How Much Spending Money Should You Give Yourself Each Month?

Everyone knows that saving money is important – but there’s another, some might say funner aspect to your budget that you want to make sure you address: spending money.

When you first started making money, you were really excited. Then you spent all of it (super fun) and realized you needed to build a budget (not as fun). 

But the best budget is the one you can stick to, and to paraphrase Stephen King: All work and no spending money makes Jack a dull boy. In other words, a budget with no room for fun will be nearly impossible to stick with in the long term. You gotta give yourself a little wiggle room to cut loose every now and then. 

The issue arises in figuring out just how much that spending money should be. Too much and you’re left with three new jackets and no lunch for the next week. Too little and you’ve got a solid savings account but no social life, and you’re wearing the same hole-y clothes on repeat. 

So today, we’re here to walk you through figuring out just how much spending money is right for you. Let’s get started. 

Why is Spending Money Important?

Finding the balance between saving and spending money can mean finding the balance between caring for your future and current self. For that reason, your budget should account for purchases that bring you joy and/or make your daily life easier. 

Think about the little things that you truly appreciate: Does your daily coffee run make your mornings that much better? What about those weekly date nights with your significant other? It could even be your monthly hair appointment that keeps your hair looking fresh and your confidence high. 

These purchases aren’t a waste of money – they’re an investment in yourself. 

How Much Spending Money Should You Give Yourself Each Month?

That’s great in theory, but what about in practice? How can you make sure you’re hitting that sweet balance between self-care and saving for the future? We’ve got you covered. 

Here are four simple steps to build a healthy, well-balanced budget:

1. First, Know Your Needs

Any good financial pyramid begins with a solid base. Begin by making a list of your necessities: food, rent, gas money, utilities, prescriptions – the expenses absolutely can’t go without. These are the areas where you can’t really cut any corners. 

Write estimates of these monthly expenses. When in doubt, always round up (you’d rather have a little leftover money at the end of the month than not enough, right?). 

For example, the median salary for a 35-44 year old is $58,604 per year. Divided by 12, that person (let’s just go ahead and call them Peter) would earn about $4,883 a month. Peter is your average guy: married with one child, living in the suburbs of a city, without any major health concerns. Imagine the expenses that Peter might have to pay each month before he can even think about spending money:

Mortgage $1,400
Health Insurance $600
Car Insurance  $150
Gas money $100
Phone Bill $50
Utilities $200
Groceries $400
Total ‘necessities’ expenses $2,900
Total monthly income left $1,983


As Peter moves forward in building his budget, he now knows that regardless of whatever else is going on in his spending, he’s got to have at least $2,900 to pay the basics each month. 

2. Pay Yourself

Your budget basics should include paying yourself, meaning money that will go into savings or investments. You should put around 30% of your total take-home income into this bucket, but don’t stress if you’re not near that number – any amount is a good place to start. 

If you create a set amount you’d like to pay yourself each month and treat that goal like any other bill you have to pay, you’re more likely to reach your goal. 

In Peter’s situation, he should aim for about $1,465 each month to put into his savings or long-term goal accounts. 

3. Make Way for Fun!

Now for the fun part. These things might not be necessities to survival, but they contribute to a healthy and happy you. 

To find your final number, you’ll want to take your total monthly income and minus out those necessities and savings numbers. For Peter, that would look like this:

Monthly income ($4,883) – Necessities ($2,900) – Savings ($1,465) = $518

Peter now knows that he has $518 dollars a month left for his fun spending. He doesn’t have to use all of that money, but he now has a realistic guardrail for all his weekend adventures. That $518 makes up about 10% of Peter’s total monthly income, which is a solid percentage to shoot for as you build your own unique budget.  

Whether you want to put aside a little extra dough for eating out at your favorite restaurant or catching a movie once in a while, you’ll need to list those wants out. How much do you estimate you need to be happy? 

For example, maybe you’ll set aside $25 a month for the latest action flick, and $50 for your favorite sushi dinner. $40 to get your nails done, and another $100 to refresh your wardrobe for the new season. Oh, and don’t forget $15 for your Netflix subscriptions (watching the latest season of Nailed It is definitely a must-have).

After you’ve listed out all the things you think you’d like to use your spending money for, take a look at your wants and needs in the context of your overall income – is there room for all of it? Are you hitting that golden ratio between happiness now and happiness in the future? 

If not, you’ll want to reconcile your income and expenses, either through minimizing your fun money, or building a little extra wiggle room into your budget. A $5,000 a month lifestyle can’t survive on $4,300 a month – so grab your calculator and start moving those numbers around until it makes sense. 

4. Revisit and Revise as Needed

Income changes, inflation raises prices, and lifestyle habits evolve as we age. Many things can affect your budget without you even noticing. 

That’s why it’s important to check back in on your budget each month. Is it still optimal between your wants and needs, or did they raise the price of that double macchiato on you?

A great budget grows with you – so don’t be afraid to make changes as necessary along your journey.

Spending money is just as important as saving money, but the key to getting both right is a balancing act. Follow these four simple steps to make sure you’ve got room for both your wants and needs.

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