Knowing your allowance and how to manage it

How much money do you have to spend? It’s a fairly simple question – and one that might come up a lot in your life – but not everyone finds it that easy to answer it. While you might have long outgrown the need for pocket money from your mum and dad you need, in some respects, to develop your own adult version of this principle. You need your own spending ‘allowance’ and to manage this effectively.

How to establish your ‘allowance’

What should your allowance be? You should take some time to go through your entire budget to help you come to an accurate figure for this. Go through your last three bank statements, line by line, and make a list of everything you’ve spent. You need to establish what your ‘essential’ payments are – covering everything from your mortgage to loan payments, bills, subscriptions and typical grocery shopping bills, for example. These are non-negotiable spends that you can’t avoid. You need to add these up and take them off your total earnings.

Don’t just see this figure as your total allowance, however, as you can’t afford to plan to spend every single penny that you have. Set aside a small buffer in a rainy day fund – at least until you have three months’ income to one side.

Then, once you’ve accounted for some savings, what’s left is your monthly allowance. You might well decide you’d be better off splitting this up into four weekly payments if this works better for you when it comes to managing your money.

Managing your allowance

Once you know how much money you have to play with, it’s time to think about managing this properly.

Here are a few things to bear in mind:

  • Pay off your debts for a better allowance – If you want a bigger spending pot, this process can spur you on to pay them off and clear more finds to spend elsewhere. Prioritise your debts (see how here) and pick them off one by one to grow your allowance.
  • Small changes make a big difference – Cutting that cup of coffee on your way to work or supermarket meal deal in your lunch break can make a big difference over time.
  • Don’t try to do everything by yourself – Make sure your partner, family and friends are all on board with your budget plan. It’s much easier to stick within your allowance if you all work together.
  • Don’t deny yourself a treat or two – Sticking to your allowance doesn’t mean spending nothing and being miserable. Make sure you give yourself a little treat here or there. It’ll feel even better if you know it fits into your wider budget plan.
  • You can track your spending with an app – Whether it’s your bank or building society’s app or a bespoke ‘spending tracker’ app, there are a number of apps you can try out which will help. These will let you check on your balance and how much of your allowance you’ve already spent in a week or month. Having this information at your fingertips is a great advantage when it comes to staying in control of your finances.

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