How Spending Money Can Save Your Savings Plan | The Importance of Fun Money

Did you know spending money can actually be essential to saving? Today we’re discussing the importance of fun money and how it can actually save your savings plan.

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Much of the discussion around retirement planning is simply about how to prevent bad things from happening.

In other words, what consumes most people’s thoughts are the following questions:

  1. How can I keep from running out of money?

  2. How can I pay for exorbitant medical bills?

  3. How can I make sure my family is taken care after I’m gone?

These are all critical questions, and typically the answers lead us to places that aren’t easy to visit. I applaud everyone who comes into our office and engages in this conversation.

It’s time to change the conversation.

Let’s talk about what you want to happen with your money instead of what you don’t want to happen.

If I asked you to describe your dream home, you’d likely have a clear picture in your mind of what that home looks like.

I’m guessing you wouldn’t lead with, “I’m just hoping the floors don’t leak and there’s insulation in the walls.” Heck no! A sound structure is important but that’s not describing your dream home! Your dream home is when you reach for the stars and picture a palatial deck overlooking a body of water, a big backyard for your grandkids or an amazing man cave.

Many of us approach retirement the opposite way. We’re simply hoping the roof doesn’t leak, there’s electricity and we have enough to get by.

You’re doing yourself a major disservice and we need to flip the script.

We need to approach retirement the same way we think about our dream home.

I see a lot of people these days envisioning a dream home, but living miserably until they get there. Yes, I’m a believer in delayed gratification, but there’s a difference between delayed gratification and a life of austerity.  

One person can only take so much ramen, grinding away at a second or third job and budgeting to the last penny until they burn out and experience collateral damage.

We need balance

Using myself as an example: When I go on hardcore diets with no leeway or room for indulgences, I ultimately break and then binge. Why does this happen? Because it’s not sustainable long term.

More often than not, I see people who’ve let their baby sized blunders trip them up and derail their entire plan.

Don’t set yourself up to fail!

Build an emergency fund with three months of expenses sitting in a boring savings account. This is the foundation for your debt repayment and long term savings. If you cut everything else out of your life, you’re going to burn out.

Here’s the work around

Set up two accounts. One is your emergency fund. The other is your opportunity fund.

Think of your opportunity fund as your fun money. It’s not designated or earmarked for any specific purchase or purpose. Draw on your opportunity fund for a family vacation, a charitable donation, a date night with your spouse or short term savings.

The best thing about the opportunity fund: there’s no rules! Start with putting $175 into your emergency fund and $25 into the opportunity fund every month.

It’s possible to have quality of life along this journey!

We have a disciplined and healthy approach to savings that will lead you to your dreams. The best part? It doesn’t include a spartan life void of joy until you reach the promised land.

If a built-in fun account speaks to you or this is a version of planning you’ve never thought of before, give us a call.