Should You Give Yourself an Allowance?

by Emily on February 1, 2012

When you were a little kid, you may have gotten a weekly allowance for doing chores or tasks around the house and you loved it. You knew you had money coming in each week if you did your jobs and then you could plot out how to spend it. As an adult, I find myself wondering, should I do this now? I often find that I never have cash in my wallet and rely on debit cards and credit cards. I have all the personal finance and banking applications on my phone and feel that I am up to date with my purchases and spending, but now I am realizing, I am not as on top of things as I thought. Personally, I find it so much easier to part with money when I am swiping my card than handing over cash, and this could very well be the source of my overspending. I think that I am up to date on with using my banking application, but all of the purchases do not go through immediately, and there are times when I have less money than I thought. Within your budget, there is a disposable income section, and it may be a good idea to view it as an allowance.

Everyone’s personal allowance may differ. You may be a person who has no desire to buy clothing or shop around at the mall, but you love to go out to eat. You may be someone who is under a certain diet regiment and your costs are high at the grocery store. You need to personally identify the areas in your life where you spend too much money and try to contain your costs in those areas. Make sure you have set a realistic goal, when thinking about your personal allowance.

Give yourself an allowance in cash in the beginning of the week. Make sure the amount of money you choose for your allowance is a reasonable amount and an absolute limit. The money you allocate for your allowance will go towards dining out, movies, and splurge purchases, anything that is not already in your budget.  If you have set yourself an allowance of spending $50.00, stick to it by bringing out only that amount of cash, leaving your cards at home.  At the end of the week, you may have spent all of your allowance, which is okay, because you planned for it. If you are under your allowance for a week, then put that money towards a goal you have been saving for.  You can set up a separate savings account that is an emergency fund or a fun account and deposit the excess allowance.  You may find that your excess allowance will add up in a savings account and allow you to do something fun or pay off a debt.

While you should be budgeting your life, having an allowance will give you the freedom to not overanalyze and micro-budget every single dollar you spend.  The allowance will give you flexibility with your spending, but allow with a limitation.  Humans are creatures of habit, and this allowance will get you into the habit of only spending a certain amount of money each week. You will learn to maintain this amount of weekly spending through weekly repetition. By depositing your leftover allowance, if any, you will reinforce savings in your mind and it will become a habit for you. You may only need to live an allowance temporarily, but it can teach you important habits that will last a long time.

The allowance is money that you can spend freely with that week. You may be budgeting and think that you are being frugal. Living on a budget is not fun for most, because it requires planning and discipline. Sometimes, I feel that all I do is think about money and it’s extremely frustrating. I think a weekly cash allowance will allow me some joy in the financial aspect of my life, because as long as I stick to my limit, I can spend the money on whatever I want. Some weeks you may spend it all by Wednesday and others you may have left over, but when the money is gone it is gone. You need to treat the money the same way you did when you were a child; you did not have an ATM card or bank account to withdraw money from at will, you had to wait until the next week to get your allowance, so as an adult you need to stick to this plan.  Having an allowance, will help you stick to your budget, your long term financial goals and live within your means.

Do you give yourself an allowance?

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  • Janine

    I think this is a great idea although I’m terrible with tracking cash so it would be a challenge for me for sure. I’ve read about these in a lot of well known PF books so I think it is a sound theory.

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