Behavioral budgeting leverages mental accounting — the tendency to treat money differently based on labels — by using separate subaccounts or physical envelopes for specific goals. This tactic reduces temptation to raid savings earmarked for essentials or future projects because those funds feel psychologically reserved. For households, labeled subaccounts work well for rent, utilities, vehicle maintenance, vacation, and sinking funds for annual bills. The separation creates clearer boundaries and simplifies decision-making: when funds are already designated, spending choices become less fraught.

Implementing this is simple: use your bank’s subaccount feature, separate savings accounts, or a digital envelope tool. Automate transfers right after payday to each labeled bucket and treat them like fixed bills. Ensure the number of buckets is manageable — too many tiny envelopes creates complexity and reduces clarity. Periodically audit the labels and balances during your monthly review: merge unused buckets, top up shortfalls, and reallocate surpluses mindfully. The label’s psychological power is greatest when the funds are visible and intentional, which increases adherence without heavy willpower.