Spending Without Worries

As I’ve mentioned on The Simple Dollar before, one component of our monthly budget is what we call “fun” money. Each of us gets a relatively small amount of pocket money to spend on what we wish. We can hold onto it for a few months to buy something big or use it on frivolous things like stops at a coffee shop.

For us, this is a vital part of our budget. It gives us three key things that budgeting without such flexibility doesn’t allow.

First, it allows for spontaneity without worries. We can go to the bookstore or the coffee shop without worrying about whether that choice will undo some element of our budget or cause us to miss a bill or anything like that.

Second, it gives room for secret gift giving. Because we have this flexibility, we have the ability to surprise each other with gifts at gift-giving occasions. Not only that, we also get to feel a bit of the “pinch” of saving up for a great gift for someone, because if we’re saving up for a great gift, we’re not spending money in other areas.

Finally, it allows for some independence and freedom. We don’t question how each of us spends our “free” money. I tend to buy games and books. Sarah tends to buy books and sweet treats. Because we have that flexibility, neither one of us really worries about what the other one is doing.

Here are a few of the specific implications and implementations of allowing some free spending money for each of us.

We don’t worry about a precise amount because we follow each other’s spending. If one of us spends a bit more than our flexible amount allows, that’s fine, because in other months we definitely spend far less than usual. This policy might not work for some people who are trying to learn how to constrain their spending. In that case, setting strict dollar limits might be a very good idea.

We often withdraw it in cash form. Most of the time – unless an online purchase is involved – we do all of this in cash. For example, right now I’m saving a significant portion of my monthly “free money” for an August trip to GenCon with several friends. I’m literally sticking cash in a jar for this trip.

We sometimes use it to cover things from our normal budget. For example, I recently paid for a dinner out with the family out of the cash I had in my wallet. This directly helped our regular budget. I didn’t mind.

We still have to maintain some form of self-control. Although we have this flexibility, we still have to be in control of our spending. It would be very easy to fall back into bad spending habits if we didn’t have the basic understanding that doing so would be very detrimental to our future.

Having some “free money” for each of us in our budget makes it much easier for us to stay on track with our big financial goals without going crazy. If you’re finding it difficult to “buckle down,” consider writing some flex money straight into your budget. You might find that it makes all the difference in the world.

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25 thoughts on “Spending Without Worries

  1. Melissa says:

    I always have a little chuckle at advice like ‘have some spending money.’ That’s great if you’re not on a really tight budget. There are times ours is so tightly strung we could play a symphony on it. I hand wrung out our washing for ages before dipping into our emergency fund for a working machine (and we don’t even own a dryer), we also have a toilet that you have to turn on and off at the wall when you use it, a screen door that needs replacing…There are just times when every little cent goes to saving for necessary stuff and fun stuff has to be done for free (like trips to the park and home dinner on the beach instead of at a restaurant). Life doesn’t have to be ‘non-fun’ with no cash, btw. Self control can come from necessity and habit. Why is self control such a hard concept these days? The upside for us is we have no debt except for our mortgage. We ‘look’ like we’re struggling to the outside world, but underneath the surface it’s all healthy – a lot healthier than those with all the trappings. Life does go on without free spending cash. It can even exercise the creative muscles at the same time.

  2. Spending without worrying is one of the aspect of financial freedom for me. I have a hard time doing it though. I carefully go over my personal purchases over and over again because in the past, when I’ve made them, I always find myself in a “financial emergency” or bind. I hope to never have to feel that anymore.

  3. Pat S. says:

    I like the idea of itemized savings accounts. With ING and other online banks, you can set up itemized accounts with automatic direct deposit, if you have the spare amount in your budget this is a great way to build up a little “fun money”.

  4. Amanda says:

    We had “fun cash” but it never worked well – we would forget to get it each money, cash was inconvienent but otherwise it was on the CC statement. We finally each opened up an ING Electric Orange Checking account and at the beginning of the month transfer money into each account. Now, fun cash works like a charm. Right now, we can only afford $20/each/month, but even that money makes a big difference in the freedom we feel.

  5. Michelle says:

    My husband and I used to fight about money all the time. But then we started doing this. I have an account, and he has an account, and we make an automatic transfer every month. When we first started this, it was $25 a month. Now it’s a bit more, but even that little bit made our lives so much better! We rarely fight about money anymore!

  6. Lisa says:

    My husband and I do this. He takes out a certain amount of cash each week. We had to do this since he has absolutely no control over his credit card spending, so his cash for the week includes his gas and necessities as well as his fun money. So far, it’s working well!

