Why You Need Some Fun Money in Your Budget

If your budget feels like a straitjacket, you may need to add a little fun money. Giving yourself permission to enjoy a small treat can help you stick with your money goals for the long haul.

There’s a time and a season to cut back extra costs in your budget—like when you’ve got focused intensity in those early Baby Steps. But that doesn’t mean you can’t still enjoy a little something while you’re doing it. Sometimes it’s not much, but it can be enough to keep you going until you hit that next big goal.

Here’s how to make room for a little fun without blowing your budget.

What Is Fun Money?

Fun money is the amount you set aside for wants (the stuff that makes life a little sweeter but isn’t a requirement for survival). Think a fancy cappuccino, a new pair of shoes you don’t need but really want, or a Saturday matinee with your kids.

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Where are you really at with money?

Take Assessment

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Putting fun money in your budget isn’t a green light to drop your money goals or go on a spending free-for-all. It’s another way to stick to your budget. Remember, you want a zero-based budget, so you should give every single dollar a job. A fun money line helps you account for all your spending—even the fun stuff—so you don’t accidentally waste money on little things here and there.

When you give yourself a budget line for fun, you can spend that amount on whatever you want. Also, if you’re married, make sure you and your spouse each have your own fun money lines.

And when the fun money budget line is gone, it’s gone. We repeat: When the fun money budget line is gone—it’s gone.

Why Should I Have a Fun Money Category?

A little planned fun can help you stick with your budget so you don’t get tired of restrictions and toss the whole thing out the window. Fun money gives you a small amount to spend on purpose while you keep making progress on your goals.

We talk a lot about goals and how they need to be the perfect balance of empowering and realistic. Fun money helps with the realistic side because it lets you stay focused on your goals and have a reward every now and then.

Fun money also reminds you that a budget isn’t all about restrictions. Money expert and bestselling author Rachel Cruze puts it like this: “A budget doesn’t limit your freedom. It gives you freedom.” You’ve got the freedom to put anything you want in your budget. Use it wisely. Hit your needs and goals hard. Once those are covered, then you can have a little fun.

A budget is deciding up front and on purpose what every dollar will do that month. That kind of planning ahead keeps you from feeling guilty when you do spend. You’re giving your money permission to go where you want it to go. But again—use that power wisely!

And that brings us to one of the best benefits of having some fun money in the budget: When you treat yourself a little, you’re less likely to fall off the goal-crushing wagon completely. It’s like the pizza night that keeps you from losing your mind on a diet. That reward makes all the hard work seem more doable.

How Much Fun Money Should I Budget?

Budget only what your monthly plan has room for. That might be $100 or maybe just $10 right now. Fun money comes after you make room for giving and either save or pay off debt based on your current Baby Step. Then cover your Four Walls—food, utilities, shelter and transportation—plus your other essentials.

There’s no set percentage. Your number depends on what your budget can handle this month.

 How Do I Find My Fun-Money Number?

Once you’ve made room for giving and your current Baby Step goal, covered your Four Walls, and budgeted for other essentials, decide how much of the money left in your budget can go toward fun. Here’s what that may look like:

Say you’ve got $200 left to assign this month and you’re on Baby Step 2. If you’re in Baby Step 1 or 2, we recommend keeping fun money to a bare minimum so you have more to throw at your goal. In that case, you might put $180 toward your debt snowball and leave $20 for fun money.

Now, that $20 isn’t a universal rule. It’s just what works in this month’s budget. Get a raise or pay off a debt, and next month’s number can change. That’s how a zero-based budget works.

A small fun money line can still go a long way when you get creative. Hit the thrift store instead of buying something new, or look for a cheap (or free!) community event rather than paying for a night out. You can enjoy yourself without paying full price for everything.

What Does Fun Money Actually Cover?

You can spend fun money on anything you want but don’t need, as long as it fits inside your fun money line. Here’s how it plays out:

• A $50 concert ticket: If you’ve got $100 in your fun money line, one ticket will take half of it, and if you buy it, you may need to skip the $35 band T-shirt so you don’t drain your line down to $15 in one night. If you’re in Baby Step 2 with only $20 budgeted for fun, this month’s ticket doesn’t fit. You’ll have to wait for a month when it does.
• A $15 movie ticket: If $15 is your whole line, a movie is great way to spend it. (Just skip the overpriced popcorn this time.)
• A $6 cappuccino: A Friday morning coffee run might fit in your budget. But doing one every day adds up to $180 a month, which could be more than your entire fun money line.

Where Does Fun Money Fit After the Four Walls?

Here’s the hard truth: Fun money comes last. Before you drop a dime on a concert or a new pair of shoes, make sure your Four Walls are completely covered. Here’s the order:

If those first three priority tiers aren’t covered, there’s no fun money this month. Cover them first, and you’ll be in a better position to enjoy fun money when your budget has room for it.

A bigger want may cost more than the fun money you budgeted for the month, so make a plan to save for it.

Kelly from THE Ramsey Baby Steps Community Facebook group puts it this way: “We have ours set at $75 per person each month, and it adds up so you can save it for something bigger. This is truly just for the fun extras and is completely discretionary spending.”

“We have ours set at $75 per person each month, and it adds up so you can save it for something bigger. This is truly just for the fun extras and is completely discretionary spending.” –Kelly

You can do the same in our EveryDollar budget app. Create a plan for every dollar you bring in, including money you want to save for a bigger purchase. That way, you can see what you’ve set aside without losing track of the rest of your budget.

Add a budget line for that concert, weekend trip or new piece of furniture, then set aside a little at a time until you have the cash. Delayed fun is still fun—and it feels a whole lot better when you don’t have to swipe a credit card to get it.