Although much of the focus in the saving, frugality and financial independence world is to cut down on discretionary and leisure spending as much as possible in order to meet your long-term financial goals, this might not always be the best approach in the long run.
Personal finance and saving money are best thought of as points on a spectrum.
On the one end of the spectrum, you have individuals who are way too loose with their spending habits. For these people, living pay cheque to pay cheque is the order of the day, and long-term financial goals exist only in the abstract. Individuals on this end of the spectrum tend to prioritise living (and spending) in the moment rather than in the future.
On the other end of the spectrum, we find that rare breed of perfectly frugal individuals. For these people, their entire life is structured to allow them to meet their long-term financial goals. This might often be the goal of retiring early, getting rid of the mortgage or buying a second home in some far-flung destination. These individuals tend to prioritise living in the future and eschew spending in the present moment to bring themselves closer to their dreams.
What is interesting about these two extremes on the spectrum of finance and personal savings is that they actually have more in common than we perhaps might have realised.
What both the loose spender and the overly frugal saver lack is a sense of balance. The loose spender tends to be far too present-moment oriented and lacks the ability to think about the future. The overly frugal saver, however, spends too much time thinking about the future and misses out on enjoying the present moment.
Given that both individuals do exist on a spectrum, it means that a happy medium between the two extreme ends should exist somewhere towards the middle.
The value of living in the moment
The main issue with the overly frugal saver is that they get far too caught up in the end goal and miss out on the journey. Although it is nigh on impossible to meet a long-term financial goal without some kind of planning, it is also equally true that life itself is about the journey rather than the destination alone. After all, what is the point in having a financially independent retirement, a fully paid-off mortgage or a vacation home if you have sacrificed everything that makes life worth living along the way?
The importance of fun money
With that said, an important part of working towards your long-term financial goals is allowing for what is known as ‘fun money’ within your budget.
Fun money is basically a form of discretionary spending that you provide for in your monthly budget and allow yourself to enjoy free from guilt. It should never detract from any of your necessities, debt repayments or long-term saving goals.
Fun money can be spent in any number of ways, although popular choices include hobbies or activities with friends. It could also entail larger forms of expenditure such as a vacation, as well as lower value, more frequent forms of spending, such as classic online casino games like book of dead.
Although the notion of fun money might seem completely at odds with the ethos of the frugality and financial independence movement, there are good reasons for making allowance for it on a monthly and yearly basis.
It is important to remember that saving towards financial freedom is very much a marathon and not a sprint. As such, allowing yourself periods of rest or downtime every now and then can actually be a great way of ensuring you keep up the momentum in the long run without burning out.
Similarly, building in an allowance for fun money allows you to actually enjoy the fruits of your (frugal) labour. After all, what is the point in endlessly saving money if you never actually get to enjoy it?
Allowing yourself to de-stress and to enjoy hobbies and other leisure activities can also bring health benefits. Personal finance worries are a leading cause of stress and depression, and as we know all too well, stress can have a number of negative health outcomes. As such, it is important to find outlets that allow you to blow off some steam and to take a break from the stresses of daily life. This will ensure you live a longer, happier and ultimately more fulfilled life.
