Budgets are hard enough to stick by without feeling like your hands are tied behind your back when it comes to spending money on extras like personal shopping and entertainment. However, sometimes budgeting money for “play” into your monthly expenses, can feel counter productive to your finances. In essence, you could always be spending that money on that looming pile of debt or at least on something that you actually need – maybe a new skillet that isn’t peeling residue into your omelet?

I’m a big believer in having “personal spending” money available each month. And while I do not advocate “rewarding yourself” because I think that puts an unhealthy habit into place, I do advocate budgeting a portion of your monthly income for entertainment purposes. So, what is a good rule of thumb for doting a little cash on yourself? We have percentages for spending money on rent (25%) and food (10%). But what amount is acceptable to spend on ourselves?

According to the U.S. Department of Labor and the U.S. Bureau of Labor Statistics, the majority of people spend around 5% of their annual income for entertainment purposes. This means that for someone making a 40,000 salary could reasonably set aside $2,000 a year or around $166 a month for pleasure seeking activities.

What I have started doing is taking my entertainment allocation and placing it in a separate little savings account. This is separate from my regular savings account. This way I know exactly how much left I have to spend on fun activities and it’s not lopped in with the rest of my cash in my checking account. This measure may not work for everyone, but since I am a very visual person it’s much easier for me to keep track of my money when I physically can see it in different accounts. I also have a nice tiered checking account that allows me to have three different accounts (checking, savings and money market) all tied in together so that it’s incredibly simple for me to transfer funds around in a short amount of time.

So, readers, how do you keep track of your personal spending? Do you just wing it or do you carefully track how much you spend each month?

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3. The Rules of Budgeting — Tailored to a New York LifeStyler
4. Real New Yorkers: Using Part-Time and Freelance Gigs to Catapult Yourself into Full-Time Work