Do you have room for fun money in your monthly budget? You might be limiting your spending to help you pay off debt or reach a big financial goal. And while it’s fine to cut back and be better with money, cutting fun money from your budget entirely could actually do more harm than good.
In this article, you’ll learn what fun money is, why you should make room for it in your budget, and just how much to spend each month.
What is fun money?
Fun money is the money you set aside each month for anything that brings you joy. Fun money means something different for everyone. Your idea of fun might be happy hour with friends or trying a new popular restaurant in town.
Someone else’s idea of fun might be new shoes or home decor. It’s totally personal to you. And the good news is that because fun money is planned in your budget, you can spend it 100% guilt-free.
Why you need money for fun in your budget
Like many people, you might find yourself hesitant to make room for fun money in your budget. There’s probably plenty of other purposes you could use that money for, and fun money can seem frivolous when you’re on a tight budget.
It turns out that restricting yourself financially can actually do more harm than good.
Restriction can lead to overspending
Restricting your spending can actually have the exact opposite effect of what you intended. While it might seem like cutting out money for fun will help you save money, it often just results in impulse and emotional spending later on.
Restricting your spending is similar to going on an overly restrictive diet. If you don’t let yourself have anything you want, you’ll find it difficult to stick to and may eventually go too far in the other direction.
Restriction can create a poor money mindset
Severely restricting your spending can be really damaging to the way you think about money. Restricting your spending can lead to feelings of scarcity. You may even find yourself believing that you aren’t worthy of spending on yourself, or that you don’t deserve it when really, that couldn’t be further from the truth. It can even make you feel guilty even when you spend money you planned to spend.
Restriction can cause you to lose steam on your financial goals
Have you ever tried to run a marathon or another long-distance run? If you sprint the entire first mile, you’re probably going to burn yourself out and struggle to make it across the finish line. Long-term financial goals are no different. It’s important to pace yourself, and that includes leaving room for fun money in your budget.
Take debt, for example. A 2021 report found that the average American has about $90,460 in debt from credit cards, personal loans, mortgages, student debt, etc. For most people, it takes years to pay off that amount of debt. Restricting your spending for years just isn’t sustainable.
Restriction can cause money fights
You’ve probably heard the stats that money is the leading source of conflict in relationships, as well as one of the leading causes of divorce. There can be many reasons for these fights, including an unexpected financial emergency, financial infidelity, or burdensome debt.
But restrictions can also lead to money fights. If one partner feels like the other is restricting their spending, they may eventually feel resentful. Additionally, cutting fun money out of your budget might mean that you aren’t making time for fun together at all.
How to save for your fun money
Including fun money in your budget sounds simple, but it’s something that’s often easier said than done. To figure out how much to set aside and make sure you consistently have room for fun money in your budget each month, you can try a couple of budget strategies.
The 50/30/20 budgeting method is a popular tool to figure out how to properly allocate your monthly income. Using this strategy, you break down your budget like this:
- 50% for needs
- 30% for wants
- 20% for savings and debt
With this budgeting method, your fun money would be part of the 30% of your budget that goes toward wants. Remember, this category includes anything in your budget that isn’t savings, debt, or a necessity. It includes eating out, entertainment, clothes, vacations, subscriptions, and more.
To start using this budgeting strategy, start by calculating 30% of your monthly income. For example, if you bring home $2,500 per month, then you would have about $750 per month to spend on wants.
Once you know how much you have available to spend, figure out all of the non-essentials in your budget. Go through recent bank and credit card statements to see where your money usually goes. Once you know what expenses you have in this “wants” category, you can decide exactly how to allocate those dollars.
A zero-based budget is a popular strategy where you plan out where each dollar of income will go. So if you earn $2,500 per week, for example, then your budget should allocate each of those dollars to a specific purpose.
It’s important to note that budgeting for all $2,500 doesn’t mean spending all $2,500. Ideally, some of those dollars will go toward savings and debt, if you have some.
A zero-based budget can be helpful for deciding how much fun money you get each month since you know where every single dollar is going.
To start, write down your monthly income, and then make a list of your fixed expenses and their amounts. Then, you can use bank statements to estimate how much you spend in other categories such as groceries, gas, utilities, etc.
Once you know how much money is left after necessary expenses, decide how much of the remaining money you want to use for your financial goals vs. personal spending. The best part about this strategy is you know you can spend your fun money 100% guilt-free because every other expense and goal has been accounted for.
Pay yourself first
Paying yourself first is a popular budgeting strategy where you fund your financial goals and savings before allocating money for anything else. This budgeting method helps prevent a situation where the end of the money rolls around, and you find you have no money left over to save or pay off debt.
To use this strategy, start by determining how much income you bring in each month. Then, subtract your necessary fixed expenses such as rent, your mortgage, utilities, insurance, etc.
Next, make a list of your financial goals. Common goals include building an emergency fund, paying off debt, or saving for a particular purchase or event. Think about when you’d like to reach each of these goals, and figure out how much you would need to save monthly to make that happen.
Once you know your income, fixed expenses, and the amount going toward savings and debt each month, you can figure out how much fun money you have available to spend. After all, whatever is left after fixed expenses and financial goals is yours to spend however you like.
Still not sure how much of your monthly income should actually go toward fun? Some people budget 10% of their monthly take-home pay for fun. But remember, everyone’s budget is different! It’s important to set a budget that fits your lifestyle and goals.
Ways to save on fun money
More than half of Americans are living paycheck to paycheck. That limits the amount available for many different expenses, including fun money. And while it would be easy to say you should just leave fun money out of your budget, we’ve already discussed some of the downsides of doing so.
Instead, you can find ways to make the most of a small fun budget each month.
There are countless cheap and free activities you can do with friends and family to stick to your budget while still leaving room for a bit of fun. Some ideas include:
- Finding free community festivals
- Hosting a potluck instead of going out to dinner with friends
- Plan a movie night instead of going to the theater
- Plan a family game night
- Do outdoor activities like hiking, kayaking, or camping
- Attend local meetups
Also, don't forget to use your fun money towards a new hobby too!
Enjoy your guilt-free fun money
Fun money might seem frivolous, especially when you’re on a tight budget. But setting aside a little fun money each month can actually benefit your mental health, your relationships, and even your finances. There are plenty of budgeting methods that can help you identify how much to spend each month.
And even if you have just a small amount to spend, you can find events and activities to make the most of your fun money. Learn how to create a budget that benefits you best with our free course!