Should My Budget Include Fun Money?

Budgeting in the 21st century is almost a given; everyone is trying to save a few dollars here and there, always reaching for the stars with their personal finance goals. But is fun money a luxury or a prerequisite to sticking to a budget? Could it help someone avoid overspending, or is it just a solid excuse to buy unnecessary stuff?

As it turns out, fun money is more than just a portion of one’s budget used for entertainment. It’s an essential part of adulting successfully in today’s world. Not many people believe it’s necessary, and some may even run from it, fearing they’ll turn into shopaholics as soon as they’re given some freedom. 

In the end, though, it all comes down to how someone approaches their earnings and if they value their dollar. All work and no play makes life sickeningly dull, and keeping some fun money aside is the right medicine.

Defining the Terms: What Is Fun Money?

When setting a budget, most people like to allocate their funds into various “buckets.” There’s the “bills” bucket, the “rent/mortgage” bucket, and the “savings” bucket, for example. Whatever is left after that often goes into two different budgets: an emergency fund and entertainment.

Emergency funds have become quite popular nowadays, given that the economy is shaky and most people aren’t working steady jobs. It’s sensible to have some money set aside for emergencies, such as a broken toilet, or even worse, hospital bills. And of course, some people may use such a fund for “fun” stuff as well — you can convince yourself anything is an emergency if you want to!

On the other end of the spectrum, there’s entertainment money — funds a whole household can spend on going out to the cinema every week, eating out in fancy restaurants, etc. 

But neither of these are really serving their purpose, i.e., letting an individual indulge themselves (only). Therefore, fun money should be a part of the budget one can set aside for individual expenses.

In essence, this portion of the budget can be whatever one wants it to be. It’s money found on a separate bank account (optional, but preferred) that can be used for sudden wants and needs. And it’s there to keep people from going over their budgets and feeling guilty later on over their purchases. Fun money doesn’t judge, nor does it have to be explained — and that’s why it’s “fun” to begin with.

The Power of Instant Gratification

The appeal of fun money is rather clear to most people — having a few extra dollars to splurge on anything they want can be quite liberating. And really, is there anything better than that? The majority of the country is spending each day trying to save up more and pinch pennies here and there. That kind of life isn’t just dull — it’s downright stressful.

Now, most people are against instant gratification precisely because budgeting and savings are so crucial. And to some extent, they have a point. But that kind of opposition is reasonable only when someone has a problem with shopping.

Some people should just avoid malls and carefree shopping sprees because they are at risk of spending all of their savings. However, such individuals are rare, and they’re suffering from addiction that makes them binge-spend. They cannot help it, the same way someone with OCD cannot help opening and closing the doors repeatedly.

In the case of limited fun money, instant gratification can actually curb regular cravings that most people have every single month. Instead of experiencing FOMO (fear of missing out) every now and again, they can actually use fun money to get themselves what they want right now. Best of all, they won’t feel guilty, as that money is meant to be spent, not put into savings or toward a retirement plan.

Does Everyone Need Some Fun Money?

The original idea of budgeting (and the concept behind one of the most popular budgeting strategies) in general is to give each dollar a purpose. Some parts of the paycheck will go toward bills and savings. Another part may be purely entertainment money for weekends away from home, luxurious vacations, etc. 

But how come those trips cannot be counted as fun money? Well, it’s because this type of money is something every individual should have.

Mind the terms here — individual, not couple or family. In today’s world, it’s quite normal to have joint bank accounts and allow partners access to one’s credit cards. But the problem there is that one can easily lose their individuality. 

Of course, some parents may think using their fun money to go to Disney World with the kids may be an incredible idea. However, no matter how entertaining the trip will be, it will be about the whole family, not an individual. 

Married couples may also have a hard time avoiding feeling guilty when spending beyond what their budget allows. That often happens because every single expense is “coupled.” They don’t have a separate account that they can turn to when they just want to buy a ridiculously expensive perfume bottle or the latest video game. Every expense has to be somehow explained to their partner, and even if they don’t mind it, the guilt is always there.

