Planning and managing your budget is extremely important. It is especially important in these times when inflation is on the rise. The line between one’s needs and wants has clearly blurred in the aftermath of the pandemic.
To escape the emotional trauma of it all, people have been resorting to take-outs and weekend getaways. On the other hand, statistics indicated that the layoffs from jobs put pressure on people to even manage necessities.
Given this backdrop, it is easy to see why you need to follow a budget for financial stability. A budget makes sure you remain focused on your long-term goals and plans. It is also an excellent way of keeping track of your expenditures compared to your income. You can track how much you spend on necessities and see how much spending room you have for entertainment.
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What is Entertainment Spending?
In a broad perspective, entertainment can be defined as an activity that provides enjoyment. A few examples of these can include eat-outs, going to the movies, going to a sporting event, and recreational activities like fishing, hiking, etc.
Planning a budget can help you identify how much you can spend on such activities. It also helps identify if these activities are worth the value you put on them.
As the pandemic restrictions lift worldwide, people are starting to invest more and more in entertainment. What better way to enjoy an entertaining evening with the most delectable food. If you are someone who likes a good entertaining show while you eat, then the dinner shows in Pigeon Forge should pique your interest. These shows surely are a feast for the taste buds and the eyes.
What works for you
There are no fixed guidelines for how much of your monthly budget you should set aside for entertainment. Some recommend 5-10% of your income after tax deductions, while others suggest spending 20-30% of the total income on entertainment and recreation.
The advice, however, also disregards any cookie-cutter approach to how many percentages can be set aside and leaves the matter in the individual’s discretion who is going to ultimately decide what would be the best amount.
It all boils down to how much you make, your priorities, and what qualifies as necessities for you. After doing the math, you’d have a clearer picture of your disposable income. If you have loans to pay or have plans like buying your own house or a car or setting up an emergency fund for yourself and your family, you would probably have less to spare for entertainment.
But if you are earning more and living a simpler life, you’d have a larger window for entertainment spending. In the end, you are the judge of how much of your income you can spare for entertainment.
How to make a budget
A household budget is an abstract that lets you track and compare your earnings with your expenses over a fixed period of time. It can allow you to lead a comfortable and stress-free life.
Some basic steps that can help you design a fool-proof budget:
- Gather Financial Paperwork – The first step is to go through your income and expenditures. To do so, you need all the paperwork that includes bank statements, details of investments (if any), utility bills, credit card bills, previous months’ receipts, and loans and mortgages (if any).
- Calculate Income – Once you have all your documents, you’ll be able to calculate exactly how much you make. It is easier if the tax from this income gets deducted automatically. If it varies month to month—as it does for freelancers or people living on social security and child care—you should use your lowest-earning month from the previous year as the benchmark. Combining all of these will give you an exact estimate of your monthly income.
- List all monthly expenses – This list should include loans, mortgage or rent, insurance, utility bills, groceries, personal care, transportation costs, and entertainment expenses. You can use your bank statements or credit card bills to record this spending and derive the average monthly spend.
- Categorize expenditures – ‘Needs’ are your mandatory expenditures, like utility bills, rent, groceries, child care, and transportation costs. ‘Wants’ include entertainment activities like eat-outs, personal care, gifts, etc. You can also categorize expenditures based on fixed and variable expenses. Fixed expenses are those that require you to pay the same amount each time. Variable expenses change from month to month, like gas, groceries, etc.
- Do the math – find out how much money you have available for spending (after setting aside for savings, if any). Using this amount, you can see if you are spending more than this amount or less. If it is less, you are good to go. If it is more, you need to take some serious decisions and cut back.
What is the magic amount?
Having a fixed monthly/weekly budget puts you on the right footing in managing your finances. You get to decide how much you have to spend on entertainment, keeping your budgetary goals in check. You should not cut back on entertainment only because you want to save more. There are budget strategies, and recommendations that you can follow that will let you have fun and enjoy life and save at the same time.
Tom Corley, a financial planner, suggests 10-percent of monthly net income for entertainment. This means if you are making $2,000 a month, you can spend $200 or less on entertainment, eat-outs, road trips, and personal care.
Similarly, the 50-30-20 budget divides your budget into fixed categories of needs, wants, and savings. These percentages aren’t strictly fixed, as expenditures tend to vary month-to-month, but it is an excellent rough estimation for a good monthly budget. This means you can spend up to 30 percent of your net income on entertainment.
The average household expenditures have been increasing yearly. Unfortunately, the employee incomes are not increasing at the same rate. That’s why making a strict budget and sticking to it is an extremely useful strategy, especially when you have to make room for entertainment spending. With the pandemic in full swing, it was hard to enjoy yourself. But now that the strict guidelines are lifting, you have to make room for entertainment activities. Instead of slashing entertainment out of your life, you should look to budget for it wisely. The above article mentioned a few strategies you could apply that will allow you to save and enjoy life.
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