Investing in Happiness: Why Your Personal Finance Goals Should Include a "Fun Fund"

Building a budget that meets all of your personal finance goals is not an easy task. Whether you're just starting with your savings goals or you've been dutifully depositing part of your paycheck into your 401k, it's essential to make sure your budget includes funds you can use for your enjoyment. While an emergency fund should be used for unexpected expenses, creating a "fun fund" will ensure you get some enjoyment out of life.

The fact of the matter is that the future of the economy looks pretty bleak. Everything is more expensive. Owning a house seems like an unattainable dream. Student loan debt doesn't seem to budge no matter how many payments you make. For many young people, the prospect of spending a lifetime just trying to survive is impossibly overwhelming. All of this is exponentially more disheartening if you find yourself living paycheck to paycheck, even after you make drastic changes to your lifestyle.

Some personal finance experts are a bit out of touch with the reality of how costly it is to live in today's society. Millennials have withstood a decade of advice telling them to cut back on Starbucks and avocado toast, all while financial experts have overlooked just how detrimental inflation has been to working-class people. But even if these finance experts have good intentions to help young people save for the future, retirement and an emergency fund shouldn't be your only savings goals.

A "fun fund" is a small portion of your budget that you can use to save up for the things that make you happy. Want to go to a concert or finally take a trip to Europe for vacation? Or maybe you have simpler desires, like adding another item to your collection. Whatever it is that makes you happy, you should make room for that happiness in your budget.

But how much of your earnings should go toward your "fun fund?" Truthfully, the exact percentage of what you should save specifically for your happiness goals will depend on your gross monthly income and your basic living expenses. After you pay for housing, transportation, food, and necessities, a good portion of your earnings should be rightfully allocated to your retirement account and your emergency funds. However, by adjusting how much you are adding to these two savings goals, you can make room for a "fun fund" in your budget. Even just adding 1% to 5% of your monthly earnings to your "fun fund" can help you achieve your happiness goals.

If you're reading this and thinking, "Well, isn't this obvious?", you might be lucky. What might seem obvious to you is not so obvious to people who have experienced financial hardship. For people who have been struggling as low-income earners, the idea of setting aside money for something other than survival needs may be a foreign concept. Some may even feel guilty for spending money on something they enjoy.

But there's a huge psychological benefit to spending money on something that makes you happy. Part of self-actualization is feeding the spirit - but if you're too focused on earning money for your daily needs and saving money for your future needs, you might not be feeding the spirit. Ultimately, not spending money on little things that make you happy can make it that much more difficult to enjoy your life.

You can use a "fun fund" for several happiness goals. Some may choose to spend this money on life's little pleasures, like the aforementioned Starbucks and avocado toast. Others may choose to buy experiences or even a mental health day.

Although money doesn't actually buy happiness, you can build a thoughtful budget that allows you to spend money on things that make you happy. After all, with a well-rounded budget, you can enjoy a greater degree of financial freedom, which will allow you to spend money guilt-free.