4 tips to stick to your allowance
The first problem I ran into after setting up the budget system is that I ran out of money in my living expenses account.
1. It’s ok to give yourself more money
If you spent all your money a week before your next paycheck, it’s ok to give yourself more money out of your planned expenses account, so long as it doesn’t effect any upcoming bills. Resist the temptation to feel guilty about this. You are working out your budget system and making guesses at how much money you need to live off. You are also working on your lifestyle and the way you spend money, so it will smooth out the longer you do it.
2. Spend your money on perishable, temporary things
I find myself spending my living expenses on material items, like a pair of new jeans. $50 will eat away your living expenses pretty quickly. While you are just starting this system, resist the urge to buy trinkets with your allowance. Start by just spending your money on perishable, temporary items like groceries, dining out, gas, etc. As long as you aren’t going overboard here, your allowance is much easier to live on.
3. Don’t try and cram other expenses into this category
It’s easy to trick yourself by moving expenses around. It’s the equivalent of setting your alarm clock ahead. Everyone who sets their alarm clock fast knows exactly how many minutes fast it is. Don’t try and fool yourself by saying, “hmm, I’m going to put this new online music subscription fee in my living expenses category, so I have more money in my planned expenses.” If it’s planned, make sure it goes in the planned expenses.
4. Take a little cash out in the beginning
When your living expense account gets it’s scheduled deposit, take a chunk of cash out. This not only saves on trips to the atm, but gives you a little reserve. You can physically look at your cash to see how much you have left. I grab money the next time I make a grocery trip.
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January 17th, 2006 at 11:52 pm
I find myself spending my living expenses on material items, like a pair of new jeans… resist the urge to buy trinkets with your allowance.
So do you include a certain amount in your planned expenses for material items? I’m thinking not just “trinkets” but clothing, household items, office supplies, etc. Just curious how these should be handled. Great system by the way!
January 18th, 2006 at 10:25 am
Great system. It’s been my topic of conversation for 2 days running now. But I found a possible loop hole and was wondering how you’d patch it.
With the allowances system (cash, debit card), you can’t spend what you don’t have. So you are physically unable to spend more than your allowance.
My spending habits are such that I seldom use cash. I have a rewards program on my credit card. I make all of my unplanned purchases with the credit card, and then pay off the entire balance at the end of the month. The problem is that the credit card is not physically bound to the balance of my living expenses account. I can spend what I don’t have, with a credit card, and the monthly balance on the credit card varies quite a bit from month to month.
In your example, all you had to do what walk up to an ATM and check your living expenses checking account balance to see how much you can spend. How would you go about it if you used a credit card for those purchases?
January 18th, 2006 at 8:32 pm
Hi Steve,
I’ve contemplated credit card benefits heavily and realized, for me, for my living expenses, that the potential for overspending outweighs any rewards I might use. Thats why I strictly use my debit card. I’ll be making an upcoming post about using credit cards in the system in general.
January 18th, 2006 at 8:39 pm
Hi Tracy,
With this post, I’m saying as you are getting started with your living expenses account, try and resist the urge to buy things other than the neccessities. This gives you time to work out how much it really costs to live on.
As far as where the money should come from for office supplies, clothing, or household goods, it depends. If you like to buy a small amount of clothing on period, and a stack of office supplies another period, just increase your living expenses a little bit.
However, if the expenses are higher, I recommend creating a savings account for “big purchases.” This account would be auto deposited from your planned expenses account. Then when you want to spend $500 on a shopping spree you have the money.
The point of the system is that we’re not being too specific in our budgeting. We’re not budgeting amounts for “clothing” vs “dining out”. We’re focusing on the bills we need to pay and the goals we want to meet. The living expenses seem to take care of themselves.