My money makeover: 4 simple steps to start a “fun money” cash system

chalkboard piggy bank spare change

Do you have a money system that works for your family? I recently shared my money makeover that has worked for my family over on Money Saving Mom. We set up our family budget on a cash system, that includes “fun money,” and it has worked wonders for us. A cash envelope system gives you the responsibility to be a good steward of your money, practice delayed gratification by saving for big item purchases, and prevents you from spending what’s not yours to begin with.

My friend Linda introduced me to the term “fun money.” It seems like a funny concept, and it took me over three years to finally adopt it into my own life, but now I want to share this life-changing and simple cash system with you.

My husband and I have always had a toxic relationship with money. If we have the money, we spend it. If we don’t have the money, we spend it. Then one day, we maxed out our credit cards, and we could no longer spend money we didn’t have.

I actually used to be good with paying my full credit card balances at the end of each month. I had an excellent credit score, owned my own condo by 22 years old, started my own business by 26 years old and was very responsible with bills and credit card payments.

But then I had a baby and fell in love! I left my job to stay home with my daughter, our income got smaller, and our expenses increased. I mean I “had” to have a Phil and Ted’s stroller. I had to.

Even if I already had a Graco stroller and a Peg Perego stroller and was a baby-wearing enthusiast who didn’t even use a stroller much. I thought I “had” to have that $400 stroller!

Fast forward three years later: my husband and I use a cash system.

We were forced to really look at our budget and enter the world of conscious spending. The funny thing is, we never had a budget, so I had to create one. We now only use our debit cards to pay for gas, a few random online purchases, and our online bill pay. We use our cash system for groceries, toiletries, and “fun money.”


Here’s how the “fun money” cash system works:

1. Designate what the “fun money” will be used for.

Our “fun money” is for anything that is not a living or survival expense: movies, eating out at restaurants, iTunes music, clothes, tickets to a concert or game, gifts, enrichment classes, books, hair cuts, etc.

2. Budget a set amount of money per person.

We budgeted $200 per month per adult and $100 per child (Zoe’s fun money goes towards her classes like ballet). So that’s a total of $500 per month budgeted for “fun money” in our family. That might sound really high to you. If so, choose a number that is doable with your own budget.

3. Set up a “fun money” payout date on a weekly, bi-weekly or monthly basis.

We chose to distribute “fun money” bi-weekly based on my husband’s paydays since his checks from work get direct deposited into our bank account.

4. Choose a person who will withdraw and distribute the “fun money.”

Since I work from home, I make a visit to the bank on payday and put our “fun money” into an envelope labeled with our names on it. This would be similar to Dave Ramsey’s cash envelope system. Ramsey says it’s all about taking baby steps. I highly recommend checking out his book The Total Money Makeover.


Some benefits and personal changes we’ve made along the way

  • Designating “fun money” to cover the little things help tremendously on impulse buys at places that are money traps (Target, I am looking at you).
  • Having a “fun money” system also eliminates a lot of fights over spending habits in the relationship. My husband can do whatever he wants with his fun money every month and vice versa. We don’t start a tit for tat battle on who is spending “our” money on frivolous items. Having a “fun money” cash system gives you the right to spend your money how you want to without judgement or resentment.
  • I was also addicted to buying books at the bookstore. Now I visit my local library weekly. We check out free DVDs and I put holds on new release books all the time. It’s amazing how quickly they come to you. And it’s free!
  • Our two beloved things: clothes and food have fallen to the bottom of what we spend our “fun money” on. It’s really quite interesting.
  • My husband and I now go dutch on dates and use our “fun money.” So when my husband offers to treat me to dinner it feels really special. And just recently I gave my husband $100 of my fun money, so he could take a music theory class. I’ve noticed we don’t really need “fun money.” It’s a luxury.
It’s nice to have our fun money to do what ever we want without having to worry about going over budget or spending money we don’t have.
{image credit: Lil Blue Boo}


Join the discussion

Do you have a system for “fun money”? Leave a reply and let me know.

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2 Responses to My money makeover: 4 simple steps to start a “fun money” cash system

  1. Popo Joy May 28, 2012 at 10:01 am #

    Love this post! Getting a handle on the money a family spends, and budgeting in the “fun money” is essential to family bliss. Following your system will bring great rewards, and lots and lots of quarrel-less discussions over money. Nice job!

  2. Trina {Beginner Beans} May 29, 2012 at 1:55 pm #

    This is how we handle “fun money.” And it works with our smaller budget too! Actually, I think it’s even more essential when on a tighter budget. 🙂

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