All About Budgets

Why we budget an adult family allowance

ByMo CanadianBudgetBinder

ice coffee family allowanceCASH TO SPLASH GUILT-FREE

 

Sometimes it’s better to have a family allowance or splurge money for those times that you least expect to spend money but have to.

Another reason you might want a family allowance category in your budget is when you really….really…. really want to buy something normally not on your spending radar that you just have to have.

I can remember a time where I really wanted a new pair of sunglasses and I’ll let you guess where the money came to pay for them.

That’s right the family allowance category in our budget. Although most times it’s myself who uses it the wife sometimes splurges on something she wants like a pedicure.

No we don’t put that under health and beauty because it’s not products we are purchasing nor does she really need it where a haircut might be a different story. Having pretty feet is nice to have so she treats herself once in a while to a relaxing day at the spa.

I know some of you might use your emergency savings for these times but for us they really aren’t emergencies nor are they part of our entertainment budget.

 

Family allowance

 

Just what does it mean to have a family allowance in the budget? I know what you are thinking and you’re probably right a family allowance really does mean setting aside money in your budget for the family.

The amount that is budgeted in the family allowance depends on how much money we have left after all of our bills are paid for. Our budget allows for $35 per month of family allowance to use which we have used this year. We use our family allowance for discretionary spending when we need to, something like a splurge account.

What is discretionary income? According to Investopedia……..

The amount of an individual’s income that is left for spending, investing or saving after taxes and personal necessities (such as food, shelter, and clothing) have been paid. Discretionary income includes money spent on luxury items, vacations and non-essential goods and services.
Discretionary income is derived from disposable income, which equals gross income minus taxes.

It’s great to have a family allowance category but if you can’t pay your bills you might want to hold off on trying to keep extra cash hanging around, especially if there is none to spare. If we don’t the use the full $30 we can save it up for the next month if need be.

Every so often we have a look at our budget from earlier months to see if we need to alter the budgeted number but mainly it’s a change we would make once a year. This may differ for you.

 

Allowance for kids

 

Growing up my parents never gave us an allowance and I can understand my parents reasoning behind it.

My parents wanted me to do the chores because I had to not because I was being paid to do it. On the other hand I can see how responsibility leads to taking home a paycheck and learning from a young age that if you are responsible than you can earn money to spend on things you want, such as toys.

So, just about every child has the need to make money at some point in their growing years and for myself taking on a paper route was the best way to earn money and learn responsibility.

Now that I’m older I can look back and say that earning money on my own was rewarding as I learned how to manage money because I was in charge of the paper route, not my parents.

A friend of ours has two kids and both kids are given allowances whether they finish their chores or not. Many times when we visit our friend complains that the job is half done or he has to push the kids to even attempt to clean their bedrooms.

I’m sure just about every parent has to motivate their children in some way or another but what they don’t need to do is give them an allowance for it as it’s not mandatory for a parent to do. I won’t say it’s wrong or right but I will say if we did you can bet the chores would be done before any payment was given.

The children are trying to see how far they can push the parents and still get that easy hot cash in their hands every week and it seems to be working. Parents get frustrated and are tired from working all week that they let things slide just so they don’t have to deal with their kids moaning and groaning.

 

Be a parental leader

 

Another thing to think about is setting an example. If your house is a pig sty and you expect your children to have a clean room they can see this. Most kids know the difference between a clean house and a unkempt house with dishes piling up in the sink, dirty floors and bathrooms.

I just don’t think teaching money to children means giving up when the going gets rough. I guess that’s why they say don’t hire your relatives either because the likelihood that you will go easy on them is pretty high over hiring helping hands that you don’t have a bond or relationship with.

I didn’t turn out so bad considering my parents never gave me an allowance to do random jobs around the house but as an adult things have changed. Now that we own our own home you could pay yourself for cleaning your house provided you would have paid a housekeeper to do it in the first place. If not, then paying yourself to clean and maintain your house seems a bit odd.

 

In your pocket

 

The pay yourself first theory is great too because before any money goes to paying bills you’re getting paid just for being you. Some people forget about this part of their budget but paying yourself first doesn’t mean that it is money you can go and blow. That money might get used for emergency savings or other investments but depends on how you divide the money.

In a way we do pay ourselves just not first it’s after all the categories in our budget are taken care of and whatever is left goes into our savings account. If we play by our budget rules we should have a healthy amount of money left over every month.

It becomes a problem for some people who don’t know how to manage their money let alone a budget where paying yourself first might actually be the best bet. The reason is you take the money and move it where it needs to go before the bills are paid, provided you have that money available. You can’t move what you don’t have. What I’m saying is you can’t fabricate a family allowance category and put money into it without sorting out all of the other “important” categories first.

 

Why a family allowance is important to us

 

Ever since I started posting our monthly budget on Canadian Budget Binder I’ve had a few people email me about my “Allowance” category. They thought it was a bit odd for adults to have a family allowance but we did this for a reason.

When we quit smoking we admitted that we enjoyed a few beers now and again and once in a while I’d hit up the drive-thru at Tim Horton’s to treat the team because we took turns at work buying coffee. Sure you can make coffee at home and I do every single day and I take it to work but there are times where you have bite the bullet (not all the time) and enjoy your hard-earned money provided you have that money set aside

I’m on the road quite a bit for work which means a cup of coffee from home only lasts me so long. We decided to set up the family allowance so there was money in our budget for those things such as coffee or food on the road or paying for friends when we go out with them. Plus, if you’re not careful you can easily blow your budget on treating yourself or buying “stuff” you don’t need.

How many of you actually keep receipts for all the “convenience” food and drink that you buy? Probably not many of you but we have and still do just so we can keep track of our expenses every month. Having a family allowance also lets us breathe a bit when it comes to spending money in our budget.

Sure we have an entertainment category in our budget but we keep that for dinners out or if we have gatherings with friends who want to go out for drinks or dinner. If we don’t use it one month than the money goes to our emergency savings although we’ve talked about making the two categories a projected expense which may change in the future.

We use the family allowance if we want to splurge on something special that we wouldn’t normally such as ice coffee at McDonald’s (my wife loves them for $1) or going on a surprise road trip and stopping off for a treat along the way. As you can see our family allowance tends to revolve around drinks and food but for others it may be gadgets or hobby accessories that they want to splurge on.

 

Share your secrets

 

I know some of you have secret hiding spots to stash your cash (yes some of you stash cash in your bra or tool box, admit it) that you use as your splurge money. You might get this money from finding beer cans and returning them for cash or re-selling items you picked up for free and made a profit from. Some people take the coupon savings that they make and set that aside for family allowance money as well. I think that’s a brilliant idea if your budget can handle that.

No matter how you budget your family allowance money having that spare cash around to do whatever you please helps when you want to spend guilt-free on things you don’t normally purchase.

Do you have a family allowance in your budget or a splurge account?

 

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Photo credit: Freedigitalphotos.net/Ping Phuket

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