In the past, many Get Rich Slowly readers have sung the praises of the “adult allowance”. Though I've read enthusiastic comments supporting this idea, I've never paid it much heed. To be honest, it's always sounded lame, and I didn't think it would be useful to me. I was wrong.
Before our short vacation in early October, I pulled $200 out of the ATM. This is unusual for me. I don't like to carry a lot of cash. I find it easier to track my spending when I use credit or debit cards.
I didn't spend very much on our trip. I bought a few old books, but mostly we did low- or no-cost sightseeing. When we returned home, I still had about $160 in my wallet.
Normally, I would have put that money back into the bank. I kept it in my wallet instead. For the rest of the month, I used it whenever I bought something that wasn't a Need. This wasn't anything I had planned to do, and it wasn't even conscious at first. It just happened. Eventually I realized that I had been forcing myself to purchase Wants with the leftover cash.
By the end of October, I'd spent nearly all of that $200. I'd only used my plastic for play once or twice. “Interesting,” I thought. “What if I were to do this intentionally? What if I pulled out $200 for the month of November?” So I did.
Cashing it in
At the beginning of November, I withdrew another $200. All month, I used that money whenever I purchased something that wasn't a Need. The new Popeye book? Paid with cash. Quantum of Solace, popcorn, and red vines? Paid with cash (and without complaint). A trip to my favorite cheap taco place for lunch? Cash again.
As the weeks went by, I began to feel liberated. By allocating this money to use however I pleased, I was freed from feeling guilty about every little thing I bought.
Still, I wasn't spending the money willy-nilly; in fact, I found myself considering every potential purchase carefully. Because I knew I wanted the $200 to last the entire month, I was careful with it early on. I passed up easy treats. By pinching pennies early, I was able to afford a splurge I had thought to deny myself.
When tickets for The Decemberists sold out, I gave up hope of seeing their post-Thanksgiving show here in Portland. But entering the final week of the month, I still had $100 in my wallet. Because of this, I purchased a $60 ticket off of Craigslist, something I normally wouldn't have even considered. I was happy to do it.
Now I'm ready to pull out another $200, and I've come to a realization: That adult allowance idea I used to think was lame? I actually like it!
Part of a balanced budget
Though the initial $200 withdrawal was arbitrary, it works well for my income and my circumstances. I can afford to give myself $50 a week without compromising my other financial goals. It works well as part of my balanced money formula. I intend to use this number going forward, at least for a couple of months.
Though I'm nearly sold on the adult allowance, I still have a major concern. As you know, I'm a proponent of tracking every penny you spend. This is easy with debit and credit cards, but I'm notoriously poor at accounting for my cash spending. I'm awful at it. I'd love to hear what others have done. If you give yourself a cash allowance — even if you don't call it that — how do you handle the record-keeping? For now, I'm just logging it in Quicken as $200 in “Misc Expenses” when I make the monthly withdrawal.
I'm also interested to hear other tips and tricks from folks who have a cash budget for fun. How much do you give yourself? What do you spend it on? (Though I'm spending mine on Wants, it doesn't cover all wants. When Kris and I go out to dinner, I stick to my traditional system.) By using cash for my discretionary spending, I've found I'm less likely to make impulse purchases. Have you found that to be true as well?
Photo by dyobmit.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.