Takeaways
- Passion budgeting helps you reach your financial goals quickly while living a full life.
- Passion budgeting harmonizes your spending with what brings you joy.
- Create a passion budget by analyzing expenses and assigning them an impact score.
- Prioritize expenses that make you happy and cut ruthlessly on areas that don't.
- Generate a passion-based income by finding a career that brings you joy.
Achieving your financial goals takes dedication. You might make promises, New Year’s resolutions, or public proclamations about the financial habits, achievements, or goals you want to accomplish, but reality can be derailing. If you want this time to be different, passion budgeting could be your solution.
Everything begins with a commitment to a decision, and achieving financial goals is no different. Here are some commonly abandoned financial goals that passion budgeting can help you crush.
- Stop living paycheck-to-paycheck
- Paying off your debt
- Start an emergency fund
- Begin investing
- Start saving for retirement
Budgeting, or planning your monthly income and expenses and adhering to a financial plan, can help you reach your financial goals quickly. Passion budgeting offers a refresh to the banal budgeting practices that drive historic financial underachievement. Passion budgeting lets you live the lifestyle you want while simultaneously tackling your money goals.
What is Passion Budgeting?
Passion budgeting is a budgeting strategy that advocates for you to live your best life and spend money in direct proportion to your passions. That’s right, keep your Starbucks macchiatos, enjoy your music festivals, splurge on the best restaurants in town, and simultaneously hit your financial goals.
Passion budgeting is probably the most pleasurable budgeting process on the planet.
Like other budgeting strategies, you must still analyze your income and expenses. The difference with passion budgeting is that you ruthlessly optimize your spending and income to drive happiness. How you make income and spend money has a tremendous effect on your overall outlook. A passion budget harmonizes the budgeting process with maximizing spending.
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5 Steps to Create a Passion Budget
Follow these five steps to build your passion budget today:
1. Declutter Your Financial Life
Americans spend $1.2 trillion annually on non-essential goods or items they don’t need [1]. Frivolous spending causes mental, physical, and financial clutter. Removing extraneous spending from your life and decluttering your spending can improve your overall trajectory.
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Success in budgeting is not necessarily about doing things right; it’s about doing the right things. This means consciously deciding where to prioritize spending, particularly on items that bring you joy. Consider expenses that bring you happiness during the month – coffee, gym memberships, hobbies, clothes – and focus on keeping those in your budget. For areas that don’t spark passion in your life, cut them swiftly. Focused spending is vital to long-term success.
Being purposeful with your spending completely changes your chances of financial success. Remove the financial clutter from your life. Start this process by examining your expenses.
2. Interrogate Your Expenses
Past behavior is often a predictor of future behavior. To examine your spending, look at your credit card and bank statements for the past 90 days. Pull out a highlighter and mark which expenses brought you happiness or passion. Note those expenses that brought no joy.
For example, if one of your expenses is $250 for a night out at a trendy restaurant for dinner and drinks with friends, and you love dining out with good company, mark it as bringing passion. On the other hand, if you spent $100 on a gym membership you never use, mark it as a cost to be shredded.
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Once you have reviewed your purchases from the last 90 days, it is time to further stratify your expenses into fixed and variable expenses. Fixed expenses are costs that do not change over time (e.g., rent, mortgages) and variable costs (e.g., new clothes, transportation costs) are costs that fluctuate with consumption.
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After you have gone through your statements, it is time to start building your passion budget from a blank slate. You are beginning with zero. The goal is to gradually add back expenses you love until you reach a workable budget.
Budgeting is never easy. It forces uncomfortable decisions.
Smart Tip:
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3. Analyze Your Spending Categories
After completely combing through your expenses, tally your spending into categories using these six spending buckets: housing, food, transportation, going out, clothing, and miscellaneous.
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Once you have grouped spending into these categories, it is time to assign a passion weight to each of these. Your favorite buckets should be at the top and those you care least about at the bottom. The totem pole of spending will provide an excellent visual of how you prioritize your spending happiness.
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4. Prioritize Your Passions
You can’t manage what you don’t measure. Now that you have a clear view of your spending, incorporate this knowledge into building a budget that prioritizes expenses you are passionate about. That might be $100 on coffee, $200 on sporting events, and $300 on restaurants.
Now that you know your passions, cut expenses at the bottom of your categories. For example, rent — one of your highest and fixed costs — might have been one of your lowest-weighted passion categories. Maybe that means downsizing to a smaller and cheaper apartment.
Or perhaps that unhighlighted expensive monthly car note stems from a decision made years ago. It might be time to trade in that car for something more affordable. Or maybe you pay for an expensive cable bill you don’t care about. Cut the cord and watch your favorite shows a la carte on a less expensive platform.
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Cutting or reducing the cost of gym memberships, music subscriptions, and telephone bills can add cash flow back into your budget. These savings can add up quickly.
As you decide which expenses to keep and which to cut, tough choices will be a natural byproduct. While you might not be able to afford all your passions, keep the ones that will drive your happiness, and at the same time, regulate your total spending.
Budgeting is never easy. It forces uncomfortable decisions. But that is what is required to meet your financial goals. Embrace those moments because they are propelling you toward success.
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5. Create a Passionate-Based Income
Cutting spending in your financial ecosystem is one way to get your finances in order. But always focusing on cutting costs can be mentally draining. To increase overall financial success, it is important to focus on the things in life that make you happy.
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Not only do you want to keep the expenses that bring you joy, but you can also double down on that approach – of finding happiness in your life - by finding a career that sparks joy. By working in a field that ushers happiness into your life every day, you are more likely to be mentally and fiscally healthier.
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Ask yourself these questions about your current work situation:
- Do you love your job?
- Do you enjoy the people you work with?
- Are you satisfied with your career trajectory?
- Does going to the office spark passion or happiness in your life?
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Be honest with yourself. If you aren’t satisfied with where you are in your career or don’t know where to begin finding the perfect job, try these steps to figure out your next career move.
Finding a job that immediately sparks passion can be difficult. So, it doesn’t necessarily mean you need to quit your job immediately. Your first order of business could be to find what you are passionate about where you currently work.
If you work in a large company, maybe you need to transfer to a different department – marketing, creative, finance, operations – that more directly aligns with your interests. If you can’t find immediate passion at work, focus on building a résumé in something that does spark joy so that you can find a new job. You also can supplement your income with something that does, such as freelancing, a side hustle, or business.
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For example, if you want to be a freelance writer, consider starting a blog, writing a book, or contributing to online publications. Another option is to produce supplemental income streams with certifications that you already have. If you are a certified public accountant, start a CPA consulting business as a side hustle.
Transitioning into a full-time passion income can inject joy and purpose into your career. It can completely change your mental outlook.
Building a budget can illuminate specific areas that need improvement and highlight areas you are currently crushing. By creating a passion budget, you can master your money while simultaneously living a healthier, happier, and more passion-fueled life. What a rich decision that would be.
Smart Summary
Budgeting is one of the fastest ways to get your finances under control. Whether you are trying to choose which budgeting strategy is right for you or are fully committed to passion budgeting, getting your finances in order will set you up for long-term success. Being able to start investing, saving an emergency or slush fund, or paying off your credit card debt stems from removing clutter from your life. Passion budgeting can help you reorganize your finances and direct you to financial success. That is a smart money move.
[1] The Wall Street Journal. Number of the Week: Americans Buy More Stuff They Don’t Need. Last Accessed September 27, 2023.
