Enough with austerity. When is it okay to splurge?

Jared’s Note: Longtime readers know I wear many hats—podcaster, personal finance guy, professional trader, author, DJ, cat dad… I’m also the senior editor over at Mauldin Economics, where I write a free weekly letter called The 10th Man, along with two premium investment letters.

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With that, let’s talk a bit about luxury…


Say you get to a point where your financial life is on solid footing. Your mortgage is paid off, you have no other debt, and you’re regularly saving for retirement.

What’s next? At what point is it okay to splurge on a big purchase… to buy something luxurious just because you like it?

Personally, I like luxury watches. But I waited until age 40 to buy one, which I think was appropriate. Now, I have four watches at home that I’ve bought over the last eight years—a Rolex Submariner, a TAG Heuer, an OMEGA Speedmaster, and a Hublot.

About three years ago, I found another watch I liked. It’s another Hublot called the Spirit of Big Bang—it’s an amazing watch. And I could have bought it at any point in the past three years. But I kept saying “no” to myself until a few weeks ago. I was heading out to Las Vegas, and I called ahead to the Hublot store to see if they had the watch. They didn’t—in fact, they didn’t have it anywhere in the US. So, I ordered it from Switzerland.

It was a lot of money—more than I’ve ever spent on a watch. But business is good. And I killed it trading during the first few months of the year (while the market floundered). So, I’d met enough of my current financial goals to buy the watch.

The reality is, if I wanted to run around buying watches and clothes and cars, I could. But that is not how I live. That’s how you wind up like MC Hammer, the ‘90s rapper who bankrupted himself after blowing through $70 million.

It’s important to continue setting financial goals, whether you have $50 in the bank or $50 million. But at the same time, money is meant to be enjoyed. You can buy nice things with it, which can in fact make you happier.

Be warned: If you’re living in a 900 sq. foot house, wearing Walmart t-shirts and eating Hamburger Helper for dinner, but you have millions of dollars stuffed under a mattress, you have lost the plot. We all need balance.

With that in mind, here is my formula for handling luxury purchases…

  • Save 10 times more than the purchase price.

For example, say you want to buy a $3,000 watch (or jet ski, jewelry, etc.). You know you shouldn’t rack up credit card debt to pay for it. And you might think, “Okay, I’ll just save $3,000.” That’s certainly better than the credit card route.

But the optimal approach is to save $30,000 before splurging on a $3,000 watch. Then, once you reach that goal, you get to make the purchase and really enjoy it. Because you’ve achieved two goals at once: paying for something luxurious and adding to your retirement savings.

I often say that I don’t like rules and I don’t like budgets—I like principles. But in this instance, the 10X luxury rule may give you some much-needed reassurance that you’re maintaining financial discipline while enjoying some of the finer things in life. It lets you buy the things you want, 100% stress free, which is what I want for all of you.

Jared Dillian
Jared Dillian