Many monthly budgets look something like this:
- Rent — $X
- Utilities — $X
- Insurance — $X
- Transportation — $X
- Food — $X
- Debt repayment — $X
- Savings — $X
The amount left over is often nothing, and that seems to make sense, especially when you’re trying to repay debt and/or build up savings. It’s easy to tell yourself that every cent that’s not allocated to essential living expenses should be going to debt repayment, if you’re in debt, your savings, if you’re saving for something important, or both, if you’re trying to pay off debt and build up an emergency fund.
Here’s the thing. You’re human. And human beings need to have a little fun. Some fun is free, and I highly recommend you cultivate an appetite for free fun. But some fun costs money, and having no money in your budget for fun means you’re likely to ‘steal’ from other areas when the urge to have a little paid fun strikes. In fact, you’re more likely to overspend on fun if you don’t budget for it. You’ll tell yourself (rightly) that you need some fun, yet you don’t have any parameters around how much money you can spend on it.
Why you need ‘fun money’ in your budget
Having ‘fun money’ in your budget allows you to set limitations on your fun (and yes, I’m aware that doesn’t sound very fun). If you’re invited to four social events this month, but only have enough money for three, you’ll decline your least favorite option. As a bonus, that’s the one you wouldn’t have enjoyed that much anyway. You might even have felt guilty about it, because you’d be blowing your budget to have some fun, and not even having enough fun to justify it. You can enjoy the other three events guilt-free, because there was money in your budget for them.
I suggest you go a little further. Don’t just have ‘fun money’ in your budget. Itemize your fun. Have a set amount for all the things you find fun. This is highly personal, of course. It could be entertainment, clothes shopping, travel, and books. Some people find it helpful to itemize entertainment further: movies, meals out, alcohol, etc.
What to do with fun money you don’t spend
You don’t have to spend your fun money, but if you do, there’s nothing to feel guilty about. You budgeted for that, and you hit your savings and debt repayment goals first. If you don’t spend it, you simply add it to your savings at the end of the month, or pay off a little more debt. It’s a bonus.
If it works for you, you can also put any surplus fun money into a ‘pot’ for the future. So if you didn’t travel or buy clothes this month, that money can go into a travel fund and a clothes fund for the future. By the end of the year, your travel money could buy you a nice vacation, and your clothes money could allow you to splurge for a special event, like a family wedding (or new clothes for your vacation).
A fun-free life just isn’t realistic
Cutting fun out of your budget entirely just isn’t realistic. If you do need to do it, to get drastic debt under control, and you’re really fired up and committed to it, then it’s possible. Even then, it will work best if you do it for a set period, maybe as part of a no-spend month, with specific debt repayment goals in mind. We all need to be able to see the light at the end of the tunnel.
If you’re making a monthly budget, prioritize essentials, debt repayment and/or savings. Then add in some fun. Maybe just a little bit. You’ll find it makes sticking to your budget easier, prevents you going into further debt to finance fun, and makes ‘stealing’ from other financial commitments much less likely.