We, Millennials, see money not as an end in itself but as a tool to buy experience and enjoy life.
We prioritize traveling and experiencing the world. Fighting for causes we believe in! and making this world a better place by following our passions and dreams.
But most often we forget that there are essential things we forget to prepare for such as retirement planning, critical illness coverage, and medium-long term savings.
This article will not talk about savings and investment but how do we build and manage a Play Fund so we won’t blow up our budget and be drowning in debt.
What is a Play Fund?
Play Fund is what you use to fund things that you love to pursue such as travel, gadgets, causes, and passions but are outside your budget in terms of living expenses, savings and investment, retirement, and education.
The maximum allocation should be 10% of your monthly budget.
This is where we, millennials, sometimes fail.
We spend more than the 10% allocated for our Play Fund which sometimes results not only to 100% of our income but also to debt (spending more than we earn).
The 10% should be the maximum for a Play Fund!
20% should be placed in savings and investments, 5-10% is budgeted for charity/giving fund, and the remaining 55-60% for your living expenses.
Needs vs. Wants
A Play Fund is definitely a WANT! And you deserve to enjoy that want!
You work hard and you deserve to enjoy your money!
But before enjoying, make sure you don’t have any debt.
There is a saying that you can only seek for a balanced life only when you can balance your checking account.
We need to manage our wants too!
Wants are harder to manage than needs because needs are limited while wants are unlimited.
Step 1: Identify your Needest WANT
In your list of unlimited wants, what is your Needest Want?
The one thing that you will do whatever it takes in order to achieve that thing.
Let’s say you would like to travel to Maldives for 3D2N with a budget of P50,000.
Step 2: Compute How Long You Need To Save
Set aside 10% of your income for your Play Fund.
So let’s say that you are earning P50,000 per month after tax, 10% of that is P5,000.
P50,000 divided by P5,000/month is equal to 10months.
In 10months you can go to Maldives and pay in cash at the same time avoiding the trap of credit card debts.
Step 3: Increase your Income so you can increase you 10%
If you want to make your Play Fund accumulate faster, increase your income to increase your 10%.
Find part-time work and an online selling job where you can earn additional income without taking too much of your time.
Take note that the goal is to increase your income and not sacrifice your living expenses for your Play Fund.
Because when you deprive yourself what will happen is you will overspend and blow-up your budget.
Take note also that only 10% of the increase in income should be placed in the Play Fund and the remaining can be placed for savings and investments.
SPECIAL RULE
The special rule is that the Play Fund should be used every 3 months. Meaning if your 10% per month is P5,000, when you hit P15,000 it should be used.
The reason here is if you deprive yourself for so long, you will overspend.
But it depends on you! If you think you have the discipline to delay gratification for 10 months in order to achieve your travel goal, then do it!
Always Remember: 10% Maximum Play Fund!
To end, don’t forget that only 10% maximum of your monthly income should be allocated for your Play Fund.
Identify your needest want, compute for how long it takes to achieve the target, and find ways to increase your income so you can increase your 10%!
Your Millennial Wealth Planner,
Harold Q. Gardon, CWP, CEPP
How do you find the article? Do you have any questions? Please feel free to message me if you want me to discuss a particular topic or if you are seeking financial advice.
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