Delayed gratification can be a smart financial move. Still, you should budget for a little fun each month. It'll keep you motivated as you work towards those financial milestones. And it can help enhance your quality of life so you’re not just living to work.
Here’s how to budget for fun without going overboard and exceeding your spending plan.
What your budget should include
There are many strategies you can use to manage your money. Regardless of which you choose, your budget should include these three pieces:
- Financial goals and savings: Funds for rainy days or retirement contributions are included here.
- Needs: Essential expenses, like food, shelter, transportation, utilities, and childcare.
- Wants: Here, include any non-essentials, like streaming services, dining out, or recreational travel, along with fun money.
Adding fun money to your budget
You likely know how much money you need each month to cover necessities. Deciding how much to use for fun money each month can be more challenging.
Some financial experts recommend the 50-30-20 rule. It suggests spending 50% on needs, 30% on wants, and 20% on savings. Another popular budgeting method is the 80-20 rule. It recommends you spend 80% on needs and wants and 20% on long-term financial goals.
Both strategies could be ideal. Still, deciding how much to budget for fun money comes down to your financial situation and goals. How soon do you want to meet your financial milestones? Do you have enough disposable income to adopt one of these strategies? Is a much smaller amount of fun money more realistic now?
Note: If you follow the 50-30-20 or 80-20 rule, remember that the amount allocated for “wants” should also cover other spending besides fun money.
How much fun money should you have?
Consider starting with an amount that won’t stretch your budget thin. In fact, it should have little to no impact on your spending plan. This could be $50 or $100, or more, depending on where you are in your financial journey. Remember, no amount is too small - what’s most important is that you start somewhere. You can always increase your fun money budget as your financial situation improves.
Why fun money is important to your budget
It can be tempting to suck all the fun out of your budget until your finances are where you want them to be. But this approach is hardly ever a good idea and could backfire. Sometimes, it could leave you feeling burned out and ready to give up on your financial goals.
Fun money is also essential to your budget as it is a source of motivation. You’ll have funds available to live a little. And wisely spending on these pleasures won’t compromise your budget.
Most importantly, fun money is essential for your well-being. It can enhance your quality of life by allowing you to enjoy your hard-earned money. You can also have a fun night with family and friends or pamper yourself at the spa or salon. Or maybe you can buy that new cologne, fishing rod, or toolset. These are just a few ways to enjoy your money, but you’ll be able to do so without feeling guilty.
The Bottom Line
Budgeting for fun money helps you enjoy your present and secure your future. Consider treating yourself when you reach a particular milestone. It's an effective way to self-motivate and keep your financial momentum going.
By following these tips, you'll develop a healthier relationship with your finances. But if you've struggled to manage your money, help is available. Consider free financial coaching to receive personalized guidance on better handling your money.
