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How to budget for entertainment

When many people think of living on a CASH budget, they think it means never buying anything that isn't absolutely necessary for survival. They also equate frugal living with never going out to a restaurant, never entertaining, and cutting out all the fun things people like to do.

While making a budget and living within your means does mean cutting back on needless expenditures and trying to save as much as possible, it certainly does not mean that your days of socializing and enjoying outside activities are over.

When you are putting together your own budget, entertainment will fall into the "wants" category. This simply means that while you don't have to have money for entertainment to actually survive, it's a good thing to budget for. Everyone needs some amount of money available to spend on relaxation whether it's on their own or with family and friends.

One of the keys to successful budgeting is knowing how much to allot for items in the different categories. Obviously there are some expenses which are fairly consistent from month to month such as your rent or mortgage, quick cash loans car payments, insurance, and even utilities. But for categories like entertainment, it can sometimes be confusing as to what actually qualifies as entertainment.

Your Budget: Defining Entertainment

Before you start calculating what your entertainment budget will be, it's important to consider what actually falls into this category. It's fairly easy to determine some things like seeing a movie, attending a play, or going to a sporting event. But most financial experts would say that premium cable services and electronic equipment should also be included as entertainment. Additionally, things you do for recreation would go into this category such as golfing, tennis, fishing, or skiing.

It's important to keep track of your entertainment expenses so that they don't overtake your budget. "Wants" should never come before "needs". You should always be certain that you have sufficient funds each month to pay the most important debts such as your mortgage and car payments. If you are operating on a very tight budget, your "wants" may need to be seriously reduced or cut out altogether until you are on firmer financial ground.

According to the U.S. Department of Labor, the typical American family spends slightly more than $2,500 a year on entertainment. This equals about 5.5% of their total earned income. Some expenses may overlap and you need to decide where to place these items. For example, dining out may be considered "food" so you may include it in your food budget rather than entertainment.

Simple Guidelines

Many financial advisors recommend that you spend no more than 5-10% of your after-tax income on expenses such as entertainment and recreation. Others suggest that you can take 20% or 30% of your income for all non-essential expenses. These would include vacations, clothing, entertainment, dining out, and gifts.

Obviously the higher your income, the more flexibility you have with your budget. The amount of outstanding debt you are carrying also is a factor. Individuals with high salaries may also have large amounts of debt including very high mortgage payments. If you are struggling to make ends meet each month, your entertainment expenses may be the first place to look when cutting back. Remember that your goal is to be able to pay your "needs" and then take care of the "wants". As your outstanding debt decreases, you can slowly budget a bit more for entertainment and other non-essential items.

Determining Your Entertainment Budget

What you set aside for entertainment expenses largely depends on your total monthly income, what other expenses you have, and how you choose to prioritize what you want to spend with your disposable income. If you live a relatively modest lifestyle and have a high salary, it may be perfectly reasonable for you to budget $500 a month on entertainment. But if you are saddled with a large amount of outstanding debt, the bulk of your monthly income may need to go towards paying down that debt. Very little may be left for entertainment.

When you make your budget, determine your total monthly income. Then calculate your living expenses (needs) and outstanding debt payments. Deduct these from your monthly income and what you have left is the "discretionary" amount. This just means you can choose where to spend this money- on a vacation, for clothes, for eating out, or for entertainment.

Alternatives to Consider

Not all entertainment has to be expensive. Consider the following suggestions which offer high-value entertainment at little or no cost.

  • Most cities offer a wide variety of free events. Check your local newspapers or online for information about art festivals, concerts, museums and other events either in your city or nearby.
  • If you are a big movie fan, consider going in the afternoons when ticket prices are generally discounted. Some cities still have "dollar" theatres (not always $1 but usually $2 or $3 max). Many theatre chains offer "frequent customer" programs. You can earn free movie tickets and free or discounted food and drinks.
  • Eating out almost always costs more than eating at home. Plan a simple meal and have friends come over. If it's a large group, assign each person or couple a specific dish (appetizer, salad, dessert) and you prepare the main course. This saves you time and reduces the expense and work. Watch movies or play games. Having fun doesn't have to mean "spending money" or "going out".
  • Take advantage of your local library. Instead of purchasing books, rent them for free. Many libraries offer movie rentals, also. Newspapers and magazines are usually available to read on site.
  • Look for store promotions and use coupons.
  • Plan ahead. If there's an expensive event coming up, budget for it.

If you need to cut some of your entertainment expenses, here are some places to start:

  • Eat at home. Plan your meals. Eating out is expensive.
  • Get rid of that gym membership. Go to the park for a run or walk. Look into places that offer a pay-as-you-go quick cash option. Buy workout DVDs and exercise at home. Don't pay for things you don't use and don't need.
  • Lose the 500 television channels. Do you really watch that much TV? Get rid of the premium movie channels. You can rent movies inexpensively at kiosks at various retail outlets, through Netflix, or online. All are generally less expensive than cable or satellite television.