Building a “Fun” Fund for Entertainment and Travel

Posted: 22 Nov 2011 04:00 AM PST

I like to go out to eat. I also enjoy travel. For the most part, I get to eat out as much as I like (about once a week), since my husband and I both make it a priority. However, travel is a little more difficult, since it costs more (and requires more planning). We are fortunate enough that it is possible for us to be able to go on mini-getaways, driving and staying in a hotel for a night or two, when we want. But what about the bigger vacations?

One option that I am seriously considering is adjusting our spending plan a bit to make more room for a “fun” fund. This would be a fund devoted to things that we like to do — but that might be a little more expensive. Whether you have an expensive hobby like golf or wine tasting, or whether you want to be able to get out of town on a whim, creating a fun fund can be one way to help you meet your goals.

Creating a Fun Fund

We all know that an emergency fund is necessary for proper financial preparedness. But few of us think of creating a fun fund that can help us enjoy ourselves without breaking the bank. One of the great things about a fun fund, is that you can keep it in an account that is a little less liquid than what you would use for an emergency fund. With an emergency fund, liquidity is essential, and you might sacrifice growth. Your fun fund, though, can involve investments, CD ladders, and other, less liquid options, since you usually have a little more time available to wait for the funds.

Once you have your fun fund up and running, you can use the money for whatever you want. One of your best options might be to create a fund that replenishes itself. You can build an income portfolio with your leisure in mind. Stock it with bonds and dividend aristocrats, and you could build up regular income that can be stored in a high yield account, and that keeps building. Plus, when you set up an income portfolio like that, your money replenishes itself. However, it can take a while to get an income portfolio producing to the point at which it will support your dreams of entertainment and travel.

In the meantime, you could set aside cash for your fun fund. Decide how much money you can set aside each month for your entertainment fund. (Remember that you should try to be debt free, and make sure you have funded your other obligations before building your fun fund.) As the money builds, and earns more interest, you can use it. But you will have to be sure to replace what you take out. Some people prefer to build a cash stockpile, and then work on creating an income portfolio that can be used.

And, of course, it is possible to fund your entertainment and travel pursuits with some other type of side income. You can set aside the income from a home business, or a monetized web site, for your fun fund. In the end, it doesn’t matter where the money comes from. Creating such a fund can help you in the future, and help you enjoy life a little more.

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