Ramit Sethi recommends spending so much on fun

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Spending money on fun expenses is important – but how much is the right amount?

Key points

  • When you budget, you need to leave room to spend on fun things.
  • Ramit Sethi recommends that 20% of your income be used for guilt-free spending.
  • This is an appropriate amount for some people, but not the right choice in all circumstances.

Almost all of us have a limited amount of money to spend and lots of things to spend. Obviously, it’s important to be responsible with your funds because of this. This means doing things like making sure to pay off credit card debt and saving for your future.

But, while you certainly want to make smart spending decisions that improve your situation in the long run, you too need to be able to enjoy some of your money. If you’re trying to budget for only the essentials and hoping to save every other dollar or use it to pay off debt, you’re setting yourself up for failure because you’re inevitably going to splurge at some point. given.

Rather than creating an unrealistic plan of what you will do with your hard-earned money, you should consider making a conscious plan to spend some of your money on things you love. But how much, exactly? Here’s what Ramit Sethi thinks.

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Ramit Sethi on fun spending

Ramit Sethi is an author, finance expert and creator of the I will teach you how to be rich website. On Twitter, Sethi suggested how much of your money you should spend on “splurges”.

“I recommend that at least 20% of your income be spent on guilt-free spending,” Sethi said. Sethi’s recommendation is part of his “mindful spending plan,” which he says you can use to help ensure you’re saving and investing enough to be able to spend the rest of your money “without guilt about what you want”.

Sethi’s plan also advises you to spend about 50% to 60% of your net income on fixed costs, including your housing payments, utilities, insurance, transportation, debt repayment, and groceries. . With 20% set aside for fun and 50-60% for fixed costs, you would still have enough money to save and invest, but you wouldn’t have to live a life of deprivation.

“I’m so sorry for people who hear things like ‘don’t buy lattes’ or ‘get lentils instead of meat’ and believe money is all about restriction and budgeting,” Sethi wrote. when presenting his conscious spending plan.

If you follow his advice, you won’t have to, and you can actually enjoy your money now without sacrificing your future security.

Should we follow Sethi’s advice?

Setting aside 20% of your money for guilt-free spending isn’t a bad idea, but a lot depends on your personal financial situation and goals.

If you box reduce your fixed costs and have the discipline to save and invest about 20% of your income, then there’s absolutely no reason not to splurge on that percentage of your money. And, in fact, if you’d rather spend less on things like housing in order to free up more money for guilt-free spending, then there’s nothing wrong with that either.

But if your goal is to pay off debt as quickly as possible, or if you live in a very expensive area and your housing takes up a high percentage of your income and you don’t want to move, you may need to adjust that. downward amount.

The key is, as Sethi suggests, to establish a conscious spending plan that allows you to use your money in ways that best reflect your values ​​and goals. And you don’t have to take all the fun out of your life to do that.

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