But that’s only one reason everyone should have some fun money on the side. Experts agree that it could also prevent people from falling back into their old toxic spending habits and destroying their lives.

The Importance of Having Money for Pure Individual Enjoyment

1. It helps with self-control.

When there is enough money to splurge on all sorts of things, shopping is a fun pastime most people like to engage in. However, the more someone does it, the less control they have. 

Most consumers shop for things they enjoy without having a set budget in place. The culture of “treat yourself” has allowed for this — buying something one wants feels like a real gift. But the problems start when it gets out of hand.

That’s when most people will try to cut out shopping altogether. Yet, that’s like trying to follow a diet surrounded by cakes and cookies. When the money is there, it will itch them to spend it. If they eliminate shopping completely, they’ll feel deprived.

So how does fun money come into play here? Well, with it, it’s possible to practice self-control. The main idea behind it is that there is some money but not all of it. By setting aside a few dollars each month for unexplained personal purchases, it’s easier to dodge binge-shopping.

The gratification is already there, as each individual knows they have an X amount of money to spend each month. Once that money is gone, they aren’t allowed to dip into other parts of their budget. 

As a result, they can actually become smarter shoppers. At some point, they will realize fun money is their monthly allowance — just like when they were kids. It’s rather difficult to spend it all in one place then, so they will naturally curb their spending and practice self-control without even trying too hard.

2. It prevents negative money thoughts.

Debt often breeds negative frugality in most people in that they’re always trying to pay it off as fast as possible. There’s nothing wrong with that, of course, but it can overwhelm them and make them deprive themselves by cutting back on their various personal expenses every single month.

However, removing any sort of fun money from the budget isn’t going to save anyone. At best, they may be able to pay off the debt faster. At worst, they’ll feel punished for all the other times they treated themselves to something nice.

When there’s fun money in the budget, that negative mindset can be transformed into a positive one. Abundance is the magic word here; by allocating funds for every single thing in their life, including random fun purchases, an individual will stay sane. They won’t see budgeting as terror anymore. Instead, they’ll realize that money flows in and out all the time, but that there’s enough of it for a fulfilling life when there’s a set budget for everything: bills, savings, an emergency fund, planned and unplanned purchases, etc.

3. It makes life and budgeting less dull.

Freedom of spontaneity isn’t something most people would associate with budgeting. There’s nothing unplanned about a real budget, as each dollar should have its rightful place. 

Because of that, most people tend to write down each amount they’ve spent at the supermarket or how much their recent gas bill was. Over time, the whole thing gets rather dull and tiresome. It’s too analytical for an individual to live their life according to it forever.

That feeling can be offset with some fun money. Of course, budgeting is crucial in terms of long-term goals, such as college education, international vacations, etc. To get from a financial point A to point B, it’s wise to track all expenses and try to cut them whenever possible and for a greater cause.

But not when one is dealing with fun money. That’s the true beauty of it — this part of the budget can and will be a bit random. It won’t be planned out unless someone wants to splurge and would have to save it over a few months. Hence, there’s no reason to track expenses within that part or to mind the spending. Its whole existence is based on people getting loose from time to time and buying something that will please them, no matter how unnecessary it might seem on the whole.

4. It helps avoid money fights.

Joint accounts are rather common among couples, but they can lead to a lot of tossing and turning at night, not to mention money fights. Every single person out there is unique, and so are their spending habits. Thus, one person is going to use more money than the other, and even if it’s just a few dollars more than them, a fight may be unavoidable.

The easiest way to dodge this is to give each person an allowance. That’s why separate fun money accounts are so convenient. It’s easy to set up automatic transfers each month so that both get the same amount. The remainder is then split into two other accounts: a savings account and a joint account that should be used for bills and other expenditures.

Resentment in relationships often does come down to money; couples might not have equal paychecks, and they might spend money differently. Because of that, setting some limits can prove to be healthy and may even improve the connection between people. 

With each partner having an X amount of money a month to spend however they please, there’s simply no room for fights. Even better, it puts things into perspective and allows them to work for common financial goals without depriving themselves of anything.

