There are a lot of ways you might want to spend so-called fun money in your budget.
Planning a family vacation or live entertainment are two options. Eating out, going to the movies, or doing recreational activities are other things you can put fun money toward.
Having a budget doesn’t mean you don’t put money aside for the extras and the things that bring you joy in life.
What it does mean is that you’re strategic in all areas of spending and saving, including the fun stuff and the extras.
Below we talk more about the importance of having a budget, but also why and how to include the money for life’s treats in there.
The Importance of Having a Budget
The importance of generally having a budget can’t be overstated when it comes to personal finance.
This is especially true as we’re in a period of high inflation right now, and essentials like food and gas are going up in price. Now is an excellent time to create a budget if you don’t already have one or revisit your existing budget.
Too often, people think a budget won’t help them, or maybe they don’t make enough money for a budget.
However, budgeting, no matter your income or spending habits, helps you be mindful about where everything is going. Not only can you avoid overspending, but you can also be in a better position to save money and make smart overall decisions.
Using a budget forces you to compare your income to your expenses and realize what you could be doing differently.
With a budget, you can prioritize your goals, and instead of spending mindlessly or wastefully, you have the peace of mind of knowing that every dollar is going to something that you value and that’s important to you.
A budget doesn’t mean you can’t spend on the fun stuff. You are simply consciously deciding how much should go toward your leisure activities. Then, you won’t feel guilty.
A budget doesn’t mean your life is no longer fun. You can actually create more opportunities to do the things you enjoy when you’re smart with your money.
Why Your Budget Should Include Fun Money
Having a very restrictive budget is something that can work in the short term but may be setting you up for failure in the longterm. It’s a similar concept to crash dieting.
If you don’t allow yourself any money for extras or things you enjoy in your budget, then you’re going to get a pent-up desire to spend money. If the dam bursts, so to speak, you might do rebound spending and dig yourself a deeper financial hole.
Restriction can and often does lead to impulsive and excessive spending. When you’re limiting yourself too much, you might turn to emotional spending. You can also develop a negative mindset surrounding money if you’re overly restrictive. You can start to associate budgeting with feelings of scarcity, and you might feel guilty when you spend money.
If you don’t have money for the fun things, you could lose steam when it comes to meeting your other goals. It can lead to burnout.
If you have a partner, you budget with, too much restriction can even lead to fights and problems in your relationship. One partner may feel like the other is being too restrictive, and that leads to resentment.
When you put aside some of your income each month for things you enjoy, you’ll feel financially satisfied but also know you’re making smart decisions.
Fun money doesn’t mean that you engage in free-for-all spending, and it also doesn’t mean you’re being overly wasteful. You’re not cutting out your financial goals either.
Every dollar needs a job in a good budget, and that means some dollars’ jobs will be leisure activities, like travel or dining out.
With that being said, when the fun money runs out for the month, that’s it—it’s gone.
How Much Fun Money Should You Include In Your Budget?
There’s no one definitive answer as to how much fun money you should include in your budget because everyone’s income, expenses, and interests are different.
Assess your budget and look at what you have leftover after you put everything else to work the way it should.
If you have some pretty big goals you’re trying to meet otherwise, your amount allocated to fun money might be smaller. Then, as you meet some of your goals, you can gradually increase it over time.
Steps to Including Fun Money In a Budget
When you’re adding an area of your budget dedicated to leisure, remember the following:
- Think about what you value most. What really makes you happy and brings you joy in life? If it’s live music, maybe your budget includes money for concerts or events. It could be that you love good wine or food, or maybe travel is what you feel passionate about.
- Remember, your fun money doesn’t have to be something you spend each month. Instead, you could put money aside on a monthly basis that you’re then saving toward something bigger, like a vacation.
- Go over your expenses. This is critical for budgeting in all ways, and it’s something you should revisit every few months because your expenses can change often.
- If you follow the standard 50/30/30 budgeting plan, you will put aside 30% of your income for discretionary spending. Your leisure and fun money would come from that.
- Set your fun money aside in its own account. Then, you won’t feel guilty when you dip into it, and you won’t risk overspending. You’ll know anytime you’re using that particular account, it’s just for the fun stuff.
Finally, you can always take money away from other parts of your budget and put it toward the fun things but know you’ll have to sacrifice to do that. For example, if you want to go on an amazing vacation, maybe you don’t eat out at all, and you put more money in the fun account.