YOLO: When is it OK to splurge?

To keep your finances in check, don’t buy what you can’t afford, say the experts. You save up. You build an emergency fund, max out your 401(k) contributions and never resort to carrying a credit card balance.

But when is it OK to break the rules and follow that little voice that urges you to throw caution to the wind? For Karen Treat, the chance to take her family of six on vacation with her extended family to Key West, Fla., was too tempting to pass up. “It cost a small fortune, which meant I had to dip into our savings, so I had major reservations,” says the New York City school teacher. “In retrospect, it was a blow to our finances, but I don’t regret it one minute because my mom died a few years later, and we have the memory of that fun time with her. You can’t put a price on that.”

Saying yes to spur-of-the-moment spending gets a little more complicated when you factor in a tough economy, however. “Through the recession and a few subsequent years, the level of money anxiety was high and that corresponds with certain behaviors. Namely, the majority of people didn’t buy a new car or go on a family vacation, or buy new appliances,” says Dan Geller, behavioral economist and author of the “Money Anxiety Book.”

At some point, people start to feel they deserve some compensation for all of the financial sacrifices they’ve been making. After all, you only live once (or as they say, YOLO), right? We turned to financial experts to discuss how to handle those YOLO moments without ruining your finances.

Start with a spending decision checklist

Before you start dusting off that unused, zero-balance credit card for a splurge, ask yourself a question, says Denise Winston, financial expert and author of “Money Starts Here! Your Practical Guide to Survive and Thrive in Any Economy.” “Ask yourself, ‘Why do I want this so badly?’ Is the emotional urge to splurge based on something going on in your life? Are you trying to impress someone or keep up with the Joneses?”

In other words, what will this purchase do for you, and is it something you can live without? You may regret forking over $500 for that Coach handbag long before it’s disappeared in the back of your closet, says Winston, whereas an experience you paid for might be worth every penny. In general, material things depreciate over time and are more likely to cause buyer’s remorse than a purchase that resulted in wonderful memories or some other intangible benefit.

Next question: “What is the worst-case scenario?” While you may plan to pay off the debt you run up, says Gail Cunningham, vice president of public relations of the National Foundation for Credit Counseling, “Part of your decision-making process should be to consider the ramifications if the plan falls through. Look at the worst case, and if you can live with that, then it’s probably OK to take on the debt.”

That being said, you need to know yourself and approach this question honestly. Will you be able to pay off the debt or replenish the account you borrowed from in a responsible manner? “We’re all well-intentioned,” says Cunningham, “but it’s pretty serious when you’re using money that you don’t have, or tapping into money you do have, such as retirement savings.”

Consider this perspective: How many hours do I need to work to pay for this? “This is a game-changer in terms of how you think about your finances,” says Winston. Think about the total cost of your purchase and divide it by your take-home hourly pay rate. You might find that you’d have to work 20 hours to pay for a new tech gadget; would it still be worth it?

Finally: How will this purchase alter your budget? Before you pull out your credit card or dip into your savings to go for a big-ticket item or experience, live as if you were paying back the debt for two to three months, says Winston. In other words, put aside the monthly amount it would cost you in an account. If you can handle the extra expense, the purchase probably won’t cause too much havoc. And, bonus: By doing that trial run, you’ll have saved some money to put toward the initial purchase.

But, those moments …

While the tips above are a great guide for any financial decisions that arise, let’s go a little deeper and take a look at some of those YOLO moments — when your heart or others around you might encourage you to seize the day.

Unexpected invitations

Whether you’re invited to a high school reunion in your hometown, a destination wedding or find out that your grandmother’s health is in decline, sometimes the desire or need to travel doesn’t sync up with your budget. As long as you’re not having trouble paying your bills and have some money socked away in a rainy day fund, you can book your trip; just downgrade it a bit, says Geller. “See if you can find a bargain, a deal, something that will give you almost what you want, but not full-blown carte blanche to spend,” he says.

That approach helped convince freelance writer Amy Buttell to say yes to her friends’ last-minute invitation to join them on a cruise. “I had reservations about spending the money because I already had a trip scheduled to London to see my son the next week and London isn’t cheap,” she says. Because it was a great deal and to escape the awful winter weather in Erie, Pa., however, Buttell decided to pay for part of the cruise from her current income and put the rest on her credit card.

“For years, I had kids at home so I couldn’t do anything spur of the moment. Now that I have an empty nest, I think it’s important to take advantage of these opportunities as they come up,” she says.

Treating yourself or your kids

Doing something pleasurable keeps you going and keeps you motivated, says Cunningham. “If you’ve done a good job saving, you can put some of it toward you.” For instance, if your favorite musician is doing a farewell tour in your town and you’ll be upset if you miss it, then why not go for it?

When it comes to the kids, however, they have a lifetime of experiences ahead of them, so don’t fall into the YOLO trap and feel obligated to splurge on every big item or event for them. If you’re going to pay for the Sweet 16 party because “she’s only 16 once,” you can’t then also foot the bill for the senior class ring, the limo for the prom, etc., says Cunningham. “Consider this a teachable moment for the child that he or she can’t have it all.”

Of course, this is also the perfect opportunity to suggest that the child earn some money to put toward those extras. “When a child has some skin in the game, it enhances the experience, and puts the kibosh on any sense of entitlement,” says Winston.

Professional investments

Because you only live once, you don’t want to feel unhappy at a dead-end job. But career advancement can be costly, whether it’s attending an industry conference that only comes around once a year, taking a course or building a professional looking website.

“Make financial decisions with your head, not your heart,” says Cunningham. If you’re confident the investment will pay for itself in the form of higher earnings or better opportunities, or if you can find a way to supplement your endeavor (see if your employer will pay for some or all of it, or if there’s a related tax credit), it could be a good move for you.

Can’t afford it? Get clever

Just because you don’t have cash on hand doesn’t mean you’re doomed to a life of frugality. “There is ‘camouflage cash’ hiding in that paperwork on your desk, and stuff around your house,” says Winston. You can sell items, use your credit card rewards or maybe even trade something with someone to get what you want without going into debt.

The next time you’re tempted to seize the day, live in the moment or shout out the YOLO mantra, remember that spending tomorrow’s money — money that has yet to be earned — can put you on a slippery financial slope, says Cunningham. “Of course spending money we don’t have with a promise to pay is the essence of credit, and is something people do every single day,” she adds. “Some just do it better than others.”

Dawn Papandrea is a writer, editor and blogger specializing in personal finance, parenting, women’s lifestyle, and higher education. She is a frequent contributor to CreditCards.com as well as managing editor of The CollegeBound Network. Her work has appeared in Womansday.com, Family Circle, Living on the Cheap, iVillage and more. Her favorite quote: “If you would not be forgotten as soon as you are dead, either write things worth reading, or do things worth writing,” by Benjamin Franklin.