Hobbies can be a great way to improve your quality of life, create important social opportunities, and help you maintain a healthy sense of self outside of your professional endeavors. But they can also be expensive.
From a purely financial perspective, spending your hard earned cash on hobbies can be hard to justify. After all, whatever your favorite hobby might be, from fly fishing to beekeeping, musician to muralist, the time you spend and the cash you burn on gear, travel etc. offers little to no ROI.
But life is meant for living. And financial planning should help you plan for fun. So let’s talk about ways to think smartly about supporting a hobby.
The important thing to remember about hobbies is that any project of passion can easily trigger both compulsive and impulsive spending behaviors that are not always best for your overall financial well being.
While any financial planning should try to make room for hobbies, those passions shouldn't derail your long-term financial progress. The key to balancing the cost of a hobby with the rest of your budget, is to set some reasonable limits up front.
How Much Should You Spend On Hobbies?
A big, broad, general rule is to max out any hobby budget at 5% to 10% of your take-home pay. That’s a very rough number. The amount you can actually spend depends on your specific circumstances. Let's take a closer look at things you can consider when deciding how much, if anything, to spend on whatever your latest–or lifelong hobby might be.
Are you paying off debt, or saving for a major purchase?
If you’re hurting to make ends meet right now, or if you carry credit card debt, then sorry to say that as much as we like hobbies, and think they’re good for you, we can’t recommend you put any budget on those until you have your finances healthy and in control.
If you’re focusing on saving for a major purchase, like a house or a car, we’re going to say great job—and encourage you to not let a hobby get in the way of that bigger goal. The truth is, that putting your hobby on hold might need to be a temporary sacrifice in order to reach your longer term financial goals.
The realities of your paycheck
Let’s be honest, If you have a low income, debt, or are saving for a vehicle or the downpayment on a home, you’re not going to have extra resources for a hobby. And even if you are in a strong position financially, if you pick an expensive hobby, like vintage car restoration, or world travel, you may not have the funds you’d like. That’s frustrating, but don’t make the mistake many hobbyists do.
Do not:
❌Fund your hobby on a high interest credit
❌Think your hobby will be an immediate income opportunity
❌Short change your long term investing or retirement efforts
If it’s worth doing, it’s worth working for.
If you want a hobby bad enough, work for it. To create the budget you need to get started, look for ways to reduce your current spending, bring home a higher salary, or look for additional income streams that can get you up and running. Even if it’s on a shoestring.
For example, let’s say you want to take up horseback riding but between a horse rental, lessons, and basic riding equipment it costs $700 per month. In order to make that happen you could: start a side gig to earn some extra cash, reduce your monthly entertainment budget, or cancel a regular service or subscription you can live without.
Ultimately, your goal should be to make room in your budget without having to reduce your monthly savings. That way, you can freely pursue your hobby without harming your financial future.
When you’re in the clear.
If you’ve got debt under control, you’re on solid ground from a financial planning perspective, and you have 5% to 10% to spare in your budget then why not put that defined amount of money to work supporting something you love. After all, money doesn’t make people happy. Being able to do things makes people happy.
Just remember that passion projects have powerful emotional drivers. Don’t give up your impulse control. And stick hard to the 5% to 10% of your take home pay guideline.
Healthy Ways To Financially Handle A Hobby
If you’re trying to fit a hobby into your budget, here are 6 financial insights that will help.
1. Put Your Long-Term Goals First
This isn't going to be easy on your ear but no matter how passionate about a hobby, it’s important that you continue to put your long-term financial goals first.
For instance, if you’re trying to save up for a car, house, or retirement, don’t get distracted from putting away enough money each month to reach those targets. Keep the long term plans running like clockwork–so they will work. Then you can turn your attention to hobbies.
2. Build A Budget. Then Don’t Break It.
If you don’t have a budget now, it’s time to create one. Having a budget is critical if you want to keep your finances in order and know what’s left to pay for your hobby.
Start with a zero-based budget, which is basically just the process of budgeting every dollar of your income until you have $0 left to work with.
Having realistic details in your budget will help you figure out where your money is disappearing each month, and how much you can afford to spend on something more concrete, like your hobbies.
3. Reduce Fixed Expenses To Find Wiggle Room In Your Budget
If you want to make more room in your budget for your hobbies and passions, one of the best things you can do is reduce your fixed expenses. Take a close look at any bill that you pay at a monthly or annual interval. The most common fixed expenses are rent or mortgage payments, car payments, insurance premiums, and student loans. Then sit down with a coffee and start looking for ways to reduce those payments. For example, if you can pay off a car loan could you save interest and get rid of the monthly car payment? What if you called your insurance providers and shopped your rates?
4. Create A Separate Fund For Your Hobby
One of the most simple financial tips for dealing with an expensive hobby is to create an entirely separate fund for it. Open a separate bank account, link it to a dedicated debit or credit card, and manage those expenses on their own. Accountants call this a corporate veil when advising small business owners not to mix their personal and business expenses, but you can use the concept as well to prevent hobby expenses from creeping into other areas of your financial life.
To use a previous example, let’s go back to horseback riding. Create a separate and dedicated fund specifically for your budgeted expenses. Then be sure to have 3 months ready to go before signing up for lesson 1. That way, you’ll have the money you need to get started and continue without pulling funds from outside this specific budget. Why three months? Because if something in your financial life changes, for example, if you suddenly face an unexpected expense, you don’t want to have to stop your hobby as a result.
5. Stay Clear of Spending Triggers
When you’re passionate about a hobby, it’s very tempting to justify impulsive buying. If you’re just starting out it’s fun to explore new gear and equipment. If you’re already experienced, it’s fun to explore all the upgrades that could enhance your experience. And let's not forget that most hobbies have some social role. Peer spending can certainly affect clear and rational thinking.
The most common hobby-related spending triggers include: feeling like you need the latest and greatest equipment, online shopping when you’re bored, and spending time with people that have the ability to spend more on the same hobby as you do.
These triggers are emotionally charged and can be hard habits to break. One of the most effective ways to change impulsive spending behavior is to follow the one week rule. Force yourself to wait a week to spend money on something you want. 7 days is an almost magical way to separate impulsive want from a rational need. You will be shocked to discover how something you thought you couldn’t live without, will have no control over you just one week later.
Also when it comes to FOMO about social situations, don’t be afraid to simply say no thank you or it’s not a good time for me to take that time away. Your friends may be disappointed, but they’ll get over it, invite them to meet up after the event or trip and tell you all about it.
6. Remember Hobbies Don’t Get Cheaper.
When budgeting, plan to spend more at first for most hobbies. Especially if you’re just starting out. And don’t forget the costs of travel. But, don’t think your budget will decrease significantly once you get your first round of equipment like a pottery spinning wheel, or a backpack and tent. Almost all hobbyists are both compulsive and impulsive about buying new equipment to improve performance. Just ask anyone who golfs, collects stamps, enters BBQ competitions, or builds RC cars. Don’t kid yourself when it comes to the realities of upfront costs – and ongoing costs. As your passion grows, so will your expenses.
Bottom Line
Before you start investing in a hobby, have an honest word with yourself about your overall financial situation, your monthly budget, and your long-term financial goals. If all that’s in good shape, then, follow the guidance outlined in this article, and go for it. There’s no reason you can’t find room in your budget for the hobbies and passions you love.