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Splurge Fund Corpus

Why have one?

Say you are a bit like me and think too much about spending money on certain activities/stuff and always have guilt about splurging on something which you may do without, even though they may give you immense pleasure, even for short term. How do you manage that guilt? Put in a different way, how do you convince yourself that the money you have, let’s say not spent but splurged, is you can well afford, the spending “guilt” is unfounded and you can let go the opportunity cost conundrum. The solution I found for me is to create a separate corpus. I will call it “Splurge Fund Corpus” (SFC henceforth). Simple excel worksheet did the job for me. I created an excel sheet with different activities like travel, eating out, buying gadgets, etc and allocated annual capital to them for current FY (April 2022 – March 2023). While allocating capital for SFC, to ensure I don’t go overboard and also don’t budget too less an amount, I needed a benchmark. Enter a simple thumbrule – my SFC will range between 10% to 25% of annual essential expenses (AEE henceforth).

Fund allocation part taken care off, next I tabulated the current FY spends and how it compares with the SFC. Status after accounting for a weeklong holiday at a seaside town, and couple of other road trips:

-          If I restrict SFC to 10% of my AEE, I have slightly overshot the corpus. Basically, I have to stop splurging now and take it easy till March 2023. Trip to Puducherry took a lions share of the corpus

-          Buy hey, If I consider SFC to be 25% of AEE, I still have nearly 60% of the corpus left

-       Even if I consider SFC for the current year as 17.5% of AEE, I still have reasonable amount of funds left to splurge!!!

I think for the current year, I will consider SFC to be in the 25% segment considering last two years of covid 19 lockdowns did restrict spending on many discretionary outdoor activities, like vacationing, eating out and so on. But in a normal year, I would like to restrict to 10% or max 17.5% of annual expenses. Any funds leftover in the year would be taken as carryover money which will serve me well in case I take an extended/expensive holiday  - say a month long trip to the US or Europe or buy some really expensive stuff!!!

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