How to allocate spare cash to savings and fun money

[shuffleofftobuffalo]

I had a big salary increase quite recently. After all my bills/expenses I have £1650/m spare cash. It’s completely spare, literally every expense (monthly and annual) is accounted for in my budget which I’ve got good at sticking to.

I spend ages agonising over what to do with the money in terms of what’s reasonable as fun money and what’s a smart thing to do in terms of saving the rest.

I have a high interest regular saver account (7%) and a cash ISA (both instant access) so I already have a decent chunk of cash available for car breakdowns/replacing appliances etc if needs be.

After some scarce years I’m almost a little afraid to allow myself to have more money to spend, but my weekly £20 pin money feels a bit frugal at times, I’d like to have an allowance to spend frivolously. How would you allocate that money in terms of having some money as spends each month and saving the rest?

It wholly depends on what you class as ‘fun’ spends. My DH and I have £300 each per month for personal items, and this includes clothes. It doesn’t include eating out, events, take-always and coffees etc. as I class those as ‘Entertainment.’ This pot is used for the whole family, and is more like £700 per month. What do you class as ‘fun’ spends?

Agree with this. Do you have a fund for going out for drinks/meals? Buying clothes/luxuries or whatever?

Personally I have about £700 a month for that kind of thing and then the rest goes into savings as soon as I get paid.

Have you thought about big expenses like car replacement or home improvement or moving house? If you have DC saving for them?

Also how's your pension looking? I expect with that amount of spare money you're a higher rate tax payer? Plus if you've earned less in the past your pension could do with a boost?

What's your thoughts about retiring or working less in the future? Money you put aside now will help with that goal.

Are there any areas of your bills where you could be less frugal, eg if you're used to a small budget it can be hard to get used to being able to spend more on groceries or paying for a cleaner or gardener for example.

As well as saving you could probably think about investing in a S&S ISA once you have more than what you need for the short to medium term.

So if you take up any of those suggestions your £1650 could have reduced somewhat but to answer your question I'd have no qualms about bumping your weekly £20 up substantially. £100 is a nice round amount bur £500 pm could also be a good start.

Think of some things you'd like to do or buy for you and have them. You can afford them and you deserve them

I have a holidays and trips out pot that I’d use for eg going to the theatre type nights out and one for eating out. Going out is an occasional thing for me, so I’d like this new pot to cover going out for the odd quiet drink/local inexpensive night out, coffees, non essential clothing purchases. Nonessential stuff I would (and have!) go without if the budget was tight.

I would start off with £1000 into savings, and £650 for you. You may well find you dont spend that every month, at which point you can sweep it into savings as you approach pay day again.

Adjust the £1000 up if its clear its far too little.

Im basing this on us putting half of every pay rise into savings every time we've had an increase. It's a very healthy monthy sum right now.

I always over pay my mortgage to the limit I can without penalty .
Also totally agree with what @IceIceSlippyIce suggests.
Also increase pension contributions to the max that your employer will match .

I love travelling but do everything on a very strict budget .
I aim for financial security because you never know what’s round the corner ..

I'd put half into a long term savings account and half into an instant access saver so that when you want to have fun, the money is waiting. That would be £800pcm for good theatre, comedy, gig, concert and sports event tickets; celebratory dinners for family birthdays and occasions. or some months you may only spend a little of it, and let it build up for weekends away, throwing a big party or towards a family holiday.

This is probably much better advice than mine, long term. But i do love spending spare income on having fun with family. I hate the expression 'making memories' but great days or nights out and great holidays are memorable.

@Tonissister
Agree on memories … we do a huge amount of days out , holidays etc but I am obsessed with getting bargains !
I save points etc !
Recently had a week in Barbados for £320 each !! Used avios points I accrue with work travel …

to be honest if I didn’t travel so much I could retire much earlier but that’s a savings plan too far for me 😂
It’s a balance …. ( saying this right after I booked a trip to Florida this morning !! )

The UKPersonalFinance Wiki flowchart was recommended on here recently. Definitely worth a look.

It is really difficult to say without know what you mean by all expense covered as you say eating out is already covered but you want to for the odd quiet night out? And clothes- are they already accounted for or not

how much do you have at the moment after bills and mortgage?

Came on to recommend the finance flow chart. Easily found by searching.

Good advice is not to live up to your pay rise, but to save at least half for your future and your kids future.

Early retirement needs a lot to cover the inbetween years before state pension can be claimed.

congratulations on your pay rise, enjoy the peace of mind financial stability brings

Financial flow chart is good because it starts with a basic budget while you're out of debt and building financial stability but then actually includes a 'spend more' step once you have more spare money. Also encourages you to think about life goals.

Thanks all, lots to think about - particularly that I need to think about those big expenses and making the money really work for future goals.

love the financial flow chart, thanks v much!

I had to have 10 very very frugal years. When that was done, I still felt like having a coffee in town with a friend was pushing it, definitely wouldn’t have had a cake with it!
I spent one year putting £300 in a regular saver, and when that matured, I opened a Monzo and took inventory of what I needed but couldn’t have afforded previously. I overhauled my wardrobe, got haircuts and massages, booked courses, bought books, got an Amazon music and kindle subscription, went on city breaks.
So now, my yearly budget for ‘stuff’ is £3600, I continue to save the £300 and use them as and when I need. That Monzo account gets fed £500/month for food and ‘stuff’.
HTH