It's not about skimping or splurging...it's about quality, and when does it matter.
-app103
Right. Pretty much what I'm thinking, but splurging can have a flavor of its own. So does skimping.
Let's be vague. Here are my 2 general rules:
Splurge :
if necessary, when it helps me reach my goals and projects and is in line with my values**. And sometimes when I feel that I should go against my values, goals and projects, just for the pleasure of entropy, variety, surprise...
Skimp : anything that doesn't have any real incidence on my general happiness, or is not in line with my values, goals and projects (ie : spending more would not help achieving more or better, etc.). And sometimes... when I feel that I should go against my happiness values, goals and projects, just for the pleasure of entropy, etc.

In most cases, splurge is probably -- ahem -- not essential (hence the term "splurge" -- which doesn't mean that I think it's "bad"... considering that "variety is the spice of life"... Splurge/skimp both have their place and can allow different phenomenons, realities, feelings to blossom...). Especially that humans seem adapt to any condition, whether good or bad (hedonic adaptation -- yes, some researchers will say it's not true, but... there seems to be massive evidence for it).
According to studies (for an easy book on the subject, see Sonja Lyubomirsky's
The How of Happiness and of course all the studies on the subject...), the context (material possessions, where you live, etc.) accounts for only 10% of a persons' global happiness. 50% is genetic, and 40% is in the individual's "hands": voluntary cognitive (in the wide sense) and behavioral changes. So a big portion resides in one's attitude towards life (... in general : attitude towards relationships, individual activities and thoughts-emotions, external events...). Now isn't this encouraging?

(OK 50% is a pretty big number... but so is 40!)
**Sometimes skimping means going against my values : buying stuff -- clothes, objects, services, whatever -- from a company that's not respecting human rights, that's not being ecologically sound, etc. So I'll splurge instead --> it's in line with my values and goals.