If you’re like most people, when you first create a budget you realize that you’ve been overspending. In an effort to cut back, you’re tempted to trim or eliminate your happy expenses. While this will lower your burn rate in the short term, it’s unsustainable because you’ll end up feeling deprived!
According to the Balance, eliminating your fun money makes sticking to your budget more difficult. When you feel like something is missing you’ll go out searching and spending to find ways to fill the void. Not only do you go back over budget, but you’re in the same financial situation you started in. One where you’re still struggling to improve your savings ratio and get ahead!
Aside from splurging on assets, spending sprees aren’t going to help you build independent wealth. Instead, they’ll have the opposite effect and leave you deeper in debt!
Truth be told, it might take a long time for you to become financially free. If you’re going to enjoy the process, you need to spend money on your happy expenses. Otherwise, you’re going to feel a constant sense of lack which makes the journey more challenging, frustrating, and unsustainable!
What Are Happy Expenses?
Whether you realize it or not, your emotions impact the way you manage money. If you lack confidence in your spending plan or it doesn’t provide excitement, then sticking with it will be difficult!
However, when your budget includes happy expenses it’s easier to keep at it. You’re spending money intentionally on the things that bring you joy. Rather than dredging your budget, you enjoy it because it includes things that excite you and make you happy!
Oftentimes, your happy expenses are the ones that are most meaningful to you. They may include a meal out with friends, travel, or an activity you enjoy. Regardless, they make you feel good and can even pick you up when you’re feeling down, too!
Why Your Happy Expenses are Important
For most people, the accumulation phase is the longest stage in the financial life cycle. It’s common to be in it for decades before reaching the point where you’re able to relax and have a happy retirement!
If you feel down throughout this stage, then you’re going to look for ways to make yourself feel better. As you do, you’re going to stop following your budget and start wasting money, making it harder for you to become rich and wealthy!
However, spending deliberately on your happy expenses helps you feel better about the financial position you’re in. Since, you’re regularly using money to experience joy, your quality of life improves, making it easier to be content. Not only will this prevent you from splurging, but it helps you stay on budget, save, and progress towards your goals, too!
Too often, people fall into the never-ending trap of trying to keep up with the Joneses. Rather than buying assets, they splurge on status symbols at prices they can’t afford. Besides causing them to live beyond their means, it pushes them deeper into debt, too!
However, if they discovered their happy expenses and allocated money to them, they wouldn’t feel the need to keep up with the Joneses. Instead, they’d be spending their money as they saw fit. They could use it on the goods and experiences that they found beneficial. As a result, they wouldn’t just be happier, they’d be more at peace with the situation they’re in!
How To Determine Your Happy Expenses
Aside from emotions, social media plays an ever-increasing role in our spending, too. We buy things because other people have them, they look cool, or help you to fit in. Regardless of the reason, you don’t know upfront whether these items are going to make you happy!
Your happy expenses are unique to you. To find them, you may have to do a little soul-searching or self-reflection. Either way, discovering them helps you identify the types of expenses that are most important to your joy!
Here are 3 steps that can help you discover your happy expenses!
Step 1: Review Your Spending
One of the most basic money rules for financial success is to review your spending regularly. Not only does it help you stay under budget, but it allows you to see all the places where you’re disbursing money.
Being mindful of your expenses gives you greater financial awareness. It allows you to reflect on each of your past purchases and determine whether you’ve been spending money wisely or wasting it completely!
To start, review each of your expenses from the last few months and assign each one to a budget category. For example, you could group your mortgage payment, lawn care, and home repairs under housing expenses.
Once each expense has been assigned, make a list of all your different budget categories.
Step 2: Rank Your Expenses
Using the list from above, begin ranking each category in order of importance. The category that brings you the most happiness will take the top spot. Then, continue this process until each category has been designated.
Rather than ranking them on whether they’re needs or wants, rank them according to how they make you feel. For example, consider your grocery category. Even though you need groceries to survive, that doesn’t necessarily mean they deserve a high ranking. If they don’t provide you with joy, then they don’t deserve a high ranking.
After rating each category, sort them in ascending order. Start with #1 and work your way down. When you’re finished, the category at the top will be your happy expenses since they provide you with the most joy. But, the ones at the bottom of the list are of the least importance and have little to no bearing on your overall quality of life!
Step 3: Spending Alignment
At this point, you’ve listed your spending categories and ranked them in order. Now, it’s time to determine whether your actual spending is aligned with the things that matter most to you!
Using the original list from Step 1, calculate the total amount you’ve spent in each budget category. Then, sort them in order, starting with your largest expense first and working your way down.
Next, take this list and place it next to the one you made in Step 2. If every line item on each list matches, then your spending is in alignment. You’re using your money to maximize your happiness!
However, it’s rare for each list to match completely. It’s more common for there to be inconsistencies. Meaning you may think you’re spending on the things that make you happy when in reality you aren’t!
To save money and avoid feelings of deprivation, you need to spend according to your list of happy expenses. Having said that, start reducing and eliminating spending on the categories at the bottom of your list. This way, you’ll spend less and save more without feeling like you’re sacrificing!
After completing this exercise, people often discover that the largest items in their budget don’t provide them with equal amounts of joy. In many cases, they’re overworking themselves to afford homes, vehicles, and other material possessions only to discover these items aren’t the ones that make them happy!
Despite what society says, you shouldn’t always buy bigger, better, and nice things. Especially when those things don’t matter to you. Instead, you should spend your money on your happy expenses and the things that matter most to you!
Happy expenses make you well…happy. They make life fun, interesting, and exciting!
If you want to enjoy the process of building wealth, don’t sacrifice your happy expenses to save money. Rather than getting rid of the ones that matter most, eliminate the ones that matter least. This way, living below your means will be sustainable and that alone will help you to thrive!
What are your happy expenses? Comment below.
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