on an over-the-top item, such as a gold watch or classic car, is fine if you can afford it, but you shouldn't let too much of your wealth to be tied up in any one possession, even if you expect it to appreciate in value.

Oakley warns against purchasing a Birkin bag or a Rolex with the idea that you'll be able to sell it later for a profit. "You have to look at it from the mindset of, 'What would happen if no one ever wanted this again?'" he says.

However, deciding when you can afford to splurge isn't just about the price tag. "What it comes down to is really having a pure interest and joy in these things," Oakley says.

This holds true for smaller, everyday splurges as well. If you're eyeing a $200 handbag instead of a $2,000 one, ask yourself why you want it before making the purchase. Is this item going to bring you joy and make your life better? Or do you want it because of the label?

"It's always looking at any luxury purchase as, 'I'm purchasing this because I like it and even if it's worth $0, I will still enjoy it,'" Oakley says.

Of course, you should never sacrifice other financial goals, such as building an emergency fund, saving for retirement or paying off debt, in the name of your own personal "Treat Yo'Self" day.

But "if it doesn't impact anything else in your life" and "if you find pure happiness in it," then go for it, says Oakley.

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