Splurges aren't always bad. But forgo just one luxury purchase a year and you'll be astounded at how much your savings could grow.

Ten Bags Every Woman Should Own was released earlier this year on Harper’s Bazaar. I’m no fashionista — which may be why I was so surprised when I perused the list and found just one of the 10 bags had a list price under $1,000 (a Victoria Beckham pouch, priced at $995). The average price was $3,700!

I’m a middle-class gal, but I’ve certainly seen my fair share of luxury items being worn, used, purchased and even lost by my friends. Even so, staring at the actual prices of those high-end items really made me pause.

And it’s not just handbags. It didn’t take me long to find other outlandish prices: I found sunglasses for $250, jeans for $500, men’s suits starting at $1,000 and luxury watches that were $5,000 on the cheap end and went astronomically up from there.

I’m not here to judge. For those who get joy or fulfillment from a big purchase—a handbag, high-end shoes, a wardrobe of designer jeans—by all means, splurge if you want to. For some, it may even be a prudent choice. One friend told me that she bought an $1,800 Prada bag five years ago and has used it almost every day since. Another friend astutely observed that, at that rate, the Prada has a $1 price per use cost. In comparison, someone who spent $250 on a bag they only used ten times would have a $25 per use cost.

Even so, there are many of us who splurge on big ticket items that we later regret. I know. I’ve been there.

The thing about luxury purchases is not just their cost in the moment. It’s the long-term toll they can have on our finances. Let’s consider the following purchases in terms of overall impact:

$250 sunglasses

Before you spend $250 on sunglasses, consider this: Invest those $250 in a mutual fund and, assuming 7 percent average return, you could have $3,744 waiting for you in 40 years (that’s the equivalent of $1,537 in today’s money, assuming 2.25 percent inflation). To put that amount into perspective, today’s average Social Security benefit totals just $1,166 per month.

Buying those sunglasses on credit would just exacerbate the situation. Assuming a minimum monthly payment and today’s average card rate of 17.55 percent, the cost of a $250 item increases to $439.

$500 designer jeans

$500 can buy a nice pair of designer jeans but, if invested over 40 years instead, can yield $7,487 (or $3,075 in inflation-adjusted dollars). That’s enough to take the future grandkids on a weeklong cruise, securing your spot as coolest grandparent ever. On the other hand, buy those jeans on credit and you could shell out an additional $823 in interest payments over 17 years. Ouch.

$1,000 suit

If you decide you need to have that $1,000 suit, you could be giving up a potential $14,974 (or $6,149 in inflation-adjusted cash) after 40 years.

As retirement plan assets don’t meet the financial needs of today’s retirees, more and more seniors are working past age 65. BLS data reported in The Atlantic indicated that, by the year 2022, it’s projected that 23 percent of those 65 and older will be working part time. An extra $6,149 could buy you half a year off from a part-time job after retirement.

Even worse, buy those clothes on credit and the $1,000 purchase could cost $3,090 by the time you paid it off.

$5,000 watch

A $5,000 watch can tell the world that you mean business, but it also comes with a very substantial long-term cost. Over 40 years, a $5,000 investment could grow to a staggering $74,872 ($30,746 in today’s dollars). For some of us, that could be enough to finance an entire year of retirement.

Stick that sum on a credit card and that same watch could end up costing you as much as $17,000 (at minimum monthly payments over the next 51 years!).

Yearly luxury purchases

The numbers above are just if you buy these items one time! But what if you got in the habit of buying luxury items every year?

If you bought the $250 sunglasses one year, and then $250 shoes the next year, and so on for 40 years, you would end up spending $10,000 on luxury items. If, instead, you added $250 to an investment account each year, after 40 years you would have $53,652 in the bank.

What if you made a $500 luxury purchase every year? After 40 years, you would have spent $20,000. But you would also have given up a potential investment windfall of $107,305. That’s some serious money.


The next time you find yourself at the retail counter reaching for your credit card, take a moment first to think about the long-term consequence of the choice. Sometimes it makes sense to splurge and live in the moment. Other times it makes sense to set aside that cash because it could turn into a huge amount of money later on.

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About the author

Total Articles: 8
Alaina Tweddale is a Philadelphia-based freelance writer focusing on consumer finance and technology. Prior to going out on her own in 2013, Alaina worked for 15 years in the marketing departments of financial giants like Lincoln Financial Group, Delaware Investments, and Cendant Mortgage.