Let's be real... Budgeting Sucks.
It's something we have do (If you're anything like me) to manage bills and avoid debt.
I recently budgeted my way out of a decent amount of debt, (About $8k) and as a result I've been a lot more conscious lately about where my money is going and what it's doing.
As part of that, I've stopped "Budgeting" in my head and actually started writing down everything. Income, expenses, those damnable streaming subscriptions, and late night fast food runs, and I came to the realization that I wasn't doing something very important.
I wasn't budgeting for Fun!
Now I know how that sounds. "Budgeting for fun?" Chris I have to pay rent!
I know, I know, Just hear me out. I'm going to go over the basics in this budgeting guide for beginners and explain what I mean.
You see, budgeting doesn’t have to be just about cutting back and saving; it can also be about making space for the things that bring joy and fulfillment into your life. In your 20s, you’re likely balancing a lot of monetary drains. Student loans, rent, and maybe even saving for a big purchase like a car or a house. But it’s also important to set aside money for fun and joy.
After all, life isn’t just about paying bills and hitting 401k milestones, it’s also about enjoying the journey!
So here’s how you can create a budget that allows you to have fun while still being financially "responsible".
The Basics of Budgeting (Guide for Beginners):
Before we dive into the different methods, it’s important to understand the basics of budgeting. Budgeting is all about tracking your income and expenses to ensure that you’re not spending more than you earn.
Here’s a simple breakdown of how I budget.
Calculate Your Monthly Income: Start by figuring out how much money you bring in each month after taxes. This is from your job, side gigs, or any other sources of income.
(For me its my job as a chef, whatever YouTube revenue I get that month, and interest from a high yield savings account.)
List Your Monthly Expenses: Write down all your necessary expenses, such as rent, utilities, groceries, transportation, insurance, and any debt payments. These are your fixed costs.
If You have something you're saving for, a vacation, a house, a new car, whatever. You need to include this too. (For example, setting aside $100 a month for a beach trip later)
Track Your Spending: Use budgeting apps (I'm going to be real I haven't found a budgeting app I like, I'm open to suggestions but I've tried several and they all suck or try to do too much) or a simple spreadsheet to track where your money goes each month. This will help you understand your spending habits and identify areas where you can cut back.
(Again I hate most budgeting apps, so I manually list this in excel or google sheets)
Your income and expenses should look something like this:
(This is literally mine from earlier this year)
As you can see this month my Expenses were less than my Income, which is good.
If you are running negative, or spending more than you make, you need to understand why that is and what you can do about it.
If it's a one time thing (Like the tire I popped last month) sometimes you just have to take the L, eat into your savings, and replenish in the future.
But if you're consistently running negative, something needs to change, either by cutting back on expenses, or supplementing income with side hustles or part time jobs. It sucks, but that's life.
As you can see from my budget above I'm running positive here. This means I can save about $500 this month. (In reality that money went to paying off some debt that month)
Which left me with no money for anything fun.
Now I'm not saying go blow your money at the club or casino before you pay for the things you need to survive and live comfortably. Your health, continued existence, and continuation of a job are priority... however.
Fun is important too!
The Importance of Budgeting for Fun 🔅:
It’s easy to fall into the trap of thinking that fun and leisure are "unnecessary" expenses, especially when you’re focused on financial responsibilities. But having some fun money is important for several reasons!
Mental Health and Well-being: Doing activities you enjoy helps reduce stress, boost your mood, and maintain a healthy work-life balance.
Whether it's a hobby, a night out with friends, or a weekend trip, fun experiences can help improve your overall quality of life. There's nothing that gets me through the week like knowing I'm getting pizza and watching bad movies with my friends on Saturday. That where the fun money comes in, $20 bucks on pizza is nothing in the long run and setting aside that money ahead of time so I don't have to feel guilty about using money I'm supposed to be "saving" helps alleviate stress.
It's all a mental game!
Which brings us to...
Motivation: Having something to look forward to can motivate you to stick to your budget and save money. It’s easier to cut back on unnecessary expenses when you know that you’re saving for something enjoyable. (See Pizza Example)
Avoiding Burnout: Stress is a big factor when it comes to implementing healthy habits. Constantly denying yourself the things you enjoy can lead to burnout and resentment towards budgeting. By allowing yourself to spend money on fun, you create a more sustainable and balanced approach to managing your finances.
Personal Growth and Exploration: Your 20s are a time for exploration and growth. We're in the prime of our lives, we should be experiencing it!
Setting aside money for fun activities allows you to try new things, meet new people, and discover passions and hobbies that could lead to new opportunities.
It doesn't have to be a lot of money. When I was paying off my debt I set aside $30-$50 of guilt free "Fun Money" every other month and I'm not gonna lie. It helped.
