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Why You Need Some Fun Money in Your Budget
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.
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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.
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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.
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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
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.
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Common budgeting mistakes
- Not Tracking Expenses: it's impossible to stick to your budget if you don't know where your money is going.
- Buying on Impulse: Impulse buying is expensive.&nb...
Tracking expenses
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.