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Budgeting for Happiness: Is it Possible?

 Published on November 13, 2020

Let’s play a game of word association. If we say “budget”, do the words “uh oh” come to mind?

If money gets tight, you might feel like you have no choice but to wave goodbye to all the fun things in life. What you’re left with is paying bills and saving money. Sounds boring, doesn’t it?

Here at MoneyKey, we also think it’s misleading.

While limiting your spending is a common and an effective way to get a handle on your finances, there is such a thing as being too frugal. In your hurry to axe all your expenses, there’s a chance you may put your happiness on the chopping block.

Before you become judge, jury, and executioner of all your unnecessary spending, keep scrolling. We’ll tell you why some of your fun expenses may deserve a pardon.

What is Budgeting?

Budgeting simply means you have a plan on how you’ll spend your money during a set period of time.

By thinking about your expenses in advance, you may stand a better chance of spending your money with purpose. You’ll want to prioritize paying bills on time and saving money over unnecessary frills.

There Are a Lot of Ways to Budget

A household budget is a sweeping term that refers to a variety of spending styles, each one unique to your needs and preferences.

Here at MoneyKey, we’re about more than just lines of credit and installment loans online. We also offer financial advice that helps you become more informed about your financial future.

This includes our growing resource of financial tips for college students, families, and individuals who want to save more.

Scroll through our blog to find more info on how to budget. This is a fantastic idea if you’ve never made a budget before. It serves as a good refresher even if this isn’t your first rodeo.

computer on table next to notepad and phone.

Why is Budgeting Important?

Budgeting is important because it stops you from committing one of the biggest financial mistakes out there: spending more than you make.

It’s a way of balancing all your short and long term goals — from paying your rent and buying your nephew a birthday present to paying off student debt and saving for a house.

There are a lot of reasons why people turn their backs on budgeting. You may not know how to make one, or you may think it’s impossible to manage your budget with irregular income. Spoiler alert — it is possible with the right know-how!

But perhaps the most common one is this: they think that budgeting means you have to deprive yourself of all the fun things in life.

What Budgeting Isn’t

Budgeting is sometimes equated with living an austere lifestyle that eliminates all the fun things in life. But in reality, only extreme budgeting relies on this level of sacrifice.

The purpose of most of the other budgets is to try to bring balance to your spending.

While these spending plans prioritize things like bills, debt, and savings, they should have some money left over for fun.

Why Budgeting for Happiness is Important, Too

Ever notice how as soon as you can’t do something, it’s all you can think about?

Let’s say you spend years living in a city that has several sushi restaurants to visit. You went once or twice before moving out to the boonies, where there isn’t a sushi place for miles. Then sushi is all you want for dinner.

It’s a part of human nature to want something you can’t have, but this little quirk of ours could throw a wrench in our budgets.

In terms of extreme budgeting, a budgeting process that eliminates all unnecessary spending, your hyper-focus turns to all the things you can’t buy with your money.

It’s hard saying “no” to everything day after day.

No to drinks with colleagues after work. No to renting a cabin over the long weekend. No to great deals and sales on things that may not be necessary to your survival. And no to takeout whenever your fridge is empty.

All this negativity can take its toll, wearing down your willpower until you can’t resist the temptations anymore. Eventually, you may give in to shopping sprees and other splurges that put your finances at risk.

When that happens, cue feelings of disappointment and failure that makes you give up on budgeting entirely.

Or, it may convince you to give extreme budgeting another try before giving up again, and again and again.

smiling woman in white sunglasses wearing watermelon shawl jeans and striped shirt on a pier

Budgeting for Happiness is All about Longevity

Budgeting should not feel like a prison sentence. As soon as you feel constrained by your spending plan, you run the risk of breaking your budget. 

You don’t want a crash cash diet that works for about a month before you’re back to your old ways. You want a budget that’s sustainable for years even as your goals change.

The Benefits of Budgeting for Fun

Budgeting for fun strikes a happy medium between your quality of life vs money management. While it will require some sacrifices to prioritize bills and savings, it still leaves one or two treats that you can enjoy.

You may be surprised by how these fun expenses impact your mood. It can take some of the edge off, so you’re motivated to see through other sacrifices.

What is Fun Money?

Generally, you can split your expenses into two broad budgeting categories: needs and wants.

Fun money falls into your financial wants.

Depending on your budget, you may already have some wants built into your budget — things like your Netflix subscription or winter clothes allowance.