Now were there months where I had no fun money, absolutely, but striving for that goal of personal enjoyment is never a bad things.
That covers the why budgeting for fun is important (And why budgeting in general is)
So let's talk about the mechanics of budgeting.
Three Budgeting Methods:
There are various budgeting methods you can use to manage your finances effectively. I'll go over them briefly. There's more in depth resources out there, hell there's entire college courses out there on managing money. But here's three basic methods.
Method 1: The 50/30/20 Rule 💯:
The 50/30/20 rule is a straightforward budgeting method that portions your income into three categories:
(IMPORTANT: You can change these percentages to fit your situation! I personally run about 65/10/25)
50% for Needs: This portion covers essential expenses like rent, groceries, utilities, and transportation. This is money you absolutely have to make sure you have every month.
30% for Wants: This is where the fun comes in! Use this money for dining out, entertainment, hobbies, shopping, and other non-essential expenses that bring joy.
On the flip side, if you have unexpected expenses, this is where you have to cut costs in emergencies.
20% for Savings and Debt Repayment: Allocate this portion toward building an emergency fund, paying off debt, or saving for future goals. (Check out the various methods of paying off debt)
With the 50/30/20 Method you ensure that you basic needs are met while still allowing adequate money for fun and "Wants."
For example, if I included fun in my budget it might look something like this:
Method 2: Zero-Based Budgeting ⭕️:
Zero-based budgeting is effective because it gives you full control over your finances and ensures that you’re actively deciding where your money goes each month. It also helps prevent impulse spending by requiring you to think ahead about your fun expenditures.
Here's how it works.
List All Income Sources: Calculate your total monthly income. This means everything, even if Nana gives you $50 for your birthday.
Categorize All Expenses: And By all I mean Everything! Include both fixed expenses (needs) and variable expenses (wants), such as entertainment, dining out, as well as savings and miscellaneous things like snacks, subscriptions and drinks at the bar. If it leaves your bank account, you need to have it written down.
Assign Every Dollar: Allocate money to each category until your income minus expenses equals zero.
I know it sounds counterintuitive but you really do want zero left at the end. This means including categories like savings, food, and fun. If everything is accounted for it makes it a lot harder to go over budget!
Now If you're someone who's extra money is all cash (maybe you're a bartender or work mostly for tips, or maybe your boss is laundering money, Idk) here's a method for budgeting all that extra dough.
Method 3: The Envelope System ✉️:
The envelope system is a cash-based method that’s great for managing allocated spending. Here’s how it works:
Create Budget Categories: Identify different categories for your spending, such as groceries, dining out, entertainment, and personal care. This is not essential stuff like rent and insurance, that should be taken care of before you start pulling out envelopes.
Allocate Cash to Each Envelope: Decide how much you want to spend in each category and place that amount of cash in its respective envelope. A good way to do this is by adding up all you cash and dividing it by weight. What's Weight you say? Simply put it's how much something is worth represented as a percentage of a whole. (For example, if you had $300 and groceries are weighted 37% then you'd allocate $111. Simply keep going till 100% of your cash is allocated, with more important things weighted higher!)
Spend Only What’s in the Envelope: Once the cash in an envelope is gone, you can’t spend more in that category until the next month! That's it. You're done. Of course in an emergency you can break into it, you just have to realize that that activity is off the table for a month.
Using cash helps you avoid overspending and keeps your spending tangible. It’s an excellent way to limit spending on fun activities and make sure you don’t dip into funds allocated for other purposes.
Of course, you could Frankenstein together some hybrid of all three methods, or do your own thing, the main goal is to simply spend less than you make, save up an emergency fund (usually 2-3 months essential expenses), and keep some money for fun!
Budgeting in your 20s doesn’t have to mean sacrificing fun. It shouldn't mean sacrificing fun. One of your goals should be making memories you'll treasure for years, and having some guilt free fun money can help! (Not saying that you can only make good memories with money, you can absolutely make treasured moments for free, but money makes things easier a lot of the time.)
By understanding the basics of budgeting and adopting a method that works for you, you can enjoy your life while still being financially responsible.
Remember, life is about balance. Setting aside money for the things you love isn’t just a luxury—it’s an investment in your happiness and well-being. So go ahead, create a budget that includes fun, and enjoy the best of both worlds! (God that was cheesy, I absorbed too many peppy advertisements I think)
Anyways. tldr: Fun is important, having some cash budgeted out helps make having fun easier. Life is what you make of it so make it a good one. Take that person out for a drink, buy your friends a sweet treat, get that stupid bumper sticker you found in the gas station. Life is meant to be enjoyed.
And on that note, I think I'll sign off. If you have any questions feel free to message me, I'll get to them if I can.
I hope you've enjoyed the Info Dump, and I'll see you next time.
Until then.
-Chris
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