Is Your New Year’s Resolution to Get off the Treadmill?

By Megan Kowalski on January 15, 2025

As the new year begins, it’s a time for reflection and goal setting. Many of us resolve to improve our health, wealth, and overall well-being. But have you ever considered that you might be running on the wrong treadmill? While you may be focusing on physical fitness, another treadmill could be dominating your life: the relentless pursuit of financial happiness. Unfortunately, the hedonic treadmill will never lead to positive results.

In today’s fast-paced world, it’s easy to believe that more money and possessions will lead to lasting satisfaction. This chase, however, often proves futile—a concept known as the hedonic treadmill. The good news is that you can break free from this cycle and achieve true financial happiness by taking control of your finances. The key to sustainable financial serenity is budgeting.

Understanding the Hedonic Treadmill

The hedonic treadmill is a concept that explains why people quickly return to a baseline level of happiness despite significant positive or negative changes in their lives. For instance, a sudden windfall or a new luxury purchase might boost happiness temporarily, but over time, individuals adapt to their new circumstances, and their overall happiness levels return to their baseline.

Materialism plays a significant role in the hedonic treadmill. Society often equates financial success with happiness, encouraging constant consumption and the acquisition of material goods. However, this approach only provides temporary satisfaction. The thrill of a new purchase fades, and the quest for happiness continues, often leading to stress and financial strain.

The Power of Budgeting

Budgeting is a powerful tool that can help individuals take control of their finances and break the cycle of the hedonic treadmill. By creating a budget, you can prioritize your spending, allocate resources effectively, and ensure that your financial decisions align with your long-term goals.

Overcoming the Hedonic Treadmill with a Budget

1. Setting Financial Goals: The first step in budgeting is determining your savings goal. This figure may be higher than expected. Running a financial plan will show how much you need to add to your portfolio each year to achieve long-term goals. Once you have this, pay yourself first!
2. Mindful Spending: Start by distinguishing between needs and wants. Focus on spending money on things that truly matter to you and bring lasting value. Rank your budget priorities: savings/investing goals, overhead expenses, then miscellaneous expenses.
3. Tracking Progress: Regularly monitor your spending and savings to ensure that you’re on track to meet your goals. Celebrate small victories along the way to stay motivated.

Note that this exercise may be more difficult than you anticipate, so it is important not to feel discouraged. This is a process, and even if you are not able to reach your annual savings/investing goal now, you at least have a robust plan.

For example, let’s say you are short of your investment goal by 5% a year. However, your expenses are fixed, and you have already cut out all the unnecessary expenses you could. This makes decisions easier. This makes decisions easier. As your income grows, you’ll know that the next dollar will be allocated to that shortfall before considering new luxuries. Mentally prioritize your long-term financial success and avoid letting societal noise control your happiness.

Additional Helpful Tips

1. Start Small: If you feel like you cannot manage your miscellaneous expenses, tackle them one at a time. For instance, we all have struggled with spending almost $10 a day on coffee before work. Give yourself a small goal to limit this to once a week as a treat and opt to bring your coffee the other days.
2. Explore Budget Dieting Fads: Your budget can also use different methods of trimming that excess weight. Try different methods, such as the envelope system, or use budgeting software to automatically track your progress.
3. Review Existing Expenses: Evaluate opportunities to save on fixed expenses. (For example, check if there is a discount for paying your insurance once or twice a year instead of monthly.)

Budgeting provides a clear roadmap for managing your money, reducing financial stress, and achieving long-term financial success. Remember, regardless of your income, everyone has a budget. Some may have more built-in freedom than others, but everyone’s lifestyle is fixed. It’s not about how much you earn, but how you manage your money that truly matters to both your happiness and long-term success.