NEW YORK — Can't stop buying songs on iTunes? Don't beat yourself up.
Longing for a new pair of boots? Go ahead and indulge.
It's not the type of advice you'd expect from a personal finance expert, but happiness is an integral part of Ramit Sethi's feel-good philosophy on spending.
Besides, the author of the New York Times best-seller "I Will Teach You to be Rich" points out that agonizing over pocket change can do more harm than good.
"There's a cost when people obsess over little things like lattes," Sethi said. "They have less attention to focus on the big financial decisions that really matter."
That doesn't mean you should ring in the New Year with a bacchanalian spending spree. But being financially responsible doesn't have to mean subjecting yourself to a life of austerity.
Here are Sethi's three tips for spending smart in 2011:
Tip (hash)1. Track Spending
It's tiring to pinch pennies all the time. Instead, focus on better managing your two biggest discretionary expenses. For many, that's eating out and clothing.
After figuring out how much you spend, settle on a goal for gradually dialing down those costs over time. If you don't have the patience to track your spending, sign up for a budgeting site, such as Mint.com, that does the work for you. It's free and generates reports that automatically categorize spending based on your credit and debit card transactions.
You should only have to check in on how you're doing a few times each month. And don't panic if you find yourself over budget; a few adjustments will probably get you back on track.
Tip (hash)2. Compartmentalize
Don't think of your money as one giant pool. Organize it into buckets for specific purposes.
The categories could include entertainment, dining out or a down payment on a house. Sethi has one for unexpected stupid mistakes such as parking tickets.
By flagging your money for particular uses, you're more likely to think before you spend.
"It puts a psychological barrier around the money," Sethi said.
For instance, you might decide against going out to dinner one night if it meant raiding your down payment fund.
Some banks make it easy to compartmentalize by letting customers create targeted accounts. So you might create an account to pay for a honeymoon or other major expenses.
Tip (hash)3. Spend Consciously
Indulging isn't verboten, as long as you're conscious and savvy about it.
So if you allow yourself to splurge on a particular vice, make up for it by practicing restraint in other areas. Also look for ways to leverage your spending. If you love wine, for example, look for store discount programs that let frequent shoppers save.
Ultimately, Sethi's philosophy isn't about simply trimming budgets. It's about finding the flexibility within them to continue enjoying what you love.