As the U.S. Economy faces stagnation and a challenging job market, a new approach to personal finance is gaining traction: “joy-based budgeting.” This method, initially discussed as early as 2013 by Manisha Thakor, centers on intentional spending that enhances well-being.
A Shift in Spending Priorities
Mary Hines Droesch, head of consumer and small business products and analytics at Bank of America, explains that “joy-based budgeting” is “about being intentional with your money, so it supports what genuinely makes your life better.” This could mean opting for a small treat instead of an expensive meal, or prioritizing home-cooked meals to free up funds for social experiences.
According to Bank of America, this approach is particularly resonating with Gen Z. While approximately 56% of Americans anticipate reducing their social activities due to financial goals in 2026, “joy-based budgeting” is enabling this younger generation to continue participating in plans they value.
Consumers Cutting Back
Across all demographics, consumers are reducing discretionary spending, with nearly 90% of U.S. Shoppers currently doing so. This trend aligns with historical patterns, where consumers turn to smaller, affordable purchases—like those highlighted by the “Lipstick Index”—during times of economic constraint.
Droesch emphasizes that “joy-based budgeting” is not about impulsive purchases. She recommends reviewing spending history to identify sources of joy, then allocating income—after covering essential expenses like housing (which could consume up to half of monthly income)—with at least 20% towards savings and the remainder towards these prioritized “joy” expenses.
“Even in uncertain times, people still desire to have fun and enjoy life… they’re just more careful about how they spend [their cash],” Droesch says. “Joy-based budgeting helps people be intentional about enjoyment, so they can say yes to what matters while staying on track with longer-term financial goals.”
Frequently Asked Questions
What is “joy-based budgeting”?
It is about being intentional with your money, so it supports what genuinely makes your life better, according to Mary Hines Droesch of Bank of America.
Is “joy-based budgeting” impulsive?
No, it is not rooted in impulsivity. It involves identifying what brings you joy and then building a budget around those priorities while still saving consistently.
Who is adopting this budgeting method?
This represents catching on particularly strongly with Gen Z, though consumers across all demographics are cutting back on discretionary spending.
As economic conditions continue to evolve, will more people adopt strategies to balance financial responsibility with personal fulfillment?
