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Do you catch yourself buying little things here and there to cheer yourself up after a long day? Maybe you had a tough week at work and need a little pick-me-up.
Or maybe you find yourself never buying anything because you aren’t sure what you have left that you can spend for the month. You don’t watch your budget closely, and you’re afraid to run out. You know some money is there, but don’t know how much.
That is where “fun money” can be a game-changer for you. Having fun money in your budget has many benefits. In this post, I’m going to tell you four reasons you need to add a designated amount of fun money in your budget right now!
What is Fun Money?
Fun money is a specific dollar amount in your budget that you’re allowed to spend on anything you want. In our monthly budget, my husband and I each have a set amount of fun money. However, you can set up your fun money the way you want. Personal finance is personal, and it’s your budget. You may even choose to have a shared, more substantial amount of fun money to spend on more costly purchases that you can enjoy together.
1. Keeps You From Splurge Spending
Do you often find yourself grabbing a coffee because you’re extra tired that morning? What about buying an item on your Amazon wish list because you’ve been putting in extra time at work, and you deserve it?
Small purchases made consistently add up to a large amount of money. It’s easy to not see your huge bill of wants adding up as you spend $10 here or $20 there.
To stop this from happening, set an exact amount of fun money in your budget and track it regularly. Doing this ensures little purchases here and there won’t have a chance to get away from you.
Even if you spend your fun money all on morning coffees or Amazon purchases, always knowing how much is left will keep you from breaking your bank with wants.
2. Gives You Some Breathing Room in Your Budget
Are you afraid to spend any money on yourself? Maybe you’re always worrying about money, or you feel guilty prioritizing wants over other financial goals.
This may be a less common problem than splurge-spending, but the concerns are still valid. It’s just as crucial that you don’t suffocate yourself and never have any fun. Giving yourself no fun money at all can make you feel stifled.
That’s why it’s essential to set a budget and track the fun money you’re spending. You may have more room to breathe than you think.
I understand everyone’s financial situation is different. Maybe you’re thinking right now that you can’t afford to have fun money in your budget. I hear you.
Not everyone is going to be able to set a generous amount for fun money in their budget. And that’s okay! My husband and I don’t consider the amount we set aside to be substantial. Some people would think our set amount is a lot. I know others who have budgeted fun money five times our amount or more.
This is just another aspect of personal finance that’s personal to you. Even a small amount of fun money, like $15, can still give you a little relief from a tight budget.
3. Motivates You to Reach Your Financial Goals
It stands to reason that if you’re barely making enough to pay your bills, your fun money should be minimal. However, you don’t always have to keep your fun money at the same dollar amount in your budget.
As your finances improve and your goals change, you can increase your fun money as you see fit. Rewarding yourself with more budgeted fun money for reaching specific financial stepping stones can be an excellent motivator.
However, you have to be careful not to let a motivating reward turn into lifestyle creep. Lifestyle creep occurs when your discretionary income increases, and you spend more on non-necessities to match that increase. You inflate your lifestyle and start to view those non-essentials as something you need. Lifestyle creep is the cause for many middle and high-income earners still living paycheck to paycheck¹.
Although you should be wary of lifestyle creep, there’s nothing wrong with increasing your fun money as you pay off debt or have finally saved for a down payment.
4. Helps You Feel Independent
If you have a significant other with whom you’ve joined finances, you probably run most purchases by them before making any big decisions. You’ve decided to become a financial team, and all members of the board must have a vote.
The same rules don’t apply to fun money. It’s no questions asked money, and it’s just for you to spend on anything you want.
Fun money gives you some financial independence to buy what you want (within the confines of your budget) without having to check if it’s okay with the other person.
When your finances are combined, it’s not like you’re asking permission before buying every little thing. Usually, my husband and I will check with each other over larger purchases or purchases we don’t have to have to see if it’s something our budget can handle that month.
Every couple with combined finances does this differently. Some consult each other before making a grocery run. Others make a pact to discuss purchases over a certain dollar amount. No matter how you handle your combined finances situation, it’s still nice to have some independence and have some money that’s just for you.
Fun money is an integral part of every budget, whether yours is $500 or $5.
It keeps you from splurge spending or possibly being too strict on yourself about spending money on wants. The incentive of budgeting more fun money can motivate you to reach your financial goals more quickly. Not to mention, having money just for you in your budget can give you a much-needed feeling of independence.
If you don’t already have a set dollar amount for fun money in your budget, do it now!
Sit down, look at your finances, and determine what amount makes sense for your current situation. Nothing says you can’t change it later.