“Entertainment/Recreation” is part 6 of my writing series. To see full complete spending categories, read my February 2016 newsletter at www.PrudentMoneyCoach.com. This month, I’m going to write about what you should do if you are short on your entertainment/recreation budget.
Everybody spends money on Entertainment/Recreation (E/R). Sometimes people don’t realize how much they spend on E/R that they end up with deficit at the end of the month. Usually, E/R expense is the first category anyone would cut if/when they have to cut expenses.
What comes to your mind when you hear the words “Entertainment/Recreation”? When I was looking for an image for this newsletter under “entertainment”, I came across pictures of people partying in a club, music instruments, drinks in a bar, loud concerts, TV, and others. When I searched for “recreation”, I found beaches, sports, travel, meal with family/friends, and others. These images show that people do all sorts of things for E/R.
Now, what should you do if you don’t have enough money for E/R?
Minimize your Entertainment/Recreation Expenses
An obvious way to reduce your general spending is to cut back on your E/R expenses. Do you suspect that you are overspending? If so, you probably are. How can you know for sure? First, sit down and write what you do in your spare time or on your time off. Examples could be eating out, alcohol purchase, theatre, movies, fitness classes, lottery purchase (yup, it’s considered your entertainment, not an investment), ice cream, coffee shops, weekend getaways, etc.
Next, it’s time to count how much money you are spending on all those activities. If you add it to other expenses like housing, transportation and others, is the final number larger than your income? If it’s larger, that means your expenses are more than income.
OK, now what?
1. Reduce Quantity of Time
The first option is to reduce the quantity of time. For example, if you purchase $40 worth of alcohol every week, perhaps you can reduce it to $40 twice a month. Another example is if you spend $75/week eating out, perhaps you would eat out only twice a month. You get the idea.
2. Reduce Quality of Purchase or Activity
The second option is to reduce the quality of your activity or purchase. In our examples above, instead of purchasing alcohol $40/week, you could buy $20 worth of alcohol per week; and find an eatery that would cost you $37.50/week, or cut on appetizer, drinks and dessert. Or how about eat first at home, then go out for dessert or drinks instead?
If you like shopping, would it make any difference if you were doing the shopping activity at Old Navy or a thrifty shop (assuming quality is the same)?
When you are short E/R budget, then you would have to compromise on your expectations. Can you do it less frequent, or are you ok staying at a three-star hotel instead of a five-star hotel?
3. Find Alternatives
Many in the hot housing market like Vancouver and Toronto are paying a big chunk of their take-home pay for housing (rent/mortgage, utilities, phones, etc.). If this is you, it may leave you little money for E/R. Here is an idea, how about utilizing your home as part of your E/R? Here are some examples of E/R by thinking of alternatives.
· Instead of eating out, invite family and friends over for a potluck.
· Have a child’s (or an adult’s) birthday party at a park or at your home instead of renting a place.
· Make your own wine instead of purchasing it.
· Choose only one media: internet, cable, Netflix, Free My TV or something else.
· Cut cable. Instead, enjoy free services from local libraries such as Hoopla, DVDs, CDs, books, audio books, movie nights, concerts, workshops, etc.
· Perhaps you don’t have time to watch TV, cable or Netflix because you are too busy with social media (Facebook, Twitter, Instagram, Pinterest, etc.) or playing video games. In this case, why pay for something you don’t use?
For some people, they would rather work more hours and earn more money so they can afford their desired E/R. If this is you, remember that the amount you get to spend is after taxes and deductions. So if your net take-home pay is 70%, then:
· to spend $100, you would need to earn $142.86;
· to spend $1,000, you would need to earn $1428.57;
· to spend $10,000, you would need to earn $14,285.71.
For some people, suddenly the absolute-must-have E/R or vacation does not seem so attractive anymore.
What NOT to do
If you have rainy-day fund, please do not use it for entertainment/recreation. Emergencies do happen and you don’t want to borrow money from high-interest loans or credit cards for emergencies. Have at least $2,000 in your savings account for emergencies.
The key is to set your entertainment/recreation budget when you have limited money. You can minimize your E/R expenses or increase your income. If there are too many E/R activities that you would like to have but very little budget, pick one or two activities that you really like and save the rest for special occasions (birthday, anniversary, etc.). On the other hand, it is unrealistic to set no E/R budget. You may survive for a while, but it will not be sustainable. Lastly, do NOT use your emergency fund for entertainment/recreation. Emergency fund is for emergencies.
For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.