How much of your salary should go to entertainment? Since you have experience, I was hoping you could give me some clues as to what you look out for. A little advice would go a long way right now.

- Tim

PFA: Your question is a good one at a time when many are becoming more concerned about going back to basics because of the financial challenges we are experiencing.

Entertainment can be interpreted to have a wide meaning but normally it is about amusement and diversion from the regular rounds of making a living.

It is necessary for anybody who desires to live a balanced life but should not be allowed to encroach on funds which could be better spent on improving the financial well-being of an individual or family.

To put entertainment in its proper place in your budget, I suggest you do the following. Treat it as a discretionary item. Set aside a set dollar amount of your net salary for it. Use your own funds. Pursue activities that contribute to the well-being of yourself, your family and even the wider society. Manage your entertainment time well.

Discretionary items tend to be low priority or non-essential items that may be used to enhance your standard of living but may be avoided if necessary. They relate to your wants, not your needs.

Entertainment should be a discretionary item in your personal budget which would make it one of the first to go or to be reduced if it becomes necessary to cut spending.

Spending less on what does not seriously affect your quality of life makes more resources available for what is required to support your basic lifestyle.

Setting aside a set dollar amount for entertainment seems a better option than devoting a percentage of salary because this protects against spending creep whereby spending increases, often unrecognised, as income increases. This increases the risk of overspending.

invest

Plan to spend only from your net salary when you are allocating funds to entertainment and other items in your budget. Avoid using income from other sources for entertainment and other forms of spending. As much as possible, invest such funds or use in a way that will yield long-term benefits to you and your family.

Use your own funds for entertainment. It is pointless to be repaying a loan long after you have stopped enjoying the use of the borrowed funds.

Balance your time well so that there is sufficient for personal development, earning income and equipping yourself to earn. Entertainment should not be at the expense of any of these.

There are many ways to reduce spending on entertainment with-out depriving yourself of its benefits. Several of these will enhance the quality of your family life and help you to play a role in creating a better society though you may be required to make drastic changes to your approach to entertainment.

Spend more time in activities with your family. A games night once per week would be a good place to start. It will help the family members to get to know each other better and to reinforce important values. Invite friends to join sometimes. This is one sure way to reduce spending on entertainment.

group activities

Other family activities could include watching cable or DVD (which you can swap with trusted friends) or listening to music together. Save by avoiding cable packages that offer more than you require.

Even if you are single, there are group activities in which you can get involved - with friends, church groups, community groups, co-workers. There is still a place for hiking, cookouts, a game in the park, time at the beach, treasure hunts.

What has happened to good old volunteerism? Arrange to spend time at children's homes, for example. There is much you can do to bring joy to these boys and girls and to raise your own level of satisfaction.

From my experience, I know many of these do work but, if you need 'real' entertainment occasionally, you should be able to treat yourself from the savings generated out of some of these suggestions.

Is there a rule of thumb for the portion of salary to be spent on entertainment? I am not aware of it. It is a personal matter determined by your own circumstances.

Whatever you decide, it should not be so much that it impairs your savings and investment programme, building your emergency fund, and your ability to acquire the basic and more valuable things of life.

Oran A. Hall is co-author of 'The Handbook of Personal Financial Planning'. Email: finviser.jm@gmail.com