Our “Fun Fund”

My husband and I recently created a “Fun Fund”. And the size of this fund is about 39.6% of our current projected/planned annual expenses. This Fun Fund includes the following categories: travel (we’d like to do two international trips and two U.S. trips per year as a family), gifts, charity, wardrobe items, entertainment and dining (e.g., treating others to meals; we’re already allocating $1,000 outside of the Fun Fun each month to spend on groceries and family dining).

In a previous article, I mentioned that our projected annual expenses for year 2017 (and possibly the near future years, too, at the time of writing) was $50,000. Then, early this month, we’ve decided to move that number back up to $60,000 (our annual expenses in year 2015 and 2016 was $60,000), even though we currently don’t have child care expenses.

With a budget of $50,000, we were allocating about $13,700 toward the categories aforementioned. We’ve (most, I) came to realize such a number was a little over-stretched and won’t bring me much happiness. So, my husband and I looked at our financial numbers again, and we’ve decided that we can spend up to $60,000 a year and still be able to save a lot.

In my husband’s own words: “I feel I’ve lived my 60s while in my 20s, and now I’m living my 30s in my 30s. Maybe I’ll live my 20s while in my 40s!”

We are very fortunate that we have the means and freedom to increase our spending as we wish. I haven’t always feel this kind of freedom. For years, my husband and I worked hard to reach the million dollar mark. Once we got there, we relaxed our spending a bit. As we continue to build our scoreboard, we’ll probably be more willing to splurge on more luxurious experiences.

The Financial Planning Process

A big part of making your finances work for you is about knowing yourself. I’ve found that this a very important piece for me. From knowing about my husband, he would be happy to have a high savings rate of 80%. Ours has been around 70%, which I wrote about in a previous article. At our incomes level, I know I’d be miserable saving at the 80% rate. So, he and I sat down and we talked. We talked about our values, our priorities, our dreams and our financial numbers. And together, we came up with a financial plan that works for us.

Financial planning can be as rigid or fluid as we (and our significant other) want it to be. As money goes in and goes out of our scoreboard (a.k.a net worth) and as the financial markets fluctuate, it’s very important that we take the time to assess (and reassess) our current financial situation objectively. As we do this, we also need to ask ourselves how we are doing. And then do our financial planning accordingly.

Are your savings rate and spending in line with what you value? If spending a lot of money doesn’t make you happy, even when you already have very large investment and bank accounts, you might need to look inward and redefine what happiness is to you.

If you have to squeeze very hard on a set budget (and maybe feeling a little miserable doing so) just so that you can put as much of your paycheck(s) into your investment and bank accounts every month, you might want to reevaluate your priorities. I wrote a post on Ways to Enjoy Today While Building and Maintaining a High Savings Rate.

The great thing about financial learning and planning is that once you have the knowledge, clarity and wisdom, they are yours to keep forever. And you can work those skills and strategies to your advantage, anytime.

Lifestyle Inflation, Environmentalism and Frugality

One thing I don’t see us ever engaging in is lifestyle inflation. That’s just not us. We care a lot about the foot prints we leave behind on this Earth. We don’t like to waste. My husband became more frugal during the “going green” movement in the mid 2000s. He then became even more frugal during the financial crisis of 2008. Many others in the early retirement community, such as Mr. Money Mustache, also share the view that environmentalism goes hand-in-hand with frugality.

One day when we have a lot more money and time, both my husband and I would like to start our own charity projects promoting and providing financial literacy education to disadvantaged families. We’ve both seen first hand what financial learning and financial empowerment have done for us. We’d like to extend this sense of freedom, satisfaction and fulfillment to other struggling families. 

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