The One Question You Should Ask Before Every Major Purchase

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Recently, my husband had to buy a new bathrobe. The old one, which had completely worn out after a decade of wear, was the exact same ridiculous pastel coffee mug robe that Brad Pitt sported ironically in the movie Fight Club. The coffee mug robe cost $188, and had been a gift from me because my husband simply could not bring himself to spend nearly $200 on something he was going to wear around the house on lazy mornings.

He loved that intentionally ridiculous robe, but despite my urging him to replace it with the same one from the same boutique, he again balked at spending that kind of money on a bathrobe. No matter how often I pointed out that he'd be spending a little less than $19 a year on daily joy (assuming the replacement robe also lasted 10 years), I could not change his mind.This situation got me wondering, though. How do you decide whether it's worth it to spend $200 on a ridiculous bathrobe, $500 for a phone upgrade, or an additional $5,000 to get the trim package you really want on your new car?

Here's the thought process you should go through to figure out if a major purchase is worth it.

The big question: Is this an investment or an indulgence?

The basic definition of an investment is something that will appreciate in value over time. Buying a house is a common example of an investment purchase. In addition, upgrading your flight to business class so that you can more easily get work done on the plane may be an investment (if you can truly commit to working in flight) since the cost of the upgrade will be more than covered by the money you make while working.

But what about investments that appreciate in something other than monetary value? For instance, you might spend money on biweekly massages, which do not appreciate in financial value, but they do keep you pain- and stress-free, which might be worth far more to you than the cost of the massages. That is an investment in your physical and mental well-being, even if you never see a specific financial return.

On the other hand, an indulgence is something that simply makes you feel good in the moment. You don't expect an indulgence — like buying your favorite gourmet coffee, driving a sporty car, or purchasing the latest trendy clothes — to appreciate in financial value. There is nothing wrong with spending money on indulgences, and in fact, they can be an important part of your budget. The problem is when you justify your indulgences by claiming they are investments. (See also: How One Nice Thing Can Ruin Your Whole Budget)

How to tell the difference

The fundamental disagreement that my husband and I have over the bathrobe comes down whether or not spending nearly $200 on it would be an investment or an indulgence. I believe that it's an investment in his daily happiness. He believes it's an indulgence, and therefore not worth the money.

There are a couple of things to consider to help you figure out if your major purchase falls into one category or the other:

Length of use

In general, the longer you can get good use out of a product or service, the more likely it is that you are looking at an investment. That means that clothing fads are more likely to be indulgences, whereas well-made classic pieces like a suit or little black dress are more likely to be investments.

Is there a possible substitute?

If there is no other way you'd get the same feeling from another purchase, then it's likely that you're looking at an investment. For instance, you may feel more professional, put-together, and relaxed when you get a weekly manicure. Painting your own nails does not feel the same, and in fact, you feel less professional with your DIY manicure. That means your weekly manicure date is likely an investment in your positive outlook, rather than an indulgence.

Just because it's an investment doesn't mean you should buy it

Even though the big ticket item you want to buy will be an investment in your well-being, that doesn't necessarily mean you should buy it. Major expenditures can derail your finances, even if your purchase will appreciate in value in some way. Before you make your investment purchase, ask yourself if you can afford to make the purchase. If you can't, commit to saving up for it. (See also: 5 Mental Biases That Are Keeping You Poor)

Know what you value

Ultimately, determining whether or not you should make a major purchase is all about knowing the things you value most. Spending money on things that will appreciate in value — whether financial or emotional — can be a good investment. Spending money on things that will offer more fleeting value is generally an indulgence.

Knowing which is which can help you decide when to spend, when to save, and when to just go ahead and buy the silly robe.