Generally speaking, my wife and I try to lead modest lives and not to waste our money on stuff. We would rather save and invest our extra income than drive a fancy car or buy expensive clothing. Nevertheless there are a number of things that we don't skimp on:
1. Our Kids - our oldest will be turning 5 this week. We will hold his birthday party at a local kids' gym. The party itself will cost a couple of hundreds of dollars and we are also buying him a Nintendo Wii as a present (if I can find one. Apparently, all the stores in our area are out). All in all we'll probably be spending about $500 on the party and the present.
2. Our Vacations - we don't go on many vacations, but when we do, I have no intention of counting pennies. It's not that we'll stay at the fanciest hotels, but we'll stay somewhere nice, eat at good restaurants and get a few souvenirs.
3. Our Home Entertainment - with three kids you don't get to go out much. With that in mind, we pay a pretty penny for our cable and Internet packages, we subscribe to Netflix and we own a high-end Plasma TV. Next month I hope to also improve our sound system.
I guess what I am trying to say is that personal finance is all about making the right trade-offs, and by right I mean right for you. In my case, I am content with driving a dinged up Geo Prizm 1997, if I can spend some money on my next ski weekend.
As long as we are saving enough for our major life goals, such as retirement and education for our kids, I don't feel bad spending some money on the things that really give us pleasure.