5. It makes sticking to a budget achievable.

Without some personal allowance on the side, people tend not to stick to their budgets all that well. And really, is that surprising at all? Budgeting for things they have to pay rather than something they want is stressful. They cannot escape the fact that rent is due each month or that if they don’t pay their utility bills, they may be cut off.

But sticking to a budget is easy if there’s room for spoiling oneself. It’s sort of like a diet — it’s harder if one cuts out everything that could make them fat. Living without carbs is impossible, and so is living without any wants and wishes. 

Simple things that just make someone happy, no matter how short-term they are, are necessary to keep everyone sane. Otherwise, it’s likely that they will binge-spend at some point; the pressure will be too much for them to handle, and seeing that all their hard-earned money is never truly theirs will definitely hurt.

How to Determine the Right Amount

Most experts agree that allocating 10% of the net amount of money earned is quite enough to cover all the fun things people may want each month. However, in most cases, those same experts place restaurants, cinemas, and all other sources of entertainment into that category.

Of course, some people may decide that’s what their fun money is for, which is completely fine. Still, if they’re in a relationship or have a family (and most who are looking into budgeting for fun money are), at some point, they may fight over those funds. 

Fun money should always be individual; it’s not for couples to treat themselves to dinners every other day or to spend thousands of dollars on a luxe vacation. Imagine having to decide who pays or where to go — it’s just going to lead to more bickering. 

Hence, it’s best to pick a lower percentage. The 10% mentioned is a great option for the whole miscellaneous (which includes entertainment) budget. Still, to account for some fun money, keep it at, for example, 5%. Reserve the other half for personal expenses. 

In case there’s just one person and one paycheck of $2,000, both the miscellaneous budget and the fun money part would equal $100 (10% divided by 2). Yet couples will have more leeway if there are two $2,000 paychecks. 

Both parts will be worth $200, so each person will get $100 to spend on themselves. And since nothing is set in stone, they can always change the percentage according to what they need and want. If they don’t like dining out or catching a movie every now and then, they can allocate more money toward personal fun expenses. 

How to Make a Fun Money Budget Work

There’s no need to explain the purchases.

The point of fun money is to save one’s individuality so that they can avoid depriving themselves of the things they yearn for. But if they start explaining each purchase and giving excuses, they might as well never buy anything again. That will only trigger the guilt that fun money should offset.

When it’s gone, it’s gone.

Whether it’s a one-person household or a marriage, if one of the individuals spends their fun money fast, they have to wait for more until the next month. That’s the only way for them to learn self-control; at some point, they’ll realize that’s not the best strategy to sticking to their budget and not depriving themselves. Sometimes, waiting to spend it on something greater is worth it.

Exceptions are allowed but should be avoided.

In rare cases, it’s possible to make a few exceptions. If a couple has fun money set aside and one of them needs a few dollars more, they could ask their partner if they could get a “loan,” either by taking some money from the regular budget or by borrowing from them. However, they have to consider whether the loan is worth it and if it could be avoided. If they really need it, they have to “pay it back” next month by subtracting the amount from their fun money budget. If it can wait, they should save each month until they have enough. After all, fun money “rolls over” — no one has to spend it if they don’t want to.

Everyone gets the same amount.

Couples often fight about how much each of them can spend. In most cases, the basis of this is one person earning more; if one gets a few hundred dollars more than the other each month, they sometimes believe they have the right to spend more. But that’s not how fun money works — that sort of behavior is a type of financial abuse. To be fair, it has to be equal. So fun money should come from both net amounts the couple earns and split in half.

Budgeting for Fun

Fun money could easily change the way people see personal finance and how they act in relationships. It’s a fantastic tool for eliminating some of the financial worries and resentment, as it’s based on individuals having funds to splurge on themselves only. 

However, as is the case with most budgeting strategies and ideas, some rules apply. Additionally, keep in mind that fun money isn’t a free pass for recklessness. It can help anyone budget correctly and reach their financial goals — but only if they’re ready to stop spending when it’s all gone.