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Entertainment expense varies widely by individual and family. How you spend your leisure time is a very personal decision. What are your hobbies? What interests do you have? Some considerations:
Friends – What are your friend’s entertainment activities?
Family – What does your immediate and extended family do for entertainment?
Background/heritage – How were your hobbies formed by your upbringing?
Geographic location – How does where you live impact your interests?
Personality type – How does your personality influence how you entertain yourself?
Leisure time available – How does the amount of time available for entertainment impact your choices?
According to this article the average household spends $269/mo. on Entertainment expenses – about 5.3% of total expenses. We know that entertainment is not one of the Big 3 Foundational Expenses. So why examine it? Two reasons:
- How you spend on entertainment reveals your passions, financial priorities and predicts retirement spending
- $269/mo. seems minor, but the opportunity cost is staggering over a lifetime
Examine your entertainment spending. Ask yourself:
- Are my entertainment dollars spent on what I’m passionate about or other’s interests?
- Do I have enough free time to explore my hobbies, or need to cram entertainment into short bursts?
- What would I do if I had more time?
- Am I pressured to spend on entertainment by friends or family?
- What is my personality type? Am I more introverted or extraverted? Do my entertainment activities align with my personality type?
- What entertainment is available for limited or no cost in my area?
The point of these questions is to encourage the reader to evaluate whether their entertainment spending is aligned with their passions and priorities.
Given the purpose of this site is to share insights from our family’s journey to financial independence. I’ve asked myself how I would spend additional free time I hope to achieve one day? What would happen to our entertainment spending if we did have more time? Over the last couple of years, our entertainment spending has averaged $120/mo. From Mint.com categories this is: Amusement, Art, Games, Movies, Music, Newspapers & Magazines and Party hosting expenses – likely reduced by Covid and fewer activities. I would argue there’s entertainment spending in other areas of our budget, but for the analysis, I’ll use the data as I have it. Here are my current activities/hobbies:
- Garage gym lifting
- Trumpet playing – I try…
- Playing/coaching sports with my kids
- Board games
- Watching FCDallas soccer matches – typically at home, but get out to a few each season
The list is low-cost and more than enough to keep me busy if I had more free time.
For our analysis, assume you invest $150/mo. (maybe you reduced your spending and invested the savings) into your Roth IRA from the age of 25 to 65. See the results below (assuming an 8% annual return):
This is the sort of opportunity cost that exists – life changing money in 40 years. Maybe you can reevaluate your entertainment spending and find incremental savings. Make a game out of it, for each dollar you eliminate, immediately increase your Roth IRA contribution by that amount. Here’s a few ideas to get you started:
- Cable TV? Still necessary?
- Streaming services. Maybe you can rotate subscriptions and still watch the content you want?
- Do people still subscribe to magazines? I guess some do, just make sure you’re getting value out of it.
- Movie theaters? Or watch at home?
- Use your public library for all books and movies. Challenge yourself to try the library exclusively for 3 months and see how it goes.
In the pursuit of FI, there is offense (earning more) and defense (reducing expense). Reducing entertainment expense is defensive. Many might consider any savings here a small factor. I urge you to consider the mentality developed from careful expense examination. You are developing a value-weighing muscle that pays dividends over your lifetime. By taking the time to evaluate these smaller decisions, it will help you make bigger decisions thoughtfully in the future when more is at stake.
So, get out there and Entertain Yourself… thoughtfully.