Five easy ways to fight the urge to splurge

You've finally done it - a detailed, realistic budget. It's a crucial step toward financial freedom, and you should be proud. A lot of Australians don't even bother to create, let alone stick to, a budget.

That's probably because following a budget can be so challenging, just like staying on a diet. Reaching your goal weight would be so much simpler if there weren't always so many delicious goodies around, right? Similarly, keeping to a budget would be far easier if tempting new products weren't constantly being dangled in front of our faces, practically begging us to splurge.

With all of life's obstacles, challenges and temptations, it's up to us to resist them. When it comes to spending, there are many ways to fight the urge to splurge. (For a related reading, see Expert Tips For Cutting Credit Card Debt)

1. Leave the Plastic at Home

You've probably heard this before, but it's perhaps the most important way to avoid overspending. Not carrying credit cards wherever you go eliminates the possibility of large impulse purchases. Although it may sound a bit old-fashioned, consider carrying cash most of the time and only the amount you can afford to spend. Bring along the plastic only when you know you'll need it.

2. Trick Yourself into Feeling Like You've Splurged

For example, try playing this little mind game with yourself next time you go shopping: Put something you want but don't really need into your cart and keep it where you can see it the whole time. After a few minutes, it'll seem like you own it. Ditch the item when you're done shopping, then hit the checkout line. It's uncanny, but this little trick can make you feel like you splurged on something even though you never actually bought it. See if it works for you. (For a related reading, see Five Horrific Things That Can Haunt Your Finances)

3. Get Feedback on Spending Decisions, Particularly Big Ones

Before you go out and drop, say, $4,000 on a high-end 24-horsepower lawn mower, check with someone who knows you - a spouse, sibling or friend. After a bit of discussion, you may realise the $1,200, 14-horsepower will do the job just fine. Get feedback on all relatively big purchases, like flat-screen TVs, power tools, cars and sound systems.

4. Budget for Splurges, But Keep Them Small

Nobody's perfect. So instead of aiming for perfection with your budget, leave room in it for indulgences. From a personal finance perspective, small splurges are obviously preferable to big ones because they're cheaper. Generally, bigger splurges are no more pleasurable than smaller ones and that frequency, not size, is the key to maximum enjoyment. So someone who eats at expensive restaurants a couple times a month might try hitting the sub shop and then going for ice cream once a week. (For a related reading, see Top Six Mindless Money Wasters)

5. "Hide" Money from Yourself

Take full advantage of building your super fund or consider locking your money away in a term deposit. Term deposits not only reward you a high rate of interest but discourage customers from withdrawing money by charging you penalty fee.

The Bottom Line

People are increasingly succumbing to the daily temptation to overspend, often at the expense of their financial well-being. In fact, there were more than 1.5 million bankruptcies in 2010 - an all-time high. The number is expected to be even larger in 2011.

Don't allow yourself to go down that road. With the right attitude and a little creativity, you can defeat the urge to splurge. (For a related reading, see The All-Cash Budget Plan: Does It Work?)

Start a savings plan with a high interest savings account. Earn up to 6% paid monthly. Find the highest rate account at Yahoo!7 Moneyhound