  7. Nicole says:

    I had the feeling reading this that the first comment would be of the “Well, that’s great if you…” variety. I don’t really understand why people do this. If the shoe doesn’t fit, don’t wear it — discard it, move on, and most importantly, let the target audience of the article appreciate and apply it without the guilt trip.

  8. Scott Messner says:

    We have the same thing but call it allowance. It is always in cash form and my wife and I can spend it on whatever each of us wants.

    Like you, sometimes we will use it for taking the family out to eat, etc.

  9. Dana says:

    Why not create sub-accounts for times when you want to save up for something? So instead of having cash in a jar, you could create a sub-account for your conference and be earning interest on it.

  10. ChrisD says:

    Just yesterday I was reading a random book which gave advice on how to pass off new clothes as old clothes to your significant other to hide how much you were spending on clothes.
    I can’t imagine what kind of messed up relationship that describes (whether with clothes, money or the SO) so the idea that you have room and discretion in your budget for stuff that you are allowed to spend money on seems fundamental to me (if, of course, you can afford it).

  11. kjc says:

    @ #1 Melissa:

    “We ‘look’ like we’re struggling to the outside world, but underneath the surface it’s all healthy – a lot healthier than those with all the trappings.”

    How can you know that your relationship is healthier than that of a couple who have “all the trappings?”

  12. Anitra says:

    I recommend this to friends all the time. It also gets rid of “revenge” spending – the “Well, he bought X for $100, and I think it’s stupid, so that justifies me going out and spending $100 on something I like.” If you each have your own discretionary money (or allowance), then it doesn’t matter how the other person spends it.

  13. Hunter says:

    My wife and I have a similar system. It’s a pressure release valve for what can be a tight budget.

    We have a no questions asked policy for our $100 allowance to each other twice a month. Whether i tops off the Roth or is spent on shoes, it doesn’t matter.

    A tight inflexible money system is unsustainable, you’ve gotta have some wiggle room.

  14. Kevin says:

    @kjc:

    You beat me to my question. Like Melissa, my wife and I also have no debt except for the mortgage. However, we also have working toilets and laundry facilities. I found it a little presumptuous (and self-righteous) that she implied you can’t have both.

  15. cc says:

    i am on a super tight budget and i started a fun money savings account- and for poster #1, for a while it only had $5 in it. but knowing i could blow $5 on anything, as pathetic as this sounds, really cheered me up. it’s not much more now- i added in a birthday check (less some money i HAD to pay bills with) and it’s up to a grand total of $20. hey, that’s a cheapie night out with friends that i would otherwise have to turn down and sulk over all night! or some silly trinket from the internet that’s a 3am impulse buy! i spent all night at an arcade with some friends and had no guilt about loading in the quarters, because it was “allowed”.
    when i’m counting pennies so hard to try and make rent and bills, knowing that i have even a smidgen of money i can spend irresponsibly is a mental lifeline.
    also, #1, you don’t need to spend the money for it to make you feel better. just knowing it’s there is awesome.

  16. Riki says:

    @#1 Melissa:

    If the “underneath” is healthy, there should be room to make necessary repairs. And if the “underneath” is healthy, why is your budget so tightly strung you could play a symphony?

    There’s no virtue in living with broken toilets and appliances to save a few bucks.

  17. Jonathan says:

    Regarding #1 – I think that many people are forgetting that there are people in this world who simply do not have enough money to cover repairs that most of us would consider negligible. Sometimes I feel that I’ve lived comfortably for so long that I might start to lose touch with the reality of what it is like to be poor. I’ve been there, though, and I live in an area with 30% of residents living below the poverty line, so am reminded of the reality daily.

    It sounds like Melissa is able to keep a positive attitude even though she has constant reminders that her family does not have enough money to cover things that most of us consider incidental. She realizes that life can be lived and enjoyed without spending money on “fun” things or activities. Those are not negative qualities. We should all strive to be like Melissa. It might make us appreciate what we do have even more.

  18. JS says:

    My husband and I would like to do this. I don’t mean to hijack, but does anyone have any advice on how to set the rules of what comes out of the individual accounts and what comes out of the household budget? I can see arguments happening over grey areas. For example, my husband spends far more money eating out than I do- sometimes because he is a student and has less options for bringing his lunch than I do as an office worker, but often because he felt like a burger and a beer at the pub instead of a homemade sandwich. And to share the blame, I get my hair cut every 8 weeks at a somewhat upscale salon, while my husband goes about 12 weeks between haircuts and then goes to whatever cheap place is convenient. I need to have a regular haircut to look professional at work, but I could probably go to a cheaper place. How do we assign the cost of things like these, where they are part necesssity and part luxury?

  19. Jonathan says:

    @JS (#18) – I don’t think that there is a one size fits all plan for this sort of thing. I think that the important thing is to agree on these things up front, before the expense occurs, to avoid arguments.

