Personal Finance (Sec. 2.4)

Fundamentals of Finance by Adam J. McKee

SECTION 2.4:  Fun and Toys

This work is licensed under an Open Educational Resource-Quality Master Source (OER-QMS) License.

Open Education Resource--Quality Master Source License

As I’ve previously stated, everything in life should be approached in moderation.  That means that your financial security does not revolve around a total absence of fun and entertainment.  Life is to be enjoyed.  The flip side to this is that if you spend lavishly on vacations, entertainment, and other forms of fun, you will wind up with more month than money.  You should make entertainment a budget item, and seek to live within that budget item as you would with any other category of spending.  A key question to ask yourself is this:  “Will I feel like this money was well spent a few months (or years) down the road?”  As with most other aspects of life, a sense of frugality can provide you with ample enjoyment of life’s diversions without breaking the budget.

Entertainment Spending

A little consideration of cost can go a long way when it comes to preserving your budget.  Consider going to the movies for example.  You can save several dollars attending a matinee rather than a more expensive evening showing.  You may not know that theaters make almost nothing off of showing movies; the makers of motion pictures receive the bulk of ticket sales.  Theaters make the bulk of their profits off of selling concessions at hyper-inflated prices.  Having a meal before you go to the theater will discourage you from spending your hard earned money on ridiculously priced popcorn, candy, and soft drinks. Be on the lookout for discount theaters that show movies that aren’t still playing in higher-end theaters.  Often, the ticket prices at budget theaters are significantly reduced.  Also, consider a movie night at home; Netflix is much, much cheaper than the theater experience.

Competition and the “cord cutting” phenomenon have made cable and satellite television a little more affordable in recent times, but the yearly cost of extensive “packages” can still be staggering when you look at the total.  Carefully consider your TV watching habits.  Are you getting $1000 to $1500 per year out of the service?  If you are a huge sports fan, then a package with ample sports channels may be worth the cost to you.  If you exclusively watch movies, a streaming service like Netflix may be a much better deal.

Live events can be fun and exhilarating.  They can also be very, very expensive when compared to watching them on TV or other media.  Consider limiting your attendance at live sporting events and concerts.  Carefully consider the cost of season tickets to sporting events and other series entertainment.  Do you attend nearly all of the events that you have paid for?  If not, then paying the extra cost of season tickets is usually not a good bargain.  Be on the lookout for cheap tickets offered on the secondary market just prior to shows starting.  Standing in line at a “half-price ticket booth” may be annoying, but the savings can be substantial.

Also, consider changing up your routine and doing things that you may not be accustomed to doing.  Many museums, aquariums, and zoos offer significant discounts at off times and dates.  Many museums and parks are funded by government or philanthropy and are thus free to the public.  All else being equal, free is the best price you can get for entertainment.  Keep an eye out for “entertainment books” that are filled with coupons to different venues in your area or an area that you are visiting.  If you actually want to participate in the discounted activities, these can offer real value.  If, however, those activities are of no interest to you, then you are wasting your money buying the coupon book.

Restaurant Dining

Perhaps the sneakiest destroyer of wealth for the average person is eating out on a frequent basis.  This includes beverages, such as premium coffee.  The secret to gaining wealth is incremental, steady growth over time.  The secret to losing wealth is incremental, steady spending over time.  If you have that special coffee you buy every morning for only $5, you may find that you are spending nearly $2000 per year just on coffee!  A McMuffin and a cup of coffee every morning on the way to work may be a good value, but if you do that every day, the cost can amount to thousands of dollars over the course of a year.  A surprisingly effective way, then, to reduce your spending is to limit restaurant dining to a special treat that you do only infrequently.  Limiting your eating out to once a week or once every other week can result in benefits to your waistline and your bottom line.  Also note that breakfast and lunch prices tend to be much cheaper than eating dinner, even for the same dishes at the same restaurant.

Restaurant food, especially fast food, is notoriously unhealthy.  Healthy options tend to come at premium prices.  You can eat much healthier by buying far cheaper ingredients at the grocery store and preparing meals for yourself.  Today, cooking meals at home has even become trendy.  Food Network has bona fide celebrities teaching you the fine art of cooking on a nightly basis.  Companies like Blue Apron make the process very convenient by providing you with high quality, premeasured ingredients along with a detailed recipe.  In this case, you are paying a premium for convenience!  The frugal way to do it is to buy fresh, high-quality ingredients at your local grocery store and find mouthwatering recipes from your favorite chefs on TV or on the web.

When you do decide to have that special evening on the town, you can still save money at restaurants by being menu savvy.  Look for restaurants that have happy hour appetizer and drink specials.  If you are not a big eater, consider making a couple of appetizers your entire meal.  Most restaurants today serve huge portions, and if you have drinks and an appetizer before dinner, you are likely to waste most of your main course anyway.  Consider the healthy option of having water with your meal.  Sodas can cost as much as $5 when inflated prices, tips, and taxes are added.  Always keep in mind that restaurants make the most profit (meaning you get the least value) on drinks, appetizers, and desserts.

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