“Guilt-Free Money” is a financial concept, often popularized by financial experts like Ramit Sethi, that refers to a specific portion of your income that you intentionally set aside to spend on anything you want, without feeling guilty.
The idea is that after you have covered all your essential expenses, savings, and investments, this remaining money is your allowance for discretionary spending, aligned with your personal values and what brings you joy.
Key characteristics and benefits of Guilt-Free Money:
- Intentional Spending: It’s money budgeted for “wants” or fun purchases, rather than being spent impulsively or causing anxiety.
- Reduces Guilt: Because the funds for your financial obligations (bills, debt, savings, investing) are already allocated, you don’t feel bad about spending this amount.
- Sustainability: It makes a spending plan or budget easier to stick to long-term because it prevents the feeling of deprivation that often leads to abandoning restrictive budgets.
- Personalized: The amount or percentage dedicated to this category is up to the individual, often recommended to be between 20-35% of income after essentials and savings, depending on one’s overall financial situation.
Essentially, it’s about building a positive, long-term relationship with your finances by giving yourself permission to enjoy your money responsibly.