Spending lavishly is, in fact, necessary when the money being spent benefits your and your children's health or when it's being spent on education or skill development. It's also wise to spend lavishly when it comes to paying into their college funds and your retirement funds. It's also okay to spend lavishly on home improvements that will bolster its value. In this case, however, lavishly does not mean casually, or without serious contemplation.

The basic concept here is that when you spend money on investments, you are building a stake in something that will offer a return, rather than spending on things that hold no value over time. It's not smart to cut corners on your most basic needs, such as health and dental care, insurance, education, or upkeep of your home. These are investments that will strengthen your finances over the long run.

You may also spend lavishly on quality goods, as long as you spend more but buy less. For instance, buying two high-quality jackets rather than ten cheap jackets will actually save you money. The more expensive jackets will last longer and always look better. But to maximize savings, buy classic shapes and fabrics, and buy sparingly.

The genius of buying higher-quality goods is that you don't buy what you don't need, and you buy minimal quantities. If you create a quality test for yourself — Is it a classic shape? Is it a durable, low-maintenance fabric? Can I build a wardrobe around it? Will it still look fashionable three years from now? — and stick to it when you are shopping, you will resist trendy, low-cost items that bulk up your closet and deplete your budget.