A weekly allowance budgeted into your monthly spending plan is an opportunity for you to take control of the day-to-day miscellaneous expenses that can create havoc in a household. Instead of swiping your debit or credit card every time you stop for coffee, have lunch out or stop at the drug store for some personal items, you'll dip into a cash allowance that you pay yourself each week. You'll learn to make better choices because a finite allowance, allocated in advance, helps you to prioritize your purchases and can reduce impulse buying.
Draw a vertical line down the center of a piece of notebook paper. In the first column, itemize all of your regular monthly or periodic bills that you pay by check or online. Record the amount you pay, and what you pay for. Include mortgage or rent, taxes, utilities, insurances, car payments, credit cards, savings, retirement, emergency fund and similar recurring bills.
Calculate your total disposable income in the second column. This is all income, after taxes, you have to spend. Include income from salary, wages, interest, dividends, investments and other income sources such as child support or alimony.
Run totals for each column after you're satisfied that you have recorded all of your income and all of recurring expenses. Subtract the total of your recurring expenses from the total of your disposable monthly income. The balance is the amount you have available each month for your allowance. For instance, if you have $1,500 in recurring expenses in column one, and $2,000 in disposable income in column two, your balance or allowance will be $500 a month.
Divide the balance by 4.3 to allocate your allowance relatively evenly to the 4.3 weeks in each month. If your allowance is $500 a month, then your weekly allowance is about $116.25 a week.
Calculate the amount you spend every day on allowance-related items. On a separate sheet of paper, walk yourself through a typical day to identify and record your spending patterns, such as tolls, bus or train fare, gas for the car, morning coffee, snack or fast food breakfast sandwich, chewing gum, candy bar, lunch, Girl Scout cookies, fresh flowers for the office, makeup, movie rentals, shaving cream, perfume, shampoo and other personal items. Don't forget club dues, subscriptions, tips to the pizza delivery guy, hairdresser and the waitresses at your favorite restaurants.
Move from daily spending to monthly and seasonal spending, and add those items. You'll pay for them with cash from your allowance rather than tacking them on to a credit card. Estimate the item's weekly cost. For instance, if you buy an annual beach pass for $50 every summer, include that in your weekly allowance by dividing it by 52 — the number of weeks in a year. You'll end up allocating about $1 per week for your beach pass. That $300 trip to the day spa you take twice a year is costing you about $11.53 a week. Round upward to $12 to avoid coming up short.
Prioritize your allowance items by their importance to you. Create a list that ranks your allowance items from most important at the top to least important at the bottom.
Add up your weekly total spending estimate. Compare it with your allocated allowance amount. If your weekly spending total estimate is less than your weekly allocated allowance, you're in good shape. But since you've moved some of your credit card expenses to cash, you're apt to show more spending than allowance.
Begin trimming your expenses from the bottom of the list. Tackle the big-ticket categories first. Keep whittling down expenses until your spending equals or is less than your allowance.
Pay yourself weekly. Set aside the cash you're allocating for seasonal or annual expenses until you're ready to spend it. Track your expenses by checking your receipts every week.
Timing your payday is important if you tend to spend most of your allowance on weekends. Take your allowance on a Monday to be sure you have the cash for your weekday expenses and to avoid overspending on weekends.
- Timing your payday is important if you tend to spend most of your allowance on weekends. Take your allowance on a Monday to be sure you have the cash for your weekday expenses and to avoid overspending on weekends.
Kate Sheridan is a freelance writer, researcher, blogger, reporter and photographer whose work has appeared in numerous newspapers, magazines and trade publications for over 35 years. She attended Oakland University and The University of Michigan, beginning her journalism career as an intern at the "Rochester Eccentric." She's received honors from the Michigan Press Association, American Marketing Association and the State of Michigan Department of Commerce.