What percentage of a person’s income can be spent on entertainment/spending money?
I’m trying to establish a realistic budget for myself after getting a new job. I’ve spent some time enjoying the fruits of a REAL paycheck, but now it’s time to be realitic and make a budget. How much (percentage) of a person’s paycheck (net pay – what I bring home each month) should be set aside for entertainment expenses? (I consider any bills that I don’t have to pay monthly for living expenses entertainment; eating out, shopping, travel, concerts, etc.) I’ve looked online and can’t find any credable recomendations. I hope that you can help!
Sphere: Related Content
the rule of thumb used to be in the 8 to 12% of your total budget for the "better things in life"
a possibly more sound rule of thumb is the 1/3 principal.
Use 1/3 of your extra monies to re-pay what you’ve brought in the past and still owe for — paying off 12 to 21 % credit card bills ( and eliminating the interest expenses ) is better than getting 5.50% interest in a CD certificate ( and paying Uncle Sam a part of that, as income ).
the second 1/3 is for your current expenses — home auto and all the insurances and utilities and the "monthly" bills you mentioned.
final 1/3 goes to savings, investments and 401(k) type — For the Future — and then don’t touch them……people are finding they would have more money at retirement if they started earlier.
there was a story of twin sisters — aged 25
#1 sister started putting money aside each month and did it until her 35th birthday and stopped…and never put another dime in the account ( apying into it for only 10 years)
#2 sister started at age 35, when she heard what #1 sister had done and started an identical savings account & continued paying into the fund until age 55…( or into it for twenty years)
the accounts for both grew at the same rates all through their lives; but at retirement ( age 55 in this case ) since the #1 sister started earlier, due to compounding, her nest egg was over 3 times more than #2 sister’s….just because of the ways of compounding and her earlier start. It is the early years that made a difference in their funds at retirement.
Generally, when I do budgets with people, I recommend the following amounts AS STARTING POINTS, that are affected by whether or not they are taking care of other goals.
Entertainment – $75 / person / month
Eating out – $150 / person / month
Clothes Allowance – $75 / person / month
Travel – Depends on expectations
Keep in mind that you should be saving a minimum of 10% of your paycheck towards retirement, have no double-digit interest rate debt, and have an emergency fund before you spend freely at those levels.
Hope that helps!
Ken Clark
Certified Financial Planner
Hi,
You can visit http://investments.checkouttoday.info for some useful tips and info related to your query. Good luck!
The answers are above, with all due respect, terrible! Entertainment is purely a WANT expense!!! To asign it an arbitrary % is stupid!!! If I make $500k per year, would you recommend I spend 12% a month, or $5000/month on entertainment?!!? I better be pretty well entertained!!!!
I would recommend budgeting around necessary expenses. And THEN figure out what is left. Should you take the advice of the people above and do x% if it means you don’t have money left for food?
I recommend that you are SAVING a minimum of 10%… after that, your food, housing, clothing, medical, etc., are your essential expenses… budget those first. After you do that, and you are saving at LEAST 10%, blow the rest (if any) on whatever you like!