Where to Draw the Line With Entertainment Spending



Budgeting Tips

Even strict budgets usually make room for what we call “entertainment spending.” In fact, there’s hardly any personal finance advice out there that doesn’t recommend you spend at least some money on entertainment or “treating yourself.”

So that’s good news, right? We shouldn’t feel guilty about enjoying life or spending money on things that entertain us. You can all breathe a sigh of relief.

Yet it still begs the question: Where’s the limit of what we can spend on entertainment? There’s certainly got to be a cap at some point. The question then becomes: How do we determine where that cap is?

It’s not an exact science, but when you look at the amount of money you spend on entertainment, there are a few ways to tell if you’re crossing a line.

Can We Afford It?

One of the most basic questions you should ask yourself when you’re about to spend money on entertainment is whether or not you can actually afford it. Now I know that people define affordability in different ways, but a good way to measure it is by the following conditions:

  1. Does it cause you to go into debt?
  2. Will it take money away from necessities (cause you not to be able to pay bills)?
  3. Will it break up your weekly cash flow?

If you answer yes to any of these three questions, your purchase might warrant a more critical analysis. Paying for entertainment, especially if either of the first two conditions is true, is almost always a poor decision, while the third will afford you a little leeway in some situations.

So in asking whether you can afford something, this is going to be the best way to determine the answer and avoid the subjective opinions about when you can or can’t afford something

The Issue of Debt

I want to single out the issue of debt and talk about it in the context of entertainment spending. Part of the reason debt is such an important topic is because it’s the hard line that shouldn’t be crossed when buying things that aren’t necessities.

In fact, you could make a compelling argument that debt isn’t helpful outside of your mortgage or a smart business loan; using it to obtain liabilities is not sustainable.

However, the widely accepted tendency is to use credit to buy a variety of expensive entertainment items, with the intention of allowing cash flow to absorb the monthly credit card payments.

When dealing with entertainment spending in your own life, this is a good place draw the first line. If at any point you need to put a TV, trampoline, vacation or other non-necessity on your credit card (as opposed to not getting it at all), try your best to abstain until you can afford it up front

Enjoyment vs. Excess

Excess is getting to be a dirty word in this country, so we should understand the term in its correct context. When we speak of “excess” and entertainment spending, we’re not talking about just spending a lot on entertainment. If you make a lot of money and your weekly budget can spare four figures a week without any danger of going into debt or not being able to pay the bills, that’s not excess.

Sure, it might be more than the average person, but that only means you’re living excessively when compared to somebody else.

Defining excess in that manner means that you demonize people who can afford to live lavishly, which doesn’t help your own financial situation one bit.

Instead, when we speak of excess, we’re talking about simply spending more on entertainment than your income allows for. That means regardless of what income bracket you fall into, you can be guilty of living excessively.

This means that our entertainment spending should adhere to the following two guidelines. It should:

  1. Achieve enjoyment
  2. Avoid excess

You work hard for your money, so you should definitely enjoy it. If you’ve had a good year and there’s some extra money lying around, go buy yourself something nice. That’s enjoyment, not excess, and it should absolutely be one of your goals when spending money on entertainment.

On the other hand, you don’t want to invest so much in your enjoyment that you’re spending more on it than your income would allow, thus becoming excessive.

It’s certainly a balancing act because you’re walking a line between enjoying life and the things it has to offer, while also trying to live within your means and be smart with your money. Yet if you can do it, you’ll know you’re in the entertainment spending safe zone.

To Sum It All Up

It’s a lot to think about, but the easiest way to sum it up would be this: Don’t go into debt, make sure your bills are paid, and keep a reasonable weekly cash flow. If all that is taken care of, you’re almost certainly in safe territory when you want to make an entertainment purchase.