When working out your budget, how do you handle your monthly spending money? Not the money used towards bills or savings or debt, but the money you actually allot yourself for entertainment, shopping, hobbies, etc.


We like the idea of giving yourself an allowance. Actually withdraw your spending money is cash so that it doesn’t get mixed in with the money budgeted for other things. You can manage that however you like, whether you want to take cash per paycheck or one amount for the month.


This way, you have the cash in hand to use for whatever you want, and when you have a finite amount of cash, you are much less likely to go overboard. If you use a credit card, or even a debit card, it can require too much tracking. You may go to the store and think “I couldn’t possibly have spent my budget yet” only to find out you actually had and the thing you just bought put you over. If you have the cash, you will know exactly how much you have left.


We don’t think it necessary to budget within your allowance ($30 for entertainment, $30 for shopping, $30 for hobbies, etc.). If you find it helpful you can, but that just adds an extra layer of tracking you probably don’t need. However, it could be helpful to plan ahead of time. Say there is a movie coming out later this month and you know you will be going to see it and going to out to dinner beforehand, along with the cost of tickets and concessions. It may be best to put that money aside so that when the time comes, you still have it. Also, if you have something expensive you want to do in a few months, like buying concert tickets or a new electronic gadget that you want to pay for out of your spending money, but won’t be covered by one month’s budget, you can put some of your cash aside in the months leading up to your purchase.


Some may say it’s better to use a debit or credit card instead of cash because otherwise how can you track your spending? Our point would be as long as you’ve budgeted for your spending allowance, you shouldn’t have to track what you spend it on. Even if you’re paying down debt, saving for retirement, and everything else in between, it won’t hurt you to have an allowance where you can spend the cash without feeling guilty or worrying about where the money is going. Just be sure to stick to your budgeted amount and make sure you can afford it!