By Annie Brandt, Senior Vice President and Market Executive at Bank of America Iowa
Americans are continuing to navigate economic uncertainty causing many to rethink how they budget. A new approach growing in popularity, called “joy-based budgeting” focuses on aligning personal spending with values while maintaining financial stability. Here’s what a local Bank of America expert Annie Brandt, Senior Vice President and Market Executive at Bank of America Iowa, shared on actionable tips consumers can utilize to embrace joy-based budgeting – from identifying non-negotiables to making smarter tradeoffs.
Q: What is “joy-based budgeting,” and why are consumers choosing this new approach?
A: Joy-based budgeting encourages spenders to intentionally align where they spend their money with what enriches their life. This could be choosing to spend money on travel, hobbies, dining with loved ones, or meaningful experiences. Instead of cutting spending across the board, this approach asks consumers to define what brings them joy and then build a budget around it.
A helpful starting point for this new style of budgeting is to review past spending and identify your “joy categories.” From there, financial experts recommend the 50/30/20 framework:
- 50% of after-tax income is used for needs, including rent, utilities, and groceries.
- 30% is used for wants, including your defined “joy” spending.
- 20% is used for savings.
By intentionally choosing to put 30% of spending towards what matters, consumers are able to balance present enjoyment with long-term financial security.
Q: With more people cutting back on spending, how does joy-based budgeting account for financial sacrifices?
A: Strategic financial sacrifice is a part of the formula. Bank of America research shows that 86% of consumers are cutting back on discretionary spending. This shift isn’t about deprivation, more so on being intentional with spending.
The transition to “save-for-it” rather than “do-without” mindset can make a meaningful difference in how consumers think about saving. For example, cooking at home more often or opting for streaming instead of night out may free up funds to redirect towards higher-priority purchases or experiences that align more meaningfully to the consumer.
Q: How can consumers maximize spending in their joy categories?
A: After consumers have identified the areas in which they want to prioritize spending their money, they can begin looking for tools that rewards those habits. For instance, the Bank of America Customized Cash Rewards credit card currently offers 6% cash back for the first year after account opening (up from 3%) in one of six eligible categories of choice each month. Cardholders can switch their selected category monthly to align with their evolving spending patterns.
Using rewards as a strategic tool can help maximize the reach of your dollars. This tactic will help to amplify spending in the categories that bring you joy.
Q: How does accounting for an emergency fund look in this approach to budgeting?
A: Financial flexibility is a foundational principle to spending confidently but building an emergency fund is a continuous challenge. Around 32% of Americans say it’s the most difficult aspect of managing their money.
Automation is a helpful tool to simplify this process. Consumers can setup a recurring transfer from each paycheck to a dedicated savings account, which can help to steadily build three to six months’ worth of living expenses. Having this form of financial cushion reduces financial anxiety and provides consumers with the confidence to spend intentionally elsewhere.
Q: Why is tax preparedness a part of joy-based budgeting?
A: Financial clarity largely contributes to peace of mind. By gathering tax documents like W-2s and 1099s early on, consumers are better able to understand their overall financial picture, ultimately reducing stress. Also, there may be additional motivation this year for gathering these documents. Since, BofA Global Research estimates that refunds in 2026 could be approximately $65 billion higher than in 2025, which is an increase of about 18%. Being proactive helps position consumers to be more thoughtful about their decisions on how to use potential refunds, whether that’s boosting savings, paying down debt, or investing in meaningful goals.