It’s Called Currency

You probably think of budgets as straight jackets for your money, that putting down on paper (or into a computer spreadsheet) just where your money is going to go each month is too confining, too restrictive.  But like water, money needs to flow. If you don’t clearly define where it will go, whether it’s a holding tank for a future need, or directly into the current of your daily spending, your money will just slip through the cracks, dripping out of your life.

One simple concept that made budgeting much less confining for me is the “blow money” category. Blow Money is where I put the amounts that I don’t track: the impromptu ice cream stop, the $2 loan to a friend, the Starbucks treat at the bookstore. This category in my budget is usually larger than I want it to be, but it allows me to acknowledge the fact that money will leak out of the system and frees me from trying to figure out exactly where it went.

Each member of your household would have their own Blow Money to spend on whatever they want. They don’t have to report that they spent $15 going to the movies and $5 on new hair accessories. You just need to budget their $30 in Blow Money for the month. (Many would call it an “allowance”, but I have a problem with that word. I’ll tell you why in another post.) You can track them separately by name or as one lump sum.

It’s that easy: when you’re categorizing your monthly cashflow, make sure to include a Blow Money item as a way to forgive yourself for not tracking every penny. A word of caution though: this category should not represent a sizable percentage of your monthly cashflow. You really do need to know where the money goes so you can plug any unnecessary leaks.

Tags: budgeting, cashflow management // 1 Comment »