How to Give Yourself an Expense Allowance and Save Money

You could spend hours upon hours reading about different ways to save money but one of the best that I have personally used in order to control my spending and save money is to give myself an expense allowance. Some people will call it "fun money" others will call it "personal money" whatever you want to call it giving yourself an allowance is a great way for many reasons to get your spending under control without depriving yourself at the same time.

Difficulty: Moderately Easy

Instructions

1. The first step to starting your personal expense allowance is to determine how much money you can set aside. I'd suggest tracking your expenses for 1-3 months in order to get a good idea of what you're spending on a consistent basis (for more info on tracking expenses see references).

2. After determining how much you will allot to your expense allowance you need to choose how often you will "receive" that allowance. I suggest taking your allowance on the day that you are paid and use it until your next paycheck arrives. In my case, I get paid weekly so each Friday morning I stop by the ATM on my way into work and take out my allowance in cash. This is the money I use for drinks, eating out, or whatever I want until the following Friday.

3. So what happens if I don't spend all of my allowance for a week? I take whatever is left over and store it in a drawer, go to the ATM with an empty wallet and fill it up again with my weekly allowance. If something comes up later on in the month where I need to spend more money than my weekly allowance will allow then I dip into the leftovers. Once the month is over, I open up the leftover drawer, take out whatever is in there and deposit into my high interest savings account. If nothing is left over then I know that I stayed right with my budget and didn't overspend...it's a win-win either way!

Tips & Warnings

• Track your expenses to determine what your expense allowance should be
• Figure out how often you'd like to receive your allowance (daily? weekly? monthly?)
• Spend your allowance on whatever you'd like, but remember that's all you get until the next allotted "allowance payment".
• Whatever is left over at the end of a given period, put it into a drawer or store it somewhere. If this money is still left over at the end of the month deposit into your savings account.

Resources

• How to Track where your Money is Going