Where do you spend your money? According to the United States Department of Labor, Americans spend approximately 12.5% of their yearly income on food, with almost half of that spent on eating out, and another 5% on entertainment.
Despite this figure, we still all spend differently. There are obviously the required expenses like housing, healthcare, and education, but what about the added expenses for the things that make you happy? One person could spend money on going to the movies, while another person may love going out with their friends. The key to happiness is to create a budget that not only fits the required expenses, but making it fit the way you live your life. Here are some tips on how to save and spend, while ensuring happiness.
Saving
Saving is like making a big meal on Thanksgiving; it takes a while to see the results of all the work you’re putting in, but the end result makes it all worth it. When you set up your budget, try separating your savings into four different categories: 401k, home, education, and emergency fund.
If you’re renting, it’s important to save for when you want to buy a home. If you have a home already, investing in it will not only lead to a better place to live, but limit problems and possibly lead to a return on investment. For your 401k, take a look at your policy and if your employer offers contribution matching, try to max out the benefit each year.
As far as education, it’s important to continue to invest in it, even if you still have student loans to pay off. Continuing your education could be anything that helps you in your job or even learning more about photography to pick up a side gig and earn some extra cash. There’s also an option to refinance those student loans to better fit your lifestyle. Companies like Earnest can give you a better rate, let you skip a payment if you need to, or customize how much you can pay each month.
Finally, an emergency fund is crucial to have in case something serious occurs. There are so many little surprises in life that we don’t see coming. Therefore, it’s crucial to have money set aside that can turn a major financial setback into a minor headache.
Fitness
Gym memberships can range from $10 to over $300 a month. The key is to find a program that works for you. Lay out your options and weigh the pros and cons. If you go with a cheaper option, but end up never using your membership, is it really worth it? If you go with a more expensive option, it may provide you with more incentive to get to the gym as much as you can.
Food
An average cup of coffee is $2.70, multiply that to account for getting coffee every morning before work, and you’re spending over $700 a year. Of course, many people need coffee, but there are simple ways to manage your food expenses to save and still gett what you want. Try reducing your budget for special occasions, like buying coffee or eating out, and you’ll be surprised how quickly saving money on food will add up!
DIY
The term “do-it-yourself” may sound intimidating, and only an option for people who have an endless amount of time, but it’s very simple to make or do things you currently pay for. Similar to a company that moves from outsourcing work, to bringing it in house, you can save a ton by putting work into doing things yourself. For example, try starting your own garden. Not only would you save on groceries, but it could even become a hobby!
Balance Experiences with Investment
If you love to travel and experience new things, it’s important to invest in that. However, you need to do it in a smart way. Using your emergency fund to book a last minute trip through a Groupon you see online could be a huge let down, and could negatively affect you financially. You never want to end up thinking it wasn’t worth it. It’s important to set aside the same amount of time you spend researching ways to save, and use it toward weighing the cost vs. experience of a big trip or event.
Conclusion:
Obviously, budgeting for happiness will differentiate from person to person, but the key is being smart with your money. If you haven’t yet, set a budget and use these tips to make sure you’re still living your life!
The above is a contribution to Leisure Freak by Jamie Wharton
Jamie is a freelance writer dedicated to all things finance, most commonly covering education costs and post-college budgeting.
I think it comes down to a certain amount of discipline and self-control. You can really have and do almost anything you want but the key is how often you are going to do them. Maybe limit buying your favorite coffee to Fridays and make it at home the rest of the week. Eat out once a month instead of every weekend. Most habits you don’t really need as much as you think you do. Its all in your head. You will feel much better about your finances and appreciate those purchases even more when you eventually get to have them.
Thanks for the comment Arrgo. I agree. Everyone has their own frugal threshold to push against without living a life feeling deprived. Finding that unique balance where happiness is still achieved while still being able to make our personal financial gains is an ongoing exercise. Like anything else, the more we do it the better we get at it.
Tommy
why the hell coffee costs so much? In Italy you can get a coffee at any bar below 1 Euro. At the bar. If you have a Moka at home, it costs you around 5 cents per cup!
I really really don’t get coffee above 20 cents per cup.
Ah, btw, I don’t drink coffee 😀
Thanks for the comment Mr. RIP. Coffee is expensive and I certainly wouldn’t pay what Starbucks wants for their coffee. I am a coffee drinker and do allow myself a good coffee at my local independent shop that perfectly roasts their own beans. All coffee sourced from small farm growers around the world. Because of their unique roaster I get all the flavor without the acid that most coffees have. I believe for many people, including myself, that it is also a social thing.
The way I approach it is if it makes me happy then allow myself some but do so in a disciplined manner within my budget. I personally take advantage of any coupons/promotions and stick to an occasional drip coffee when I plan on staying at the shop as my social outlet. I bring my own cup and pay $2.10 including tax (small cup charge) for my large cup. My morning cups and any to drink on-the-go is never bought and is perked at home. I always filled my thermos and took it to work with me in my career days past. I do feel that my $2.10 is worth the social interaction, free WiFi,and awesome product.
Budgeting for happiness to me means a sustainable budget over the long haul. Some treats are needed to avoid feeling like living a deprived life. Everyone’s treats are different.
Coffee is one of the things that people over-spend on so you are absolutely right. Why would anyone have a $6,$7 or more daily coffee or Latte habit? It definitely should be looked at as a place to trim costs from one’s budget and is often the first thing mentioned in budgeting articles. If it adds happiness then throttle back for budget sake and occasionally enjoy it. Luckily for you it isn’t on your treat list.
Now lets talk Beer.
Tommy