People who spend too much outnumber, by far, those who spend too little. But the methods that therapists and financial planners use to help "underspenders" can guide the rest of us about when it's OK to splurge and when we should resist.
Chronic underspenders can be so terrified about running out of money that they put off health care, ignore needed home repairs or descend into hoarding, says financial planner Rick Kahler of Rapid City, South Dakota. Framing certain expenditures as an investment and creating a plan that helps them see how much money they can spend without causing financial ruin can ease their distress, he says.
"'Spend' is not a good word to a frugal person," says Kahler, author of "Conscious Finance: Uncover Your Hidden Money Beliefs and Transform the Role of Money in Your Life." ''It connotes waste."
Planning also helps those who are trying to handle money better by paying off debt, building savings and investing for retirement. High-quality experiences or purchases that give lasting pleasure can stave off burnout and "frugal fatigue" that might otherwise cause people to abandon their money goals.
Here's how to walk the line:
— Have a budget. You don't want to splurge one month and wind up short on rent the next. Find out where your money is going now and what upcoming bills you need to cover. Your just-for-fun spending will come out of the income that's not already spoken for.
— Decide how to invest in yourself. Experiences tend to give us more lasting pleasure than things, but the right purchases also can be an investment in happiness. If you're learning to play music, for example, upgrading your instrument can contribute to your well-being every time you lay hands on it. If you feel guilty spending on pleasurable things, you may need some practice.
Psychologist and financial planner Brad Klontz of Lihue, Hawaii, tells his workaholic clients to get massages so they can be exposed to what it feels like to indulge.
— Don't wait until you've arrived. Paying off credit cards and building emergency savings can take years. Investing enough for retirement will take decades. And you only live once. As long as you're on track with your goals, you should be able to afford the occasional splurge.
What does it mean to be on track? Generally, it means that you're saving enough to replace roughly 70 percent of your income in retirement and that you're scheduled to pay off all your toxic debt, such as credit cards and payday loans, within the next five years, while making all required payments on any mortgages, auto loans and student loans.
If you're not on track, your splurges should be on the smaller side until you've got a better handle on your money. Not sure? Consider a consultation with a fee-only financial planner who can give you an objective assessment, says Klontz, co-author of "Mind over Money: Overcoming the Money Disorders That Threaten Our Financial Health."
— Save the full amount before you spend on fun. This one habit can stave off a world of regret. If it helps, you can set up a dedicated savings account. Online banks and some credit unions let you set up multiple savings sub-accounts that you can name, so you can have ones for "vacations," ''guitar," ''new wardrobe" or whatever else you desire.
— Finance carefully. Even if you know better than to finance the fun stuff, you can find yourself overspending when borrowing for big purchases such as cars or homes. Borrowed money feels less real than cash in your wallet, so you may be more tempted to spend on luxury add-ons. You wouldn't pay $2,000 cash for a DVD player, for example, yet people often shell out that much for "rear-seat entertainment systems."
One way to make sure you can really afford what you're buying is to first stick to conservative loans, which means a fixed-rate mortgage that lasts 30 years or less, or an auto loan that lasts four years or less. Then add the expected payment to all your current "must have" expenses: shelter, food, utilities, transportation, insurance, child care and other minimum loan payments. If the expected total is 50 percent or less of your after-tax income, you can probably afford the new payment.
If you continue to struggle with a fear of spending, both Klontz and Kahler recommend taking those anxieties to a therapist.
"It's always emotional and rooted in some past wounding or unfinished business," Kahler says. "We need to examine the baggage that keeps us stuck in those feelings."
This column was provided to The Associated Press by the personal finance website NerdWallet.
Liz Weston is a certified financial planner and columnist at NerdWallet. Email: firstname.lastname@example.org. Twitter: @lizweston.
NAPFA: Find a fee-only financial planner