If you’re like me – a penny pincher – you need to know it’s okay to have a little fun every once in a while.
But how much should you spend on entertainment and fun?
The answer is different for everyone, but here are a a few ideas that can help you figure that out.
How Most People Spend Money
The very first step to saving money is determining that you have a problem with spending. If you do have a problem shopping and spend way more than you every should, you’re not alone.
Many people budget based on how much they have in their checking account. They figure if there’s money in there, and they can still afford their mortgage, they might as well spend their money without thinking about other expenses or the long term effects of their spending.
It is better practice to spend money in the context of a comprehensive budget. After budgeting for necessary and responsible expenses, you can choose to spend some discretionary money. How much is that? Here are some ways to determine that for you.
How Much Discretionary Money You Should Spend
Here’s the short version: enough to keep you sane, but not everything you can.
You’re going to want to save some of your discretionary money for long-term financial goals. For example, you can put some extra money toward:
- Your mortgage.
- Miscellaneous debts.
- College education.
The more you want to get out of debt or save for retirement, the less money you’ll want to spend on discretionary fun. For our family right now, we’re spending what we consider to be a reasonable amount of fun money every month: $60.00 per person in our household (just my wife and I).
Trust me, that number used to be lower. Before we completed Dave Ramsey’s 3rd Baby Step, we only spent $20.00 per person.
The gradual increase in spending came as we started to experience success with our financial plan. We didn’t increase our spending to hundreds of dollars – just enough to keep us sane.
I recommend you try the same.
If you’re in debt and need to pay off your credit cards, keep your fun money spending low. Get intense about spending less money and paying off your debt!
If you don’t have an emergency fund and any hiccup in your financial life would cause a nuclear explosion, you might want to hold off spending too much money. Wait until you have a fully funded emergency fund, and then increase your spending.
The last thing you want to do is get ahead of your current financial situation when it comes to allocating fun money. Spend responsibly, think frugally, and be smart.
Define What Expenses Fit Your Fun Money Category
One of the best things you can do for your budget is define what expenses fit your fun money category.
Here is our definition of fun money:
Any expense that is not required for survival or for maintenance of our home should be considered a fun money expense.
This definition worked out pretty well for us, as it prevents us on cheating with the larger purchases.
Let me give you an example. I’ve wanted an iPad ever since Steve Jobs took the stage and introduced the device that would take a necessary place between the iPhone and the Macbook. But was it really necessary?
Nope. Because iPads are not “required for survival or for maintenance of our home.”
Sometimes the larger and more infrequent purchases might be justified if we didn’t clearly define what “fun money” expenses really look like.
I trust that you can figure out how much you should spend on entertainment. Follow these guidelines and you’ll be well on your way to figuring out the best amount for you.
By the way, if you’re new to budgeting, start with my Budget Category Brainstormer – a printable budget category worksheet with over 80 categories to start you off on the right foot!
How much do you currently spend on entertainment and discretionary items? How much will you spend now? Meet us in the comments and let us know!