Many think that making a budget is a restriction, but it’s actually the opposite: an allowance to spend money.
I remember when I was a kid, I got an allowance from my parents.
I loved it. Who wouldn’t love an allowance? Every week or two, I was presented with a few dollars of my own to do with whatever I wanted!
Now, feel free to argue that this was my parents doing me a disservice, that “kids need to learn the value of work” and all that. For my part, I did my chores, got a job starting in high school, and generally don’t feel like I would have been any better served by knocking on doors and asking to mow people’s lawns.
If nothing else, having an allowance offered me an awareness of money that didn’t involve credit. If I wanted to buy something, I had to save up and pay for it.
Wild concept, I know.
Anyway, eventually I moved into income earning and the allowance went away.
Or did it?
Because while no one else is giving me an allowance these days of course, I do still feel that same sense of freedom, like I am getting an allowance.
How is that possible? And how can you get in on this?
Read on and let’s get you an allowance.
Table of Contents
First, know what you spend
And I get it. It’s scary to see your own behavior reflected back to you. You may not want to look in the mirror, because you might not like what you see.
But what if I told you that tracking your spending could lead to you feel like you had actual permission to spend money?
Here’s how it works.
After a few months of tracking your spending, you start to get a sense of what you spend in various categories. Every month is different, of course, but you learn roughly what you spend in things like groceries, restaurants, books, clothes, transportation, etc.
Here is what that looks like. This (wildly hypothetical) pie chart shows all the money that leaves your hand in a given month. Since this includes both Bills and Expenses, but we don’t we care about Bills (since they are largely fixed amounts each month), I’ve greyed that part out:
Once you have a sense of what you spend, you can ask some questions:
- Do you have the money each money to continue to spend roughly like this?
- Are the amounts you spend in each of your categories in line with your larger financial goals?
If the answers to these two questions are “yes”, then you can do something pretty cool: You can give yourself an allowance.
A beautiful example
Let’s look at a single category as an example.
Let’s say you love spending money on beauty products. Ulta, Sephora, Kiehl’s, Clinique, Armani, Chanel, Yves Saint Laurent, whatever your style.
And this is certainly an area where you can spend roughly infinite money. This moisturizing cream is almost $200 an ounce.
Now, you may have some anxieties around spending in this area, fearing that you spend “too much”.
But remember what you have already done by this point: you looked at all of your spending categories, divided them up between your available money, and decided that it was in line with your wider financial goals. (See below if you’re stuck at this step.)
At this point, you can give yourself a Beauty “allowance”.
The actual amount depends on your unique situation, but let’s just say it’s $200 a month. This means that you can spend $200 on beauty.
Let me repeat: you have given yourself an allowance to spend $200 on beauty products.
This isn’t an I-should-spend-less situation. You’ve already allocated this money in advance. You have the money, so spend it!
And this holds true for every single one of your Expenses categories:
- If you’ve allocated $200 for beauty, then spend $200 on beauty
- If you’ve allocated $500 for eating out at restaurants, then spend $500 at restaurants
- If you’ve allocated—I don’t know—$400 for Starbucks? Then go caffeine it up!
No really, go spend
We’re so used to feeling like we should spend this amorphous “less” that it can take a while for the opposite feeling to set in. “Wait, you mean I can (and should) spend $200 on shoes each month?” Yes! If you want.
You see, people think having a budget is a restriction, but it’s actually an allowance.
This is the reward for doing the hard work of determining what you have—and want—to spend.
Now, remember that giving yourself an allowance doesn’t mean that you can spend whatever you want on everything you want.
As anyone who knows me has heard me say: you can have anything you want, but you can’t have everything you want.
So the numbers have to add up. You can’t allocate any more money than you make each month.
Next, you have to stick to your agreements! You can’t say “I’ll only spend $300 on restaurants this month so I can buy $500 in shoes” only to spend $800 on DoorDash. That won’t work.
When the money is spent, it’s gone, and you just have to wait until next month.
Luckily, you can get an allowance next month too.
Once you understand how you spend money, you gain the ability to determine how much you want to spend in each of your spending categories. This then gives you permission to spend those amounts, and that will feel like getting an allowance.
Now, if you were confused above about how to figure out what is appropriate to spend given your financial goals, that’s understandable. It’s not a straightforward process to balance your needs and wants for today with your needs and wants for the future.
If you’re struggling to figure out how much you can spend today such that you don’t jeopardize your future, send me a note. I do this sort of thing all the time with people and have developed a foolproof plan to help you figure out how to allocate your money.
But for the rest of you, make a plan, and then have fun spending your allowance!