Vacations? Flowers? Massage? How to save for what makes you feel good
You probably know how to plan and save for big, boring expenses or financial needs. But what about fun stuff?
Expenses that don’t put a roof over your head, but provide joy, rejuvenation, and other hard-to-quantify benefits, are also worth saving.
In fact, they deserve their own account, says Delia Fernandez, a certified financial planner based in Los Alamitos, Calif.
“Find out what drives you, what makes it all interesting for you, and… set aside some money to make it happen,” she says.
What types of expenses are we talking about?
When it comes to wellness spending, each person has their own preferences, says Aja Evans, a New York-based financial therapist and licensed mental health counselor. For example, some people would find an intense cycling class to be energizing and confidence-building. Others prefer to do just about anything else.
Consider what goods, services, and activities generally bring you joy. Yes, your budget will determine exactly what you can afford. But for now, think. Fernandez asks, “What’s going to get you through these times? And what makes your life precious? What refreshes you; what inspires you?”
Some ideas: services like massages; products like fresh flowers; activities like holidays and date nights.
Why create a wellness account?
Allocating money to these types of expenses can help you be more intentional about your spending. For example, let’s say you put $25 from every paycheck into a vacation fund. With this money safely stashed away, you cannot mindlessly spend it on impulse purchases. You also protect this money from financial demands.
Let’s say you have up to $50 to spend each month on brunch with friends and you’ve already spent $35. This weekend, you might still love brunch, but skip the mimosa which would put you over the $15 you have left.
Ideally, this plan also covers any potential guilt of spending money on yourself. As Fernandez says, “You put it aside for that purpose.”
How can I balance this in my budget?
I hope you have been persuaded to indulge yourself in the new year. Plan those treats now.
One way to determine how much you can afford to spend is to apply the 50/30/20 rule to your monthly net income.
The goal of this budgeting method is to divide your money this way: 50% for needs, 30% for wants, and 20% for savings and debt repayment. Your new wellness fund would come from this “wants” category.
Here’s another approach: Start with your monthly after-tax income, then subtract all necessary expenses (needs), which include housing, food, transportation, basic utilities, insurance, childcare, and other expenses that allow you to work, as well as minimum loan repayments.
Next, subtract contributions to savings goals (like an emergency fund), as well as payments to retirement accounts and debts.
What’s left is your discretionary money. Decide how much you will regularly contribute to your new fund. “It could be $10. It could be $50. It could be $100,” Evans says. “The main point is that you actually put the money aside.”
Ideally, those contributions go directly from your paychecks to a new fund, Fernandez says. (Work with your employer to set up a new direct deposit.) If this method isn’t available, set up recurring automatic transfers from your daily check to the new account.
Where do I keep this money?
Fernandez recommends keeping this fund in an online savings account, on which you’ll likely earn interest.
Note that you are generally limited to six withdrawals or transfers per month from savings accounts before incurring any fees. This rule has been temporarily relaxed during the pandemic, but to avoid fees in the future, consider a savings account only for infrequent withdrawals. Use it for your monthly spa visit, for example. Or watch your savings grow as you collect money for a trip or a major purchase.
If you plan to use this fund more than six times a month, such as for frequent morning smoothies, opt for a checking account. Open it at a financial institution you don’t already use, so the new account isn’t too easy to use for day-to-day spending. Aim for a free account, with no monthly fees or minimum balance. A few of these checking accounts even earn a little interest.
Laura McMullen writes for NerdWallet.