All of us get the urge to splurge sometimes, and any budgeting expert worth their salt knows that, which is why they generally champion setting aside some money to indulge in wants without harming your financial health. That said, it’s all too easy to go too far with what could start as an innocent splurge and put yourself into peril. If you’re living on a frugal budget and working to save for a comfortable retirement, you have to tread carefully.
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A big part of knowing which splurges are safe to make is knowing which splurges will put you in the red zone. Of course, everyone’s situation is different and some folks will be able to go a little more nuts with spending than others without exposing themselves to risk. But as a general rule of thumb, you should avoid the following four purchases, which certified financial planners (CFPs) say could derail your wealth goals.
It’s not just car enthusiasts who may feel a bit weak in the knees when they see a gorgeous luxury car vroom by; anyone infatuated with status symbols or sumptuous, high-quality experiences may find their minds wandering with envy at the sight of a stunning Porsche. But luxury cars are generally bad investments and can be total money pits.
“The big issue with luxury cars is that while most people can afford them initially, problems arise when their income decreases,” said R.J. Weiss, CFP, CEO of The Ways to Wealth. “At that point, switching to a non-luxury car often feels difficult. Because luxury cars are such a visible purchase, many people fall into the habit of overbuying vehicles, even when it’s no longer financially sustainable.”
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Which experience would you prefer when you next visit Europe: staying in a hostel or staying in a five-star hotel? The majority of folks would opt for the hotel without hesitation. But these high-end travel experiences can really blow up your financial life.
“Like luxury cars, it’s hard to return once you’ve stayed in a five-star hotel,” Weiss said. “People who’ve traveled in style — spending $10,000+ on a vacation, which might have been reasonable for their income at the time — often want to recreate that same experience, even if their financial situation has changed. It’s not that you can’t splurge occasionally, but it’s important to recognize and remind yourself that this is a ‘once-in-a-lifetime’ thing, not a habit to maintain.”
On the travel note, you should also steer clear of timeshares. These just aren’t worth it. The same goes for vacation homes.
Melissa Murphy Pavone, founder at Mindful Financial Partners, estimated that these can cost $20,000 to $500,000+ upfront, plus annual fees.
“Timeshares and vacation homes often come with hidden fees, limited resale value and restrictions on usage,” Pavone said. “These costs can erode long-term financial health.
Have you seen all the fancy new tech that’s coming out in 2025? It’s all pretty tempting, especially if your work and your personal life are utterly enmeshed and you’re on your devices all the time. But the latest and greatest tech is often absurdly expensive. You can do without it.
“We’ve all been tempted by the newest phone, computer or tablet, and each of these gadgets can easily cost $1,000 or more,” said Taylor Kovar, CFP, founder and CEO at 11 Financial. “While it may not seem like a huge amount in the moment, those funds could be better used to pay off debt, grow your emergency fund or boost your investments. Upgrading to the latest model isn’t always necessary, especially if your current device is still doing its job just fine.”
Here’s one that’s really important and less talked about: permanent life insurance. Many financial experts vocally despise permanent life insurance for most (emphasis on most) folks.
“The industry-wide surrender and cancellation rates show that many people overbuy and can’t comfortably afford to keep paying their premiums, which can be 20x higher than those for term life insurance,” Weiss said. “It’s not that permanent life insurance should never be bought, but the use cases are much smaller than those who buy it. Most people are better off buying a term policy and investing the difference, ideally in tax-advantaged accounts.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Planner: These 5 Purchases Could Derail Your Wealth Goals
