What is Joy-Based Budgeting, and Does it Work?

The word joy is probably not one most people would choose when describing setting or following a budget. But there is an approach to managing your money known as joy-based budgeting. It’s the practice of spending on the things that enrich your life while still meeting your savings goals:

Kaylee McClellan, a certified financial planner with Innovative Planning Group 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.

Her clients value the ability to travel and even live abroad for brief stints, so they’ve designed a budget that allows them to do so while still saving for later.

Without the travel, McClellan says, “they’d be miserable. And they wouldn’t be able to buy into the long-term savings plan.”

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.”

In much the same way that including some chocolate might help you stick to a diet, including some joyful spending can help you stick to a long-term financial plan.

“It’s spending on purpose,” says Ashley Bleckner, a CFP with financial services company Ellevest 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 and CEO of Gertsema Wealth Advisors 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:

Identify what brings you joy. This may sound simple, but if you’re staring at the ceiling wondering where to begin, there are several online quizzes to help you narrow it down. (McClellan recommends this one from Think2perform, a performance development company.)

Track spending for 60 to 90 days. Choose a period that reflects your typical spending (read: not the holidays) and look closely at where your money went. Are you spending on things that make you happy or enrich your life?

Adjust accordingly. If you find that your money is going to things that don’t bring you joy, think about how you can tweak your outflow so that it does. “Start looking for the opportunities to save the money and consume things that align with what’s important to you,” Gertsema says.

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 focus.

“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.”

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The most important thing about budgeting is finding an approach you can stick to. You are far more likely to reach your goals if your budget fits your life. It’s OK to change things up. Just keep your eye on your short and long term goals, and you’ll get there!