Balance is crucial in a budget. You need to account for all the important spending without denying yourself some fun.
Of course, striking that balance is one of the hardest things you can do. The entertainment category of your budget often takes on a life of its own, using up more cash than you plan.
A one-time surge in entertainment spending — say, over the holiday season — isn’t going to make or break your budget. But overspending in every month of the year can put your finances at risk.
This article is here to make sure you don’t overindulge. Below, you’ll find out how to create a budget that balances your need to save money and still have fun.
Start From Scratch
You’re making a new budget, so don’t rely on old plans or expense lists from last year. You need to have up-to-the-minute information on your spending habits.
Understand the Bare Bones of Your Budget
What are the bare bones of your budget? They’re the essentials you cannot afford to skip. They’re often tightly related to survival, like the roof over your head or food on your table. But they also may include expenses that protect your financial good name, like personal loan payments and credit card bills.
Go over the past year’s bank statements to put an exact figure on all your expenses, including the following:
- Rent
- Utilities
- Personal loan payments
- Credit cards and lines of credit
- Insurance payments
- Car financing
- Transportation costs
Once you cover these bare-bones expenses, see how much money you have left to work with.
Identify Your Financial Goals
Don’t pour that leftover figure into entertainment just yet. You have to share it with short- and long-term financial goals. Whether it’s savings for a vacation, stocking an emergency fund, paying down personal loans, or saving for retirement, these goals take precedence over the fun stuff.
How much should you save? While the answer should reflect your unique goals and financial standing, most financial guides say you should save 20% of your take-home pay each month.
Track Your Entertainment Spending
By now, you’ll have a small amount of money to spend on entertainment. To make sure you spend this money wisely, it’s important you know your entertainment priorities.
Track your usual entertainment spending to see how much you’ve spent on this category in the past. Don’t worry if that spending exceeds the cash you have left in your budget. Most Canadians are cutting back on entertainment these days.
Look at this list and pick your priorities. Then, cut those expenses that don’t fit this new budget.
Explore Cost-Saving Alternatives
You might be able to afford more of your priorities by finding cheaper entertainment options. Consider these cost-effective ways to spend your time:
- Free community events
- At-home movie nights with friends
- Hiking in free parks and conservation areas
- Potluck dinners with friends
- Free streaming services
Bottom Line:
Be honest with your entertainment spending. It can be a big drain on your paycheque without you even knowing it. This budgeting guide will change all that. Not only will you know exactly how much this spending costs, but you will also know how much you can afford. Finding the right balance between enjoying life and managing your budget is the key to long-term financial success.