Fun money is a little different. Think of it as a little extra cash that you can spend on anything, at anytime with no strings or guilt attached. Having that freedom to splurge spontaneously can go a long way to buoy your mood.

How Much Fun Money to Budget

There’s no one-size-fits-all amount. How much fun money you can afford depends on the following:

  • Your income: When it comes to the black and white of your spending plan, there’s only so much money to go around. If you earn $40k a year, there’s a good chance that you’ll have less to spend than someone making six-figures.


  • Your short and long term goals: Budgeting categories like an emergency fund or retirement savings need your attention. If your retirement is just around the corner, you may have to prioritize these savings and reduce your fun money. But if your goals are a ways off, you may be able to increase what you spend.


  • Your debt: You should prioritize paying off an installment loan, a cash advance, a line of credit or any online loan you may have before you use this cash on fun things. 

To find the right number for your needs and capabilities, you’ll need to think about your short and long term goals carefully and weigh them against your income and financial obligations.

If there’s anything left over after you see to these goals and obligations, that’s your fun money.

Depending on your circumstances, you may be able to set aside $100 of guilt-free money each month. Or maybe, you can only afford $10 every few months. It may even fluctuate.

It doesn’t have to take up a huge portion of your paycheck. Big or small, this cash can keep your spirits high as long as you know how to squeeze every ounce of value out of your money.

Make a mental note of how much money in your checking account is available for this purpose or, if you use the envelope method for budgeting, take cash out from the bank and put it in an envelope to use later.

empty envelopes laid out to be used for envelope budgeting

Examples of Budgeting for Happiness

What this budgeting process boils down to is finding out what makes you happy.

This may be a surprisingly difficult question to answer. It becomes all the more challenging when you only have a little fun money because of your debts and other goals.

Take your time. Brainstorm ideas on how you may balance quality of life vs money obligations.

If you aren’t sure how you can spend this money, here are some examples:

  • Special ingredients to test out a new recipe
  • Craft supplies for a small DIY project that will beautify your home
  • Paying for an online course
  • A sampler pack of craft beers from your favorite brewery
  • Music lessons to master a new instrument
  • Picking up a new plant from the nursery or hardware store

These are only ideas to get the juices flowing, so don’t feel like you have to spend it in this way.

Some of these — like enrolling in an online course or learning how to play music — are acts of self-improvement. But others are just plain fun. The splurge you pick doesn’t have to serve any purpose other than enjoying yourself.

There’s no right or wrong answer. How and when you indulge in fun is totally up to you, provided you stick to your spending limit.

Budgeting for Happiness is Not an Excuse to Overspend

Whether it’s an occasional sweet treat at your corner café or a standing music class you attend each week, make sure your fun fits your finances.

If you only have $10 to spare each month, don’t commit to a $13 movie ticket because it’s “close enough”. That’s three whole dollars over your limit. Eventually, this habit can add up and eat into other, more important parts of your spending plan.

The same idea applies even if you have more fun money to spare.

Let’s say you have $100. You can spend it all at once or spread it over several items or experiences. If you choose to spend it here and there, keep track of these purchases to make sure you don’t go over your limit.

While budgeting for happiness may help you keep your spirits high, it is not an excuse to spend more than you should.

Neither is it a good reason to apply for an online installment loan or a line of credit. As a general rule of thumb, only ever borrow cash when you need it to help with unexpected emergency expenses.

What is an Unexpected Emergency Expense?

While your unique problem may vary in size and scope, common emergencies include:

  • Urgent medical bills
  • Unexpected auto repairs
  • Unforeseen home expenses

Something like an installment loan may be a financial backup when your savings fall short covering unavoidable yet urgent issues.

As for your happiness budget, make sure you scale your splurges to your finances.

smiling woman in glasses and pink blazer in front of white board with red lettering

Avoid Budgeting Burnout

There’s no doubt managing your money takes time, effort, and patience. But you’ll need heaps of all three if you commit to an extreme budget.

Without them, you risk budgeting burnout. Sooner or later, you’ll run out of the energy or desire to stick with your austere spending plan, and that’s when the real damage can happen.

Free from a budget, you can easily overspend and land yourself in financial hot water.

Budgeting for happiness helps you avoid the trouble that follows this fatigue. It doesn’t have to be much — in fact, it shouldn’t be if you live on a tight budget — but even a small treat or indulgence may go a long way to reviving your commitment to the rest of your plan.

Carve out some money to splurge on something fun within reason. It might help you stay on track with each of your goals.

Posted in: Lifestyle

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see MoneyKey's Terms of Use.

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