Budgeting in Fun
Even when the economy is in an uncertain spot, wealth managers agree it’s important to put some money aside every pay period to do the things that are inspiring and spark joy.
The current economic climate has placed financial strain on many individuals and families across the country, making it increasingly difficult for those facing financial hardship to save money and maintain a budget.
In times of economic uncertainty, it can be tempting to put all extra income toward savings, retirement funds, and investments rather than spending it on discretionary purchases and enjoyable experiences such as travel, dining, hobbies, and entertainment.
However, while investing in the future is important, it is also important to set aside some money for the things that bring enjoyment and fulfillment. Allowing room in the budget for leisure and personal interests can contribute to morale and support overall emotional and mental well-being.
One effective way to balance financial responsibilities with personal enjoyment is to set aside a specific percentage of income each pay period for discretionary spending. This approach allows individuals to cover their basic needs and financial obligations while still having money available for activities and experiences they enjoy. Another option is to set a specific goal, such as a vacation or a major equipment purchase for a favorite hobby, and consistently set aside money to work toward that goal.
“Take whatever percentage you’re comfortable with, and then put that aside. That’s the most prudent and practical way. But what we suggest to clients is to see how you do with that, and then increase it or decrease it based on circumstances,” says Stan Molotsky, president and CEO of SHM Financial Group.
Beyond money for leisure and entertainment, some people also make room in their budgets for activities that support personal growth and their values.
“I’ve had some clients who have me build in a spiritual budget, and that’s for personal growth and development retreats, work that they want to do in their local area or sometimes internationally for volunteer work, which costs something out of their budget to be able to travel and do that kind of thing,” says Amy Begnaud, senior vice president of wealth management and financial adviser with the Begnaud Wealth Management Group, part of Janney Montgomery Scott LLC.
There are trade-offs to consider when setting aside money for discretionary spending while also trying to maintain savings and investments. The right balance depends on an individual’s income and financial goals.
“If I know a client really loves skiing and would really love to go to Utah or Colorado for a ski trip that they’ve always wanted to take, and they really don’t have the discretionary income for that right now, we talk about trade-offs. Those trade-offs might be not buying the more expensive car, or looking at where cash flow is actually going,” says Begnaud.
Another way to free up discretionary income for the things that matter most is to identify unnecessary expenses, such as forgotten subscriptions and memberships.
“Don’t shortcut yourself of the short-term enjoyment of things because you never know what the future is going to hold. Life is fun if you take advantage of it,” says Molotsky.
That philosophy can also apply later in life. After spending decades saving and building wealth, some people may still be hesitant to spend money on the experiences they’ve always wanted, such as travel or time with family.
“Oftentimes I meet with clients that are in their 70s, 80s and beyond, and they’ve done a fantastic job of putting money away and working with an adviser like myself to grow that wealth. Now we’re at a point where they have the ability and the luxury to be able to travel and they’re reluctant to do so. It doesn’t even enter their mind to book a first-class seat,” says Begnaud. “So one of the things that I’ve said to some of my clients is, ‘If you don’t travel now and if you don’t book a first-class seat, believe me, your children will.’ They have worked a long time to save and grow that wealth, and now they’re not really enjoying it. So the next generation will. And I’m a proponent that people really live their lives,” says Begnaud.
Resources:
Begnaud Wealth Management of Janney Montgomery Scott LLC
Mount Laurel
(856) 291-5032
The SHM Financial Group
Voorhees
(856) 454-5110