    If you feel that your husband eats out more than he should, then maybe the two of you should come up with a plan. Perhaps you can divide the dining out budget into 3 groups, one for when you both eat out together, one for when you dine without him, and one for when he dines without you. You might agree that his dining alone budget should be a bit more than yours, due to his circumstance, but this might not be necessary. Either way, if either of you go over your dining out budget because you decide to do something extra take that out of your fun money. Or you could just include solo dining out expenses in your fun money, and then if you decide to eat out less you have more to spend on other things.

    I would apply the same approach to the haircut situation. We do not pay to have our hair cut, but when we did it was included in our household budget. If you (or he) feel that you should spend less than you do on haircuts, then you could set a specific budget amount for that. If you go over, you would pay for the rest from your fun money. For some people visiting an upscale salon may be considered a fun activity, so that might be fine with you. Using your fun money to partly finance that could remove some of the guilt you have. On the other hand, you might decide that you’d rather spend your fun money on something else, and find a cheaper place to get a haircut.

    I think that the most important thing is that you and your husband agree on what spending is part of the normal household budget, and set appropriate spending limits. If either of you choose to go beyond the limit without first discussing and getting agreement from the other the expense should be covered by your fun money.

  20. Nate says:

    @#18 JS:

    My wife and I define our “fun money” to be for anything that is completely unnecessary. For me that includes things like beer, eating out for lunch at work, a snack from the vending machine, etc. My wife usually spends hers on lunch with a girlfriend, a treat from the grocery store, or something for our son that she knows he doesn’t need, but wants to buy him anyway. I tend to save mine, hers tends to be gone a week into the month. Doesn’t really matter.

    To use your haircut example, if she can get a haircut for $30, but chooses to go somewhere nicer that costs $50, she would pay the extra out of her money as it falls into the unneccesary category. We don’t nitpick purchases since we’ve got enough wiggle room in our budget, but we do have basic ground rules.

  21. ejw says:

    we don’t have that type of system. We truly spend so little on self splurges that I’m not sure how it would work. My husband brings his lunch everyday…I work from home and obviously eat here. If I do have coffee or lunch out its for business reasons so I order reasonably and it’s a write off. I buy my clothes from super sales and thrift stores. I never buy full priced books, only used and library books. Make up is whats on sale at the grocery store with double coupons, or really great sales at Walgreens. My friend cuts my hair. I color it myself with professional products that come to about $3 each time. We seldom eat out because we’re usually disappointed compared to what we can create at home. I do like wine, but I find truly decent wines for 5-6 bucks a bottle and only open them on weekends. We go to a $2 second run movie theater a couple times a month and have popcorn and a show for less than $10. We’re both so frugal 95% of the time that when one of us does spend a few bucks (even on full priced things!)it doesn’t make a huge difference. We pass up little things that don’t matter much like coffees out, fast food, Dairy Queen, junk food and convenience food from the store, buying cd’s and dvd’s etc and these things really add up to have money to spend on what we really want.

  22. Annie says:

    I automatically transfer 50 dollars from my paycheck biweekly into anohter account and that is my fun money for the 2 weeks. I can use it for coffee, eating lunch outside or whatever i want. I often find some weeks that i have a balance of 20-25 dollars becasue i didn’t go out as much and i end up transferring that money into a savings account. I think it’s a great idea to have “fun money”, i think it will make people realize that it’s ok to spend money after all your dues to your debts and to your future savings have been met.

  23. CJ says:

    Building on Trent’s approach, my spouse and I track our finances using software. (Quicken/MS Money etc)

    We budget small amounts for things like “snack food” (say, $20/mo) with larger amounts for necessary expenses like groceries and discretionary spending like dining out.

    Where the software has been VERY useful is for projecting cash flow.

    One click shows I will have (for example) a minimum of $400 in my chequing account for “anything” by mid next month. Since bills cause the bank balance to rise and fall, this lets me know what my “low point” will be.

    I carry that number around with me on my phone. I could spend that money without batting an eyelash, though more often than not, it gets invested or saved.

    This is the power of living below your means and having DATA to make informed spending decisions. Before I was tracking money electronically, I would stay up night worrying about not having enough.

  24. Steve in W Ma says:

    If you don’t have $10 to buy a replacement toilet valve and flapper at the hardware store, and not enough time to replace it, your budget is indeed tight, and your schedule is tighter. I suggest fixing all of those little things, if possible, because otherwise, at some point all of it will tend to add up to a crisis–emotional, psychological, or actual. That’s been my experience, at least.

  25. JS says:

    Lots of good suggestions and ideas on here- thanks! I think once we hammer out the rules, it will be easy.

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