You probably know to plan and save for the big and boring expenses, aka financial needs. But what about the fun stuff? Expenses that don’t put a roof over your head, but do provide joy, rejuvenation and other hard-to-quantify benefits are also worth saving for.
In fact, they deserve their own account, says Delia Fernandez, a California-based certified financial planner.
“Figure out what keeps you going, what makes all of this worthwhile to you and put money aside to make that happen,” she says.
What kind of expenses are we talking about?
When it comes to feel-good expenses, each person has their own preferences, says Aja Evans, a New York-based financial therapist and licensed mental health counsellor. For example, some people would find an intense cycling class to be energising and confidence-boosting. Others would rather do pretty much anything else.
Consider which goods, services and activities typically bring you joy. Yes, your budget will determine what, exactly, you can afford. But, for now, reflect. “What’s going to get you through these times? And what makes your life valuable? What refreshes you; what inspires you?” Ms Fernandez says.
A few ideas: services like massages; goods like fresh flowers; activities like holidays and date nights.
Why should I set up a feel-good account?
Earmarking money for these kinds of expenditures may help you be more intentional with spending. Say you put $25 from each paycheque in a holiday fund. With that money safely stashed, you can’t mindlessly spend it on impulse purchases.
You’re also protecting that money from financial demands. Otherwise, if all your available money were in one bucket, Ms Evans says your self-care spending would likely be the first to cut when money is tight.
By devoting money to a specific kind of expense — be it a mortgage or manicure — you’re creating a budget. And budgets help prevent you from overspending.
Say you have up to $50 to spend each month on brunch with friends, and you’ve already spent $35. This weekend, maybe you can still enjoy a cheaper brunch to ensure you don't overspend your budget.
Ideally, this plan also hedges any potential guilt about spending money on yourself. As Ms Fernandez says: “You put it aside for that purpose.”
How do I swing this in my budget?
Hopefully, you’ve been convinced to treat yourself this year. Now plan for those treats.
One way to determine how much you can afford to spend is to apply the 50:30:20 rule to your monthly take-home income.
The goal of this budget method is to split your money as such: 50 per cent towards needs, 30 per cent towards wants and 20 per cent towards savings and debt repayment. If you follow that framework, your new feel-good fund would come from that “wants” category.
Not trying to officially budget at this point? Here’s another approach: start with your monthly income, then subtract all the necessary expenses (needs), which include housing, food, transportation, basic utilities, insurance, childcare and other expenses that enable you to work, as well as minimum loan payments.
Next, subtract contributions towards savings goals (like an emergency fund), as well as payments for retirement accounts and debts.
What’s left is your discretionary money. Decide how much of that to regularly contribute to your new fund. “That could be $10. That could be $50. That could be $100,” Ms Evans says. “The main point is that you’re actually setting aside the money.”
Ideally, these contributions go directly from your paycheque to a new fund, so set up recurring automatic transfers from your salary account to the new account, Ms Fernandez says.
Where do I keep this money?
Ms Fernandez recommends keeping this fund in an online savings account that is easily accessible. Online savings accounts typically have monthly limits on the number of times you can make withdrawals, so this option will only work for some. Otherwise, look at setting up a regular account that has no monthly fees or minimum balance requirements.
Enjoy the things for which you saved. Then regularly revisit your plan, Ms Fernandez says. You may want to change how much you contribute — perhaps more after a raise or less after an emergency expense.
What you save for could change, too. Maybe you wind up preferring drawing lessons over cycling classes.
“We all have to have a plan,” Ms Fernandez says. “But we all have to update it and change it when the facts change.”