The fact is that having fun money in your budget helps alleviate your stress and can even help you better cope with life’s everyday problems. The only thing you should be asking yourself when it comes to making fun of money is “How? and How much?” Fun money doesn’t have to come from an excessive amount of cash. There are plenty of ways to earn some extra income each month without breaking the bank.
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What Is Fun Money and What Is It Used For?
Fun money is the cash you set aside to spend on whatever you want in its simplest form. For example, fun money can be used to treat yourself after a long week of hard work or shopping for something frivolous and unnecessary because you deserve it! The point is that having some sort of extra income in your budget allows you to spend money on yourself.
Why Fun Money Is Important
Life can get pretty challenging at times, but that doesn’t mean you should be worried about your finances! Having fun money in your budget is essential because it helps to alleviate tensity. Spending some money on yourself gives you a sense of relief and makes you feel good enough to continue working hard and improving your life.
Fun money doesn’t have to come from an excessive amount of cash. There are plenty of ways to earn some extra income each month without breaking the bank. One great way is by using a side hustle. A side hustle can be anything, really, but it should at least be something that brings in about 100-200 dollars per month on average. Another excellent way to gain extra income every month is by selling unwanted items around your house or simply recycling them.
How Much Should My Fun Money Be?
Fun money doesn’t have to be a certain amount of cash. The important thing is that you set it aside for yourself and make sure not to touch it! Also, it’s best if your fun money isn’t included in your budget as an allowance because then you won’t feel like any limitations are being placed on how much or where you spend your extra monthly income.
Be Smart With Your Fun Money
Just because we’re talking about having some extra spending cash, this does not mean that you should go out and buy anything and everything under the sun with absolutely no regard for what things cost.
Using your fun money to buy something that you don’t need will only lead to debt in the future. If there’s ever a time where you have to spend your fun money on something important, don’t sweat it! Just make sure that next month’s extra monthly income goes towards a more frivolous purchase.
Adverse Effects of Being Too Strict With Your Monthly Budget
Having fun money in your budget will allow you to cope better with life and reduce strain. But, on the other hand, being too strict with your budget could hinder your ability to save up enough money to pay off your debt or buy a home. This is because the income you would usually devote to those expenses is instead going towards necessities.
Following a strict budget could also make you feel as though your finances are constantly being monitored, which can cause you to become more anxious. Some effects are discussed below
1. Can Cause Overspending
Budgeting can cause you to overspend if you don’t plan out your budget carefully enough. On the other hand, you may get the opposite of what you want if you limit your expenditures too much.
2. Poor Money Mentality
Having a budget in place which is too strict can lead to poor money management. You may find that you don’t like the idea of having to keep close watch over your personal finance and would prefer not to have any extra income whatsoever.
If this continues, you may have issues down the line. For example, when buying a home or applying for car insurance, you may not have enough money saved up to do so because you’re living off of the bare minimum.
3. Loose Momentum on Financial Goals
Having a budget in place is essential for reaching your financial independence goals. If you are too strict with it, though, you may find that you can’t keep up over time because of the hassle and pressure which comes along with having to monitor every single penny that you spend! In “Too Much Pressure,” we discussed that this could lead to issues such as not saving money for retirement or becoming indebted.
4. May Lead To Conflict
If you and your partner have different budget ideas, this can lead to money fights. For instance, if one person wants to live off the bare minimum while the other is working on retirement savings, it could cause serious issues down the line that may not necessarily be able or willing to be resolved.
How to Budget for Fun Money
You can set up an entirely separate bank account with your extra income and allocate it to fun or entertainment purposes. Then, by keeping track of your income and expenditures, you can prevent overspending.
Identify whether specific bills should not come out of the fun money bank statements, such as rent or groceries. By setting up a strict budget for your fun money, you will be able to avoid overspending and making frivolous purchases that can get out of hand quickly.
Don’t deviate from the budget once you know how much money should go into your fun account and where it should be spent! It can be challenging to stay consistent with a strict monthly plan, but this will help keep your finances to reach your goals.
Strategies to Save Fun Money
Below, you can find some helpful budget strategies to ensure that you are saving up your fun money for the things that matter most.
1. 50-30-20 Budget
Suppose you want to make sure that 50% of your income goes towards fixed expenses such as rent or groceries. In that case, 30% should go towards discretionary spending money such as going out to eat or purchasing clothing, and 20% should go towards your savings account.
Doing this will make sure that you are covering your fixed costs while also spending a bit on yourself.
This way, when there is an emergency and money is needed, you can easily access the 20% that has been put away for savings and won’t have to worry about not having money in your account.
2. Zero-Based Budget
In a zero-based budget, every single dollar is accounted for, which means that if you want to spend money on something, it first needs to be allocated in your budget. The same is true if you want to save money.
The good news is, this can help you stay on track and ensure that you are not overspending because every dollar needs to be assigned to a category.
By practicing zero-based budgeting, you will be able to set aside money that can go towards your savings account or retirement and better reach your financial goals.
3. Pay Yourself First Budget
With a pay yourself a first budget, you are automatically giving money to your savings account every month before any of the rest of your income is spent.
This can help you save up a good amount of money that will allow you to reach your financial goals without any additional effort on your part.
More Money-Saving Tips for Having a Good Time
Figure out how much money you can afford to spend on entertainment every month.
Ensure that this amount of money left will not cause you any financial obligations strain and will not hinder you from reaching your other goals.
This way, when it comes time to spend money on entertainment or fun activities, you will not have to worry about it affecting other aspects of your life, and you can have a little fun.
The Bottom Line
Having a fun money budget is an easy way to ensure that you stay within your means and save up for the things that matter. Following the above tips and strategies will ensure that your fun money is being put towards a good cause.
It is crucial to understand how much money you should allocate to your emergency fund and where the remainder of your income should be allocated. Once you have done this, you will easily stay on track with your monthly budget and achieve even the most ambitious financial goals.
Samantha Hawrylack is a personal finance expert and full-time entrepreneur with a passion for writing and SEO. She holds a Bachelor’s in Finance and Master’s in Business Administration and previously worked for Vanguard, where she held Series 7 and 63 licenses. Her work has been featured in publications like Grow, MSN, CNBC, Ladders, Rocket Mortgage, Quicken Loans, Clever Girl Finance, Credit Donkey, Crediful, Investing Answers, Well Kept Wallet, AllCards, Mama and Money, and Concreit, among others. She writes in personal finance, real estate, credit, entrepreneurship, credit card, student loan, mortgage, personal loan, insurance, debt management, business, productivity, and career niches.