Using Adult Allowance to Cut Back on Expenses

Over the last several years, my wife and I have started and continued to maintain a system of “adult allowances.” As we’ve since discovered, the concept is neither new or unique to those in the personal finance community. Because we developed the idea on our own and later discovered our commonality with many others around the world, I have a firm belief that the concept is a “natural” one, or as Stephen Covey would say – based on  principles.

What exactly is adult allowance?

Different people define it in different ways, but the idea is fairly universal – adult allowance is a set amount of money, distributed at set intervals to one or more parties involved in the budget, and usually for the purpose of being spent on items like fun, entertainment, gifts, or personal items. That’s really all there is to it – anything above and beyond this concept will be personal to your system and adapted to how you manage your finances.

In our own situation, an adult allowance is less about exactly what we purchase with the money, and more about the freedom it provides for personal spending. For example, some people use their personal allowance to purchase wants, fun items, and pay for entertainment. This money is not allocated in any other part of their budget, and the amount of their allowance is the total they can spend in these categories over the established period (weekly, monthly, etc.). On the other hand, as in our own system, money can already be allocated for fun expenses and certain wants in the regular budget. What allowances permit is an ability to conduct spending on a personal level.

The Benefits of an Adult Allowance

There are a number of benefits to this kind of setup, particularly if you have to “answer” to a spouse about your financial status:

• Personal freedom: With a bit of money for yourself, gone are the potential feelings of being “locked in” or losing your “freedoms” – a personal allowance permits you to spend on whatever you want, whenever you want, so long as it stays within the limits of the allowance cap. It’s probably the last place in a marriage where you can have a bit of financial privacy and continue to be open and honest with your spouse on all other financial matters.
• Conscious plan for fun and a place in the budget: With an allowance, personal expenses and fun are built right into the budget without having to worry about “how are we going to pay for this?” or “should we spend on that?”
• Removal of guilt: How often do you hear about your neighbor who got yelled at by his wife for buying something for himself? Or the wife whose husband couldn’t believe she spent $100 on a pair of shoes or a manicure? Gone are the days where this is an issue, thanks to the allowance. Your partner can’t question your spending habits because you’ve agreed that the money is “yours” to do with what you wish.
• A secret stash for gifts: My wife kept complaining that I would know ahead of time when she bought me a present (“Hey, honey, what’s this charge to GameStop for $45?”). Now personal spending turns into personal saving as each party to the deal saves a bit up for the next great gift.
• Freedom from tracking: Allow yourself the ability to not track something for once, and have complete freedom to do with your allowance what you wish, so long as you don’t go over.
• Deterrent to overspending: Remember that age-old advice about losing weight? You have to splurge a little once in a while to maintain motivation and avoid burning out. Otherwise, you will break down and eat the first box of cookies you see. An allowance is a little “blow-off valve” that allows this slow venting to take place without a big “ka-boom.”

A little personal stash has permitted my wife and I to maintain our personal boundaries, financial sanity, a little thrill of still having something of “ours,” and to avoid silly fights over money. Try it out for yourself!

Photo credit

Further reading:

• Learning to Love the Adult Allowance
• Marriage and Money: Allowances for Adults?
• How to Budget with an Adult Allowance