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Why You Need Some Fun Money in Your Budget

Plan For Some Fun

A budget isn't about restrictions or a speed breaker to your freedom, but a way to plan for your freedom and fun, responsibly.

When you have every aspect of your financial life and goals planned out, you do not feel guilty having a little fun, and the fun budget is your permission to spend.

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IDEA EXTRACTED FROM:

Why You Need Some Fun Money in Your Budget

Why You Need Some Fun Money in Your Budget

https://www.daveramsey.com/blog/fun-money-in-budget

daveramsey.com

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Key Ideas

Fun Money

In a 'zero-based' budget, where we are putting every dollar to work for us, we have to put aside some 'fun money', a budget line for our fun activities, like a fancy cappuccino or the new shoes we desire.

Fun Money is not an excuse to be wasteful but a way to stick to your budget.

Plan For Some Fun

A budget isn't about restrictions or a speed breaker to your freedom, but a way to plan for your freedom and fun, responsibly.

When you have every aspect of your financial life and goals planned out, you do not feel guilty having a little fun, and the fun budget is your permission to spend.

Your Fun Mileage May Vary

Each one of us has different levels of income, debt, and savings goals.

If one is new to budgeting and has limited resources, it is prudent to keep the fun money to a bare minimum. It is also fun to stretch your dollars, getting more for less, using creative ways. For instance, you can buy second-hand instead of buying everything new, to save your dollars.

Savings hacks are always a good idea, and there are several Apps available to help you manage your spending.

SIMILAR ARTICLES & IDEAS:

A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

...

The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

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Managing your emergency fund
Managing  your emergency fund

Having an emergency fund can prove life-saving when you are in desperate need of money. However, before starting to use the money, make sure the situation really requires the measure. 

Evaluating necessity 

One very important reason, if not the most important of them all, when choosing to use your emergency fund, is the situation of necessity

Of course, if you have to, you should do it. However, you might want to pay attention to what necessity really means: if you can as well do without, then you probably should not spend your savings on that.

Patiently manage your emergency fund

Whenever you have the impression that you should use your emergency fund, ask yourself if the situation really is urgent. If the answer is Yes, there is no time to waste. 

However, take time and be patient in managing different situations as, if there is no need to spend the money, than better not do it. Remember, it took time to build up that fund, no matter how big or small it eventually is.

Common budgeting mistakes
  1. Not Tracking Expenses: it's impossible to stick to your budget if you don't know where your money is going.
  2. Buying on Impulse: Impulse buying is expensive.&nb...
Tracking expenses
One of the ugly truths about budgeting is that when you keep track of your expenses, it’s painfully clear when you’ve gone off track. 

Write it down when you’ve gone over your budget. The negativity you feel will help prevent you from overspending more or doing it again. Just think of this step as damage control.

Being frugal and miserable

If you try to deprive yourself too much, you’ll binge later and throw all your hard work out the window. 

A spending binge can set you back far more than treating yourself occasionally, so go for the occasional minor splurge. Just keep your treats within your spending limits and you’ll be fine.

Typical Budgeting is Flawed

Typical regular budgeting methods assume that just by allotting limited money to a particular expense type (like groceries) is enough for us to spend less and balance our budget instantly.

Th...

The Reverse Budget

A Reverse Budget looks at your current lifestyle and makes slow improvements over time until things are sufficiently better.

We look at how much we are spending eating out, commuting and daily indulgences and see the past quarter trends using your credit card and bank account spending.

The Two Approaches using Trends

When you look at our past spending patterns and trends, you can select one or two categories to focus and use one of these two approaches:

  1. Tackle the high-dollar impact areas like housing, fuel, food, or healthcare, and see if those can be cut down to some extent.
  2. Focus first on your 'disposable money' expenses like eating out, and entertainment and curbing those, gradually.

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When budgeting comes in handy
  • You have no idea where your money is going.
  • You’re chronically overspending.
  • You’re not saving any money.
  • You struggle to afford the things you really want.
  • You...
Phases of motivation

People cycle through periods of motivation, especially in the New Year. It’s best to harness these bursts of 'can-do energy' whenever they appear.

The action phase

The New Year's resolution or 'action phase' is when you're highly motivated for change. Use it to set things in motion and automate as much as you can. 

  • Put your bills on autopay
  • Start using a savings app
  • Cut out any subscriptions you don't really need.
The maintenance phase

If you don't have a plan when the New Year's glow has worn off in a few months, you will stop doing whatever you promised to do. 

To force yourself to stick to a budget:

  • Write down everything you spend.
  • Add it up at the end of every week.
  • Submit a report to help keep you accountable.

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Measure your expenses

Take a hard look at how much you are spending day to day. Every time you spend money, write it down as it happens in a little notebook or log it into an app.

Alternat...

Aiming to save pounds, not pennies

Get a cheaper living situation: Live in a smaller house that needs less stuff to fill it or get a roommate.

The personal finance rule of thumb is to spend no more than one-third of your income on rent. 

You Can Cook

If you can read, you can cook. If you can read and cook, you can use meal planning and prep to save time, money, and improve your health.

Base your menu for the week on two things: what you already have in the house and what is on sale at your supermarket.

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How To Choose Good Habits
  • Envision your ideal end result. What are you going to achieve?
  • Write it down. It will serve as a powerful motivation, especially if you include why you want it.
Good Habits For Health and Fitness
  • Regular Aerobic Exercise: Great for both your physical and mental health. Increases the production of dopamine and boosts creativity.
  • Preparing Your Own Meals. It’ll take some getting used to, but it’s a habit that’ll boost your health, wealth and productivity. 
Good Habits For Finance and Wealth
  • Create a Household Budget: the best habit to help you save money. A household budget helps to encourage frugality and discourage impulse spending. You’ll feel more motivated to engage in other good financial habits once you’ve got this in place.
  • Financial Audits. This involves frequent checks as to whether you’re spending your money as wisely as possible.

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The zero-sum budget

Using this method forces you to “spend” every dollar that you make, by allocating all of your earnings into the different categories that your finances require.

It prevents waste and m...

Steps of the zero-sum budget
  1. Determine how much you make on any given month.
  2. List your bills: Once you determine how much money you'll make this month,  figure out how much money you need to spend next month.
  3. Compare and contrast:  Once you see your monthly income and your monthly bills on paper, a clear picture of how much money is left over emerges.
  4. Spend all of your money on paper: decide where that money will serve you best.
  5. Track your spending.
  6.  Make adjustments to get it right.
The 50/20/30 budgeting method
The 50/20/30 budgeting method

With the 50/20/30 budgeting method:

  • 50% of your monthly spending goes toward essentials - your home, your food, etc.
  • 20% of your monthly spending ...
Debt payments

Debt payments may look confusing when you add it to the savings column. But the easiest way to build up a savings balance is not to have your money go toward debt. Once your debt is paid off, you can increase the savings.

Reducing your essentials

Play around with your monthly budget to see where you can reduce your monthly spending:

  • You could contact your internet company to get a discount.
  • You can clip coupons and use rebate apps to spend less on your monthly groceries.
  • You could set aside less for medical expenses if you have an emergency fund.