Your monthly budget should include everything you require to maintain a reasonable lifestyle, and this includes recreational activities.
We find out how you can create a “fun budget”, and we look at what you can do if you’re overspending on recreation.
Tip: Make sure you include savings and investments in your budget. Get started here.
Creating your “fun budget”
It’s basic budgeting savvy to set aside funds for emergencies, cover your living expenses, and protect your assets from damage. A “fun budget”, however, can easily evade this process.
If you continuously work until retirement, without spending any of your hard-earned money on personal rewards, misery will be inevitable. It’s important to set aside resources for your recreational activities, even if this just includes a Netflix subscription and some takeaway food.
Sheila-Ann Robey, financial adviser at Lifeguards, an affiliate of Liberty, says that when it comes to any kind of budgeting, you should divide your income according to the 50/30/20 rule.
“This means that 50% should go towards necessities, such as housing and utilities, 30% should be used for non-essential items or a ‘fun budget’, such as eating out or going to the movies, and 20% should be allocated toward savings or investments,” says Robey.
Contrary to what you might think, it takes more discipline to budget for recreational activities than for necessities, because you may be tempted to step outside of your allocated amount.
For example, when you’ve budgeted for a movie night and all your friends are buying popcorn, you may be tempted to join them, even if this additional luxury isn’t included in your budget. It takes a lot of willpower to decline the popcorn and stick to your financial plan.
Robey says that, ultimately, you should draw up a budget that suits your specific income and expenditure needs. You don’t share the same realities as your friends and you need to make the right decisions for yourself.
“A qualified financial advisor can assist you in this regard. They can help you design a budget that will ensure financial sustainability,” says Robey.
READ MORE: How to become financially independent and retire early
Overspending on recreation?
Robey says that once a budget has been drawn up, it requires diligence to stick to it.
“A budget will allow you to monitor how much of your income you are actually spending on non-essential items. This will encourage you to reduce those expenses if they are not in line with your plan,” says Robey.
Recreational expenses, such as eating out, shopping, gifts, entertainment, and subscriptions, are wholly within your control, Robey says, and can usually be reduced with a committed choice to healthier financial habits.
“When you have made this choice, dedicate a specific amount of your budget towards recreation, and prioritise accordingly. When your recreational budget is up, don’t be tempted to spend more or use credit facilities. Rather wait for the following month,” she says.
This process becomes a habit that formulates and sustains healthy financial choices, Robey notes, leading to a healthier bank balance at the end of each month, and hopefully, more savings.
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