I have previously talked about our jump in income over the past year. For those who don’t know, I started making a little money on the side from my new hobby and my wife got a promotion. We have been very diligent in saving and putting money towards retirement, but we never really gave in to some of our wants. Earlier we had been frugal by necessity, and now we have been faced with questioning what we want to do with our extra money.
I’m convinced that this is one of the leading causes of financial irresponsibility for people in their 20’s. It’s not too rare that a young adult gets their first decent paying job and makes more money than they could have imagined. Within a few years, many young adults go from eating ramen noodles in their dorm room to rolling in the dough.
A couple weeks, my wife and I got to talking about how diligent we have been with our finances. We are maxing out our Roth IRA‘s, contributing to my 403(b), saving extra money, and don’t have any debt. We still make sacrifices like refusing to buy a 2nd car, but we are left with a little extra money each month. After much deliberation, we decided to set up a “fun budget.”
What Do I Mean By a Fun Budget
I am sure many of you are wondering if I have gone off the deep end. Others may wonder what the heck I am talking about. For those who can’t read between the lines, our fun budget is purely to spend on stuff that we want. Not stuff that we need, but purely want. We designated a specific amount for each month that we can spend on items or experiences that are not necessary without having to feel guilty. It is small enough to still let us prioritize our financial goals, but large enough to let us have a little fun.
What exactly does that equate to? What do I mean exactly?
Okay, if I have to lay it out for you, I will. Things that we imagine we will use our fun budget for are eating out (yes, that is not a necessity), buying books (because we can rent them from the library if we really want to), going to concerts or movies, going out for drinks with friends, and buying stuff. Things that will not be included are groceries (we have to eat), clothes (if we need them for an event or job and are not just buying to have extras), gas, insurance, etc. Basically, it is as simple as it sounds. If it is a necessity, it will not be deducted from our fun budget. This is purely for pleasure.
Why We Set Up a Fun Budget
Before any of my financially responsible readers criticize my choice, let me point out why we decided to set up a spending plan for life’s pleasures. With the extra income coming in and many of our financial goals already met, we realized that we have some extra cash. For those of you who don’t know, my wife and I have (until recently) barely made ends meet. We were doing okay, but with little room for eating out or doing fun stuff. Our idea of splurging was buying a $20 pizza that would last us for 4-5 meals and renting a $1 movie from redbox.
To make a long story short, we realized that one major area of our life that was lacking was a decent social life. Throughout our adult life, we have prioritized a debt-free lifestyle. This means paying for grad school in cash, even when it is hard. Yet, at the same time, we did not want to let ourselves loose. We didn’t want to justify financial irresponsibility or spending money without any consequences. We decided to find a compromise. By establishing a spending plan for fun, we are therefore keeping ourselves from spending too much money.
Perhaps more importantly, it brings the joy of budgeting back. One of the curses of making too much money (don’t get the wrong idea – we aren’t making THAT much money) is that you have a large enough cushion that it is not necessary to budget. Budgeting becomes unnecessary and therefore a chore. Yet, our fun budget helps to keep things exciting. By limiting our splurges, we are forced to prioritize what we really want. It’s like a child in a candy store who is given the option of 1 item in the entire store. Most likely, that kid will take his/her time deliberating the decision because it is that important – they have to make the best choice because they only get one thing. It’s the same way for us. Implementation of our fun budget means that we are still evaluating our spending.
While it was difficult to give in to the urge to “live a little,” I have come to see the benefits of controlled splurging. By establishing our fun budget, we are making things exciting again, enjoying life while we can, and still saving money. In case you are wondering, our first month’s fun budget was spent on a portable dishwasher (we’re renting, so it had to be portable). This was a GREAT investment because it saves us at least 2 hours a week on dishes each week. Talk about a great investment! Before our fun budget, we would have kept convincing ourselves that it wasn’t necessary and continued to live in misery even though we could afford it.
Readers, do you have a fun budget? Or do you think it encourages you to spend too much money?
Photocredit: images_of_money via flickr