To me, the most elegant way I've heard it is:
Spend money on what truly makes you happy.
Cut ruthlessly everywhere else.
Genius
True - as long as you truly know what makes you happy.
I know women that get manicures, pedicures, $100 haircuts on a regular basis and they say they couldn't go without. Can this really be? These same families have debt and constantly complain about money, but they tell me in the same breath that they signed up for this great new yoga class. I think they would benefit a lot by cutting out all the excess for a year and see how it goes. When something that is actually a habit is tied to your happiness, then it's hard to tackle it and to see it for what it really is. Same goes for simple things like having a daily glass of wine. Why not have it weekly and enjoy it more?
As far as the haircut goes, I think you have to pay for things sometimes that truly make you happy, but only after having tried another way. For example, I get my haircut at a salon once a year. To do it every month would seem ridiculous to me and I might not enjoy the experience as much. I have also had MMM cut my hair and realize it works fine as long as my hair is still long, but I prefer to get a more stylish or shorter cut every once in a while. But, I make it a birthday gift to myself and it feels like a huge treat.
When you do things in moderation (and you know the alternative or how it feels to go without), then you can truly enjoy them. I guess it goes along with "hedonic adaptation" and what becomes the new "normal".
Having said all that, I personally would not splurge on anything (haircuts, restaurants, coffee, whatever it might be) if I had any credit card debt or any other type of high interest debt. Pay that stuff off first and then enjoy your small splurges when you can afford them.
A lot of this depends on your personal financial situation and what your goals are...