"Play" Money – What Is It and How Much Should I Have?

In the previous post about penny stocks (see link below), I discussed how penny stocks (stocks trading under $2 per share) are a very risky investment instrument, and as such, intelligent investors should not invest their retirement nest-eggs in these low priced stocks.

My Money Blog – Penny Stocks

However, if you do feel inclined to trade penny stocks for learning or the excitement (both are OK), I recommended only investing what I call “play” money in these stocks. I gave a general explanation about what “play” money is, but I didn’t have a chance to get in to the details of 1) what is it, and 2) how much play money should a person have? These two topics will be the subject of today’s post.

1. What is play money?

So first, what is the concept of play money exactly? In T. Harv Eker’s book, “The Secrets of the Millionaire Mind,” he recommended that your paycheck should be split in the following way, because it is the way millionaires do as well. Please note that this is your paycheck that you receive, after pre-tax deductions have been extracted.

If you haven’t read T. Harv’s book, pick up a cheap used copy of it at Amazon. I’ve pasted the link below if you’re interested! It’s worth the read!

  • 50% of your paycheck should be kept in your checking account for monthly living expenses (food, childcare, gas, etc)
  • The remaining 50 % should be split as follows: (The %’s below are % of your total take-home income)
Note: do not forget the account hierarchy order, My Money Blog – Account Hierarchy. It is not wise to allocate your money as described above if you a) do not have an emergency fund, b) do not have health insurance, c) or have a lot of high interest credit card debt. In these cases, your funds should be prioritized towards those higher priority outlets first.
As T. Harv Eker describes it, play money is money that should be set aside each month, and used for things you enjoy (sports, concerts, etc), and also things that make you feel rich. T. Harv puts a lot of emphasis on buying things that make you feel rich in order to get people to be in the millionaire mindset. Additionally, this type of “controlled splurging” can be healthy because it fulfills the human urge to spend.
What would qualify as something that makes you feel rich? Examples would include such things as buying a $100 bottle of wine or going to the nicest restaurant in town and ordering something at “market price.”

2. What is the correct amount of play money?

As the bullet point mentioned above, T. Harv recommends setting aside 10% of your total take-home income for play money.

For example, if your gross salary is $5,000 per month and we assume you pay 28% taxes, and contribute 15% of your income to your 401k pre-tax, this would give you a take-home pay of $3060 ($5000 – $750 to 401k = $4250 – 28% taxes = $3060 take home pay).

You would then keep 1/2 in your checking account ($1530), and allocate the remaining 1/2 according to the bullets above.

This would translate in to $306 play money (10% of your take home pay). Sounds like a good, reasonable amount right? Now, naturally, you can adjust this number down as it best suits your situation. I usually end up spending less than this each month and have money left over. If that happens, no sweat! Just transfer it to one of the other allocation categories.

Hope this post was helpful and let me know if you have any questions.

Keep on learning!


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About the Author Jacob A Irwin

Hi folks! My name is Jacob. I am the owner and operator of My Personal Finance Journey. I started this blog in January of 2010 and have enjoyed the journey ever since. Since finishing up graduate school in Virginia in 2014, I have been working in biopharmaceutical development in Colorado. You can read more about me and this site here​. Please contact me if you have any questions!

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Leave a Comment:

@mathewhidden says July 19, 2011

The information shared by you is informative and tells a lot about penny stock. Thanks!

    MyPerFinJourney says July 23, 2011

    Thanks for reading Mathew!
    My recent post Tips on Saving Money for the Future

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