I guess I better explain what I mean by fun money.
My wife and I found very quickly after getting married that we are complete opposites when it comes to spending and saving.
You see, my wife and I have our budget structured so that we each pay ourselves a bit of pocket money each month. We can choose to do whatever we want with this money, from buying lunches, to going shopping (for me, that usually means saving up for expensive electronics), or buying each other presents.
The Envelope System (Cash Budgets)
It turned out extremely helpful to have read Larry Burkett’s book, “The Complete Financial Guide for Young Couples,” before we got married. Shortly after marriage, we found we were driving each other crazy. I was wincing every month as the balance in our joint checking account dwindled with small purchases, and my wife was getting really tired of hearing me complain about that dwindling balance.
So, we adopted a cash budget using the envelope system. Pioneered by Larry Burkett and popularized today by Dave Ramsey, this method allowed us to set aside money for our obvious bills that did not get automatically deducted from our account each month. We setup our envelopes as Groceries, Entertainment/Restaurants, Gas, Auto Repairs/Maintenance, Hair/Makeup and Gifts. In addition, we set aside a small amount that we paid ourselves in Fun Money.
This greatly helped smooth things over for us. I stopped seeing the small nickel and dime transactions in our joint checking account, and she had the freedom to stop and grab snacks or drinks, or buy small things at Target whenever she wanted. And I started to do what I wanted with my fun money, set goals and start saving for larger purchases!
Variability
The amount of fun money we pay ourselves has ebbed and flowed over the years. When we were first married, we lived off a single income and had nearly $55,000 in student loan debt. We decided we wanted to live as far below our means as we comfortably could, and focus on paying off this debt as fast as possible. But, in order to stay successful at this over the long term, we decided on an initial amount of $80 per month that we each paid ourselves in fun money.
We were diligent and paid down the debt as quickly as possible. To give us a jump start, we sold off some investments we had in a taxable brokerage account. With these two things combined, we paid off our debt in approximately 20 months. Once paid off our debt, we raised our fun money budget to $150.
Fast forward a few years later, we raised it again to $200. Then, shortly after having our son, we trimmed that fun money back to $150 per month. And, a year later, we raised it back up to $200.
Funding my Investment Account
I’ve used my fun money for various purposes over our years of marriage. I’ve purchased my dream guitar (a beautiful Gibson 2014 Les Paul Classic), built a sweet new computer, bought various other electronics, along with a handful of tools.
I like to keep a decent balance in my personal savings that ensures I always have money for upcoming birthdays or Christmas. But after a while, I started getting the itch to invest a portion of my fun money to see if I could grow it even faster (and learn a thing or two about active investing along the way).
So, this is my journey. These posts are partly me tracking my successes and failures, and pressing on through a bit of pain as I learn a few lessons.
My goal is to continue contributing to this fun money investment account at a rate of $100 per month. And hopefully, I’ll end up with positive results year over year as I refine my strategies and become a more knowledgeable investor.
FNMNY 