What if those fancy foamy coffees you love aren’t just allowed in your budget, but encouraged? Or taking a salsa class, or buying gardening supplies?
Welcome to joy-based budgeting: The practice of spending money on the things that enrich your life while still meeting your savings goals.
For some, this shift can make saving feel more sustainable.
Kaylee McClellan, a certified financial planner in Minnetonka, Minnesota, works with a couple in their 30s who are “a little bit pessimistic about the future of the world, so for them it’s challenging to want to save all this money for this future date,” McClellan says.
Without the travel, McClellan says, “they’d be miserable. And they wouldn’t be able to buy into the long-term savings plan.”
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Why joy-based budgeting is effective
Joy-based budgeting can be successful because it includes the fun parts of life, instead of a more limiting style of budgeting that “fails almost every time,” McClellan says. “It restricts people way too much.”
“It’s spending on purpose,” says Ashley Bleckner, a CFP in San Diego. “Spending intentionally.”
And spending with your goals and values in mind can lead to better decisions.
“There’s a theory out there called ‘The Red Car Theory,’” says Nick Gertsema, a CFP in Saint Joseph, Missouri. If you’re thinking about buying a red car, he says, you suddenly notice red cars everywhere.
Once you start training your brain to look for opportunities to spend on things that enhance your life, he says, “you’ll stop spending on the things that don’t bring you the joy or fit with what you want to do.”
Putting joy into practice
If intentional spending on happiness is appealing in a world that’s a little stressful right now, here are a few steps to get you started:
Revisit regularly. “Life evolves,” Bleckner says. “Goals evolve. Values evolve. So it’s a healthy exercise to check back in on an annual basis.”
This kind of budgeting might take some practice, but in the end, it’s still just managing your finances — with a new focal point.
“I am still encouraging my clients to save,” Bleckner says. “You can have a great portfolio and still feel disconnected from your life. So these concepts are what’s bridging the gap.”
About the author
Kate Ashford is a writer and spokesperson for NerdWallet. She is a wealth management specialist (WMS)™ and certified senior advisor (CSA)® and has more than 20 years of experience writing about personal finance. Previously, she was a freelance writer for both consumer and business publications, and her work has been published by the BBC, Forbes, Money, AARP, LearnVest and Parents, among others. She has a degree from the University of Virginia and a master’s degree in journalism from Northwestern’s Medill School of Journalism. Kate has been quoted by outlets including the Associated Press, MarketWatch, NBC and Fortune. She is based in New York.
