Wednesday, November 21, 2007

Fun Money

Since I haven't yet had a personal finance post on the blog, I guess I might as well throw this into the hodgepodge of stuff currently here.

Amanda and I try to live on a budget and have tried various budgeting systems, many of which we've been unhappy with. One thing that has worked for us is what we call "Fun Money". Dave Ramsey calls something similar "blow money", but it's not exactly the same thing. Nearly every budgeting system I've looked at (including Ramsey) recommends budgeting for, for instance, work lunches. Ramsey has a category "blow" for small expenses that weren't worth budgeting. For several years Amanda and I did something similar, but it had a problem.

I wanted a very expensive camera (at the time a Nikon D70 which was around $700) that I knew would never fit in our budget. I'm a long term guy so I was perfectly willing to scrimp for years to get there but our budget didn't have any way for me to save money for personal purchases. Enter fun money. What we decided on is that we would each get some amount in the budget each month to do with as we please. That would include lunches, going out with friends, any dinner on our own (for instance me before Boy Scouts), toys we buy while out, anything of that nature. Any fun money we don't use during the month gets saved in our "fun money account" (a spreadsheet, though it already came out of the budget so it's backed with real money somewhere. It's not like Social Security where we put it in a trust fund and then spend it anyway.) so that if I want an expensive camera I can not go out with my coworkers ever and in a while I can afford it. It's so far worked very well for us and I think we've actually reduced our expenses some because of it because now we know that if we impulse buy some toy it's coming out of our fun money account and not some mysterious amorphous blow money line in the budget.

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