Let’s get right to it: How much entertainment can I afford in my budget? While some people want to live “large” and enjoy their lives, some others find entertainment frivolous and minimize it. In either case, it is worth the effort for each person or family to think through their entertainment spending or risk the issue of significantly overspending.
What Qualifies As Entertainment?
For the purposes here, let’s define entertainment as eating out, family trips, drinks, events, vacations and baby sitters if you have children. You could argue that pets, cable TV and services like Netflix also qualify. You can define it for yourself and depending upon your lifestyle or family goals, it could be something that significantly changes over time.
Again, How Much? Where Do We Start?
Let’s start with a couple assumptions. Let’s assume you have an Emergency Fund already in place and that you are saving 15% of your net spendable budget (NSB, total income minus taxes and charitable donations). Let’s also assume you are living on a balanced budget (spending less than you earn) and earn about the national household average of $75,000. In this scenario, most families can afford about 5% of their NSB to go towards entertainment. That’s about $250/month. Or roughly $60/week.
How Can We Use This Information?
Entertainment in a balanced budget must be managed. It is so easy to have our entertainment spending break our budgets in a big way. A family on a balanced budget that is saving for the future has to make wise choices on where they spend their entertainment dollars. Most budgets can afford about 5% of the net spendable budget to go to entertainment while still meeting other budget goals. Let’s take a look: (% of NSB by category)
Housing (All Expenses) 30%
Debt Service 5%
Do you agree? What is your entertainment budget?