Should you have fun money while paying off debt?
Yes. Money coach Katy Almstrom, host of The Debt Pay Off Podcast for Women, says a debt payoff plan without fun money is a plan most people quit. In this episode she explains how she and her husband Scott build fun money into their own budget, splitting it equally and keeping it separate, and why her clients who do the same are the ones who actually finish.
From the episode
Episode 187: Debt Payoff Doesn't Mean No Fun: Let's Talk About Fun Money
Sep 10, 2026 · 11 min
The deprivation myth that quietly kills payoff plans
A lot of people assume paying off debt means cutting out everything fun for years. Katy is blunt that this isn't how she did it and it isn't how her clients do it either.
The host's argument is about sustainability. A plan built on total restriction works for a few weeks, then something small breaks it: a birthday dinner, a concert, a stressful week where you just want takeout. When there's no room for that in the budget, the spending happens anyway, usually on a credit card, followed by guilt and often a decision to give up entirely.
Fun money fixes the structural problem. Instead of pretending you won't spend on enjoyment, you decide in advance how much you will spend and where it comes from. The debt still gets paid. You just stop fighting yourself every weekend.
How Katy and Scott split their fun money
Katy shares exactly how fun money works in her marriage. Two rules stand out.
It's split equally. Both partners get the same amount, regardless of who earns more or who spends more on the household. That keeps the arrangement from turning into a scorekeeping exercise.
It's kept separate. Fun money doesn't sit in the joint account where it can blur into groceries and gas. Each person has their own amount, and what they do with it is their own business. Katy notes she'll be sharing the real, unfiltered breakdown of what she spent hers on in September in an upcoming episode, which tells you how seriously she treats it as a distinct category.
For couples paying off debt together, this structure removes one of the most common sources of money fights. Nobody has to justify a coffee or a hobby purchase, because it's coming out of an amount that was already agreed on.
Where the number comes from
Katy's broader approach, which she lays out across her Done With Debt series, is to plan the month before it starts. Fun money is one line in that plan, sitting alongside the debt payment, bills, and sinking funds for irregular expenses.
The host doesn't prescribe a single dollar figure that fits everyone. The amount depends on income, how aggressive the payoff timeline is, and what you can afford without slowing the debt down. The principle she teaches is that it should be big enough to feel real and small enough that it doesn't compete with the payoff goal. A token amount that can't cover anything you'd actually enjoy defeats the purpose.
The key move is deciding on the amount when you're calm and planning, not in the moment when you're tempted. Once it's set, you spend it guilt free and you stop when it's gone.
What fun money looks like in practice
In the episode Katy previews what she actually spends her own fun money on, and it's ordinary stuff: the small personal purchases that make a week nicer. That's the point. Fun money isn't a vacation fund. It's the everyday breathing room that makes a multi-year debt payoff feel like a normal life instead of a punishment.
She also connects it to her earlier episode on staying motivated for the long game, where she stresses that intentional spending is different from deprivation. Celebrating small wins and building in enjoyable moments is what keeps people going when the balance is dropping slowly.
If you're paying off debt and feeling like you're white-knuckling it, the host's advice is to stop treating fun as the enemy. Give it a line in the budget, split it fairly if you're in a couple, keep it separate, and let the plan be one you can live with.
What to remember
- Fun money belongs in a debt payoff budget. Plans built on total restriction tend to fail.
- Katy and her husband split fun money equally and keep it separate from joint spending.
- Set the amount when you plan the month, not in the moment. Then spend it guilt free and stop when it's gone.
- The number should be small enough not to slow the payoff but large enough to cover things you'd actually enjoy.
- Intentional spending is not deprivation. Building in enjoyment is what keeps you motivated for a long payoff.
People also ask
How much fun money should each person get?
Katy doesn't give a universal figure. It depends on income and how fast you want the debt gone. The rule she teaches is that it should fit inside a monthly plan that still prioritizes the debt payment, and that both partners get the same amount.
Should fun money be in a separate account?
Katy keeps hers separate from joint spending so it never blends into groceries or bills. Whether that's a separate account or cash, the goal is a clear boundary around what's yours to spend without justification.
Won't fun money slow down my debt payoff?
Slightly, on paper. But the host's experience with clients is that plans without it get abandoned, which slows payoff far more. A small, planned amount keeps you consistent for the years it takes to finish.
Based on The Debt Pay Off Podcast for Women, Episode 187 "Debt Payoff Doesn't Mean No Fun: Let's Talk About Fun Money" with Katy Almstrom, released September 10, 2026.
