Why Fun Money is Important and Tips to Save for It?
According to a recent report by a LendingClub, more than 65% of Americans live paycheque to paycheque. Although wages are rising, they are struggling to make ends meet. This is due to a rapid rise in the cost of everything.
Your paycheque will not go any far even though you have a good hike as gas pumps and grocery stores are two areas killing your budget. In fact, 42% of people earning six-figure income reported in the survey that they were living paycheque to paycheque.
A considerable amount of savings provide some sense of financial security when you are caught unawares by unforeseen expenses. After the pandemic, a large number of households had these concerns as a longer unemployment term brutally took a toll on their savings, pushing them on the verge of a debt trap.
The soaring inflation is largely accountable for people to be unable to put by money for unexpected expenses. Higher wages seem to be a good alternative to keep your head above water, but higher income comes with higher expenses.
When you are under financial stress, keeping your spending under control becomes imperative. To quickly bounce back, you straightaway cut back on your discretionary expenses, which results in frustration over time.
When it comes to a healthier lifestyle, you will naturally need money for yourself, money that you will spend on fun activities. The budget you create for such activities is known as a fun budget.
What is fun money?
Fun money is nothing but a set amount of money that you spend guilt-free on things you want. In other words, you can say this funds your discretionary expenses. Examples include dining out, night out, attending a concert, buying new home decor, and the like.
These expenses are not necessities, but you would want to make them because of pleasure. These expenses will make you happy. Any amount of money that you spend on your wants is fun money.
Everybody wants to have the freedom to spend money despite budgeting. Many people feel guilty when they spend money on recreational activities, but you do not need to. As long as you are on top of your expenses, you can prefer spending money on activities that make you jubilant.
When you create a budget, it must have a scope for spending on fun activities. It is, to some extent, important as it minimizes frustration levels. The best thing about creating a fun budget is that you will know how much money you are to spend on activities that make you pleased.
You will not end up maxing out your credit card bill. For instance, everybody prefers to spend money on things that make them exhilarated during Christmas. By having a fun budget beforehand, you will be able to avoid overspending.
If you anyhow need money, you can take out online loans for Christmas without worrying about falling into debt.
Why is it important to have a fun budget?
Having a fun budget is crucial, especially if you have been going through a hectic financial life. For instance, if you have been paying off debt for a couple of months, you could be frustrated with your obligations.
You can feel financially burnt out at any time, especially when your financial condition is not that smooth. A fun budget is important because of the following reasons:
- Fun money prevents overspending
Despite budgeting practices, very few people know how much they spent in the last month. If you do not have a budget or if you live off a restrictive budget because of debt obligations, you are more susceptible to overspending.
If you have been paying the debt for a long time and you did not spend on any pleasure-seeking activities, you will eventually splurge money by thinking that you have not spent money on it for a long time, so now you can. To satiate your craving, you will likely spend more than you should.
This impulsive purchase will impair your budget. If you already have room for fun expenses in your budget, you will know how much money you will spend on recreational activities. Further, you will spend money on the fun every month, so you do not feel an intense craving for splurging on it.
- Fun money prevents spending guilt
Many people find budgeting painful as they remove the scope for spending on entertainment. Of course, when you use the whole of your money only for savings and necessities, you will feel it like torture.
People have a perception that budgeting should not have a scope for discretionary expenses because otherwise, savings will be zero, and they will have to take out a guaranteed loan approval no credit check direct lender.
If you make the right budget, you will not run out of money. However, you may need to fund the shortfall in your savings with a loan. If your budget has scope for fun money, you will stick to it. As a result, you will stay away from the guilt of spending money. It is vital to save for the future, but it does not mean sacrificing too much in your present.
Tips for creating a budget for fun money
If you are to create a budget for fun money, you can follow any of the following strategies:
- Zero-based budgeting
It helps you get information about each penny spent by you. You will have to make categories for each expense to know the total monthly spending.
Since you will be spending money on fun and entertainment, create a separate category for such expenses.
- 50/30/20 rule
If zero-based budgeting does not work for you, you can follow a 50/30/20 rule. According to this rule, your needs will use up half of your monthly income. Note that debt payments are mandatory obligations, so they include them. 30% of your income will be utilized for fun and entertainment, and the rest, 20%, will go toward your savings.
- Pay yourself first
You will likely be confused about how much you should save versus how much you should spend on fun, regardless of your budgeting method. In that situation, you should use the pay yourself first method.
According to this method, you will set aside money for an emergency cushion and then try to divide the rest money for needs and wants. This is considered the best method when you cannot set up the balance between your savings and fun spending.
Tips to save money on fun things
Even though you have a budget for your entertainment and discretionary expenses, you should still try to save money on these expenses. Here are some fun activities that come under budget:
- Ask friends over for a potluck.
- Learn a new hobby or skill
- Shop during sale
- Schedule a weekend trip
- Enjoy cooking or spa
The bottom line
Even though you have debts to be paid off, you should leave a scope in your budget for fun spending. This will make you feel less deprived and frustrated and prevent you from splurging after some time.