You might not think this is an important part of your budget, but it’s probably my #1 rule and payment for budgeting success. This is for a number of reasons which I’ll get into, but the main reason why, is so you avoid spending via an EFT card therefore being able to fully track your allocated money. If using a card for personal purchases, it’s much harder to keep track of and too easy to overspend. You may dip into other money you need for something else that's in the same account, letting it get out of control very easily.
When allocating your own personal spending money each pay, give this to yourself (and partner) in cash.
You'll feel like you’ve actually been paid something as it passes through your hands allowing you to see it come and go in actual amounts.
Unlike a card you just swipe or scan, by using cash:
*you’re able to see it,
*you know exactly how much you have in your wallet, left over between purchases,
*how long you have to make that amount last and
*you’re aware when it will run out.
Cash is handy for those small unexpected purchases. School excursions have always taken me by surprise at late notice for payment, throwing out the budget. Cash is good if you happen to run out of products you use often like milk and need it at a moments notice. Flowers for that special someone or just an extra $20 of fuel when getting low during the pay period.
The best reason for using cash for your personal spending is that you're in total control of it at all times, to use the way you need and want. You can allocate it any way you like. You might want to halve it and stash some of it as a new savings plan. You’ll be surprised how much you can save through the year by putting just $50 or $20 away every few weeks. More if you can spare it and have a few different sections for savings (if you don't need so much for personal spending).
I pay myself $150 each fortnight and generally split it up. I keep $50 in my wallet for my own small purchases, I save $50 into my own side savings fund and I keep the other $50 in another section of my wallet for unexpected cash I might need. Although if I don’t use this, I add it to my side savings fund or another one. Because of this, I tend to have a few savings funds on the go as I can send my cash savings amount to any where I want to. Sometimes I put the $50 into my holiday fund, other times I might put it in my bank savings account and other times I use it for a monthly massage. This way I’m not interrupting my general budget and still get to spend and save what I want.
I have small wins for myself in a few different areas and this keeps me motivated to repeat it each pay cycle. I then don’t touch other money in accounts that would hold up or ruin my other allocated amounts I have set aside for bills.
By having small amounts of cash to do what I want with, I appreciate it more as I have to make it last until my next pay. I don’t like to see it disappearing therefore are less likely to spend the whole lot. I treat my personal spending cash like it has a budget all of its own.
I pay my kids their pocket money in cash too as they also like to see and feel what happens to their money. Because they’ve always seen what I do with my spending money, they too sometimes split theirs up which helps them to cover everything they want to use it for. Sometimes they want phone credit, other times they want small amounts for public transport or stash some regularly to buy clothes and make up after a few months of saving.
If you do this regularly and be patient (not spending the whole lot) you will be rewarded with a little of what you need, some of what you want and and all of your other budgeted money will always be there to pay your bills and other expenses. It will all run smoothly.
You'll be pleasantly surprised by what you can do with your personal spending money. Just make sure you allocate yourself a realistic amount each pay that you won’t dip into other funds and stick to this amount. I think this expense is the most important amount to allocate each pay.
When you have this spending cash, you’re rewarded a little from your pay. Similar to how a business keeps running and growing all while rewarding you with an income as part of the distributions. Run your domestic economy like you would a small business and it will slowly grow in savings, wealth and lower debts.
Do you pay yourself cash first? Add to comments below.