As promised, I’m back for week two of Motivational Monday (MoMo). This week I want to talk about why you should always choose to pay yourself first, and how it can help you stay on track. After all, the tagline of my blog is “Getting on track, and staying there.” Learn why you should start an adult allowance today.
“A year from now, you may wish you had started today.”
– Karen Lamb
What Does “Paying Myself First” Mean?
At Manage Your Means, paying yourself first is the equivalent of giving yourself an allowance. In our family, we set aside a certain amount of money, every month, to do whatever we want. It’s our mad money! It’s gambling money. It’s that new pair of headphones I just had to purchase. It’s fabric and stuffing for some custom pillow cases she wanted to make. It’s dinner and a movie. It’s not all of those things every month, though – and that’s the whole point.
Paying yourself first sets a boundary. You can tell yourself, “I have $X to spend, what do I want to spend it on?” It becomes a game, and a fun one! There’s a distinct pride to be had in saving for an item and paying for it outright with money that shouldn’t have gone to paying the phone bill. You lose the guilt of irresponsibility when you’ve given yourself explicit permission in your budget to do what you want, and that’s a great feeling!
After all, if you’re not going to tell yourself it’s okay to buy Cards Against Humanity… who will? You’re all grown up, but if you’re saying things to yourself such as “I’m pretty sure we’ll be able to make ends meet even if I go out to dinner tonight”, or “I really don’t know how much money I have in the bank”, you need an adult allowance (and a budget).
Why Shouldn’t I Just Spend What You Want, When I Want?
By giving some money the job of being “mad money”, you’re also telling the rest of your dollars that they aren’t “mad money”. They have other jobs. Rent, utilities, food, savings – those are important things too. Paying yourself first is every bit as important as any other expense you have though, because it helps keep you sane and it helps prevent spending too much.
When I say it helps from spending too much, you might be thinking, “Wouldn’t I be saving more money if I were frugal and didn’t spend that $X per month?” Well, you’re right. Except in my experience, when I don’t pay myself first, I eventually cave to my own whims and end up spending entirely too much on a weekend hotel, eating out, gas, tickets for a show, etc. Paying ourselves first helps curb my appetite and allows me to regularly enjoy living life without going overboard.
Okay, I’ve Bought In… Now What?
Set Your Allowance Allottment
Figure out how much you want/can afford your allowance to be. My wife and I aren’t very materialistic people at all, our monthly allowance is pretty low by most standards, so I won’t give you a dollar amount recommendation. Look at your budget and monthly expenses. Calculate what you spend now on things that would be categorized under your allowance and use that as a starting point. Try to guess how low you can make your allowance and still feel fulfilled or unrestricted. Once you’ve done that, test it for a few months and reassess.
If your work offers direct deposit, great! Open a no-fee savings or checking account (maybe even with a different bank than your normal bank – more separation is better!) and set up whatever your designated adult allowance will be to go into the new account. This is the preferred method, since you’ll never see the allowance money in your normal budget figures. It doesn’t hurt to take it out when it was never there!
Cash Under the Mattress
If your employer doesn’t offer direct deposit, you’re still not doomed from starting an adult allowance! Taking out cash and setting it aside is a tried and true method to separate your mad money from the rest. The only downsides are that for some people, cash burns a hole in their pocket faster than it would in a savings account, and that cash can be lost.
The Real Purpose of an Adult Allowance
An adult allowance isn’t meant to prevent you from buying a lot of things. If that’s your goal, you’re doing it wrong. But that’s okay! Don’t let that stop you from starting out an allowance for yourself. I was the same way when I started an adult allowance. It took several months for me to see the real value behind them and appreciate what they taught me.
Adult allowances are a worthy budgeting tool because it allows you to step back and think “do I really want to spend money on this?” There are a lot of things in life today that aren’t worth our time or money, yet we spend money on them all the same because of peer pressure, impulsiveness or an inflated sense of what our “needs” are. An adult allowance, done properly over time, should encourage you to rethink the way you want to spend.
Wrapping Up Allowances
I’ve written about adult allowances here because I practice it for myself, and it has made a difference in how I think about my wants, and also how I prioritize them. When I started an adult allowance, I spent my money on food, gum, movies at Walmart or Safeway or Google Play Credits for game apps. A couple of months in, I realized I didn’t really didn’t need or want those things, they were impulse buys.
Before adult allowances, I had never thought of food as being an impulse buy – it’s a necessity! Food’s something you have to have to survive. Yet, Americans have an overabundance of food at their disposal. Food can absolutely be an impulse buy. That’s why the checkout lines of all supermarket stores are lined with high fat, high sugar overpriced snacks.
If you’ve got your own recipe for success when it comes to frivolous spending, please share it. Paying yourself first is the best approach I’ve found to control my frivolous spending habits. Try it out and see if it works for you too!