Rule #27: Cash in Pockets Can Be Spent in Any Way

I can’t remember if I’ve blogged about this yet or not, but just in case here’s rule #27 on the J. Money “List of Money Rules“:

Any money in my pocket is allowed to be spent however I please

Haha… and it’s probably one of my favorites :)  It sounds wasteful – and maybe it is if not done correctly – but it’s the ONE area in my finances that I allow myself to be more willy nilly and not count it down to every last penny.  Something that I used to obsess about as a kid growing up, and not in the way that’s productive either  (i.e. I’d hoard every single dollar and never want to use up any of it, even if I was allowed to or was required to do so… something I’m still haunted to this day about, when I hear the echoes of my mother calling me “stingy” and “an old man with his money!”).

I know a lot of you like to track your money down to every last nickel and dime, and that’s totally cool! – I respect that – but what I’ve realized over the years is that if I personally try and do that in every single aspect of my financial life, I tend to veer off towards wacko-ville.  My brain just doesn’t have the energy to track everything at all times, so I budget in a little “gray area” to allow myself to decompress a bit (others may call this the “random” category?).

And I stress the “budgeting it in” part too because of course you DO need to know where all your money’s going in general, but it doesn’t mean you can’t siphon off a little and throw it into a newer, more relaxed, environment. This one here being the “whatever’s needed at the time” fund, sprinkled with some “spontaneous packs of gum or a beautiful bag of marbles.”  (Otherwise known as Rule #27.)

And Rule #27 also states that this money will be limited in size, and also help out Rule #13: Always have cash on hand. And this is how the rules are enacted: Every pay period I take out $200 in cash from the ATM (my “pay periods” are now once a month since being self-employed, revised from the $100 a  paycheck schedule every 2 weeks) , and that money is to be used for anything that it’s needed for throughout the month – no questions asked. And it’s very much intended to be vague  ;)

Most months I run through it, especially if I’m traveling or hanging out a lot with friends (why does that always happen?), but either way once I’m flat out, I’m out.  The pockets will have to wait ’till the next pay period again in order to be refilled.  And there are plenty of times the money carries into the following months too  – which means I not only get to save a little bit more unexpectedly, but I also take out the appropriate amount less the next time around… Which awesomely happened last month as I’ve been becoming more of a cave man here lately inside my Blogger Lair ;)

I don’t know if any of you have portions sectioned off like this too, but if you don’t, it may be something to consider (IF you are good with managing your money, of course – if you don’t trust yourself, keep on tracking every last penny to the drop!). It hasn’t solved all my obsessing problems, or my plans for being  less of a Money Freak for that matter, but it HAS helped me relax a little more and pay attention to the BIGGER stuff at hand.  I think the key is mastering all sides of the equation.

Do you have any similar rules to your own budgeting or day-to-day spending? I’m curious to see if I’m alone in this one… I’m gonna guess no? ;)

(Awesome photo by katerha)

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  1. Eric J. Nisall - DollarVersity March 14, 2012 at 7:02 AM

    I think it’s crazy to track every single penny particularly if you are a cash-only type (an I mean CASH, not even debit cards). There are so many transactions, which lead to so many receipts or notes about spending it can get to be an enormous task. Even the most ardent health-conscious workout freaks give themselves cheat periods, and these are people who breakdown and track every last calorie, gram of protein/carb/fat, nutrient, etc.

    Being so overwhelmingly anal or controlling has to take it’s toll mentally as you said would happen to you. I can understand wanting to know where the money goes in order to budget and plan going forward, but there is such a thing as going overboard. I just don’t see what evil could possible come from having a slush fund of some small amount that can be used for anything under the sun or in your immortal words, be spent “willy-nilly”!

    That’s just my $.02. Now excuse me while I go to my spreadsheet and record where that money just went so I know for the future when I wonder why I’m missing $.02 from my stash ;-)

  2. Frugal Fries March 14, 2012 at 7:29 AM

    I think it depends on how much money you have to work with. For someone like you, it makes a lot less “cents” to track every dollar. To some people though, those dollars can make a lot of difference.

    Right now, I’m on a pretty strict savings budget. I have a total amount of money I would like to save each month and a projected total based on my typical spending. If my actual spending turns out to be less than the projected spending + mandatory savings amount, I get to pocket the rest!

    Often it’s only around 50 to 60 dollars a month, so, to me, everything counts!

  3. jefferson March 14, 2012 at 8:25 AM

    the fact that you have great cash flow and a nice financial situation is what allows for you to have “free money”.. i just can’t get away with it..

    i used to do the very thing that you are talking about above.. and honestly, it was a problem for me. I would often find myself getting coffee every day at starbucks and raiding the vending machine at work every afternoon… Basically spending money that I couldn’t really afford to spend, and doing it “under the radar”, where I wouldn’t be accountable.

    i do fantasize about a financial life where i don’t have to worry about the money that is spent on such things, but i have a long way to go before i can get there..

  4. Ryan March 14, 2012 at 8:45 AM

    I just recently started a new budget system and am actually trying to “track my money down to every last nickel and dime”, but I’ve also created a budget line “flex cash” that I can do what ever I want with. Money is no fun if you can’t have some fun with it, right?

  5. Shondellclarke March 14, 2012 at 8:49 AM

    I have what I call “fun money.” This is any money left over after bills and savings.

  6. Hunter March 14, 2012 at 8:51 AM

    Rule #27 is a winner. As long as the big goals are being met a little personal freedom is very psychologically healthy. Our fun money is to be spent in a way that gives each of us the most satisfaction. It’s our little slice of freedom in the bigger combined financial relationship of marriage.

  7. Michelle March 14, 2012 at 9:23 AM

    I don’t track everything I buy. I don’t have enough determination to write everything down and keep track of every penny.

  8. Alexis March 14, 2012 at 9:26 AM

    We give ourselves an allowance ($50 each every pay period) for lunches out and miscellaneous small stuff. But if we don’t spend it all, it goes into our personal stashes, which we save up for splurges (my hubby likes video games; I tend to buy clothes).

  9. Kevin @ March 14, 2012 at 9:38 AM

    I used to budget $60 a month of “cash”. I could be spent any way I wanted to spend it. Thing is, I would usually go 3 or 4 months without spending any, so now I don’t even bother budgeting it. I just try to keep about $60 in my pocket in case of a cash emergency.

  10. Matthew Doyle March 14, 2012 at 10:04 AM

    I used to be this way, but I was driving myself crazy and my wife crazy. I have now set financial goals such putting a certain amount into savings each month and keeping a minimum balance to have in my account each month. We have gotten into a groove where we each only go to lunch once a week and maybe out to dinner twice a week, if that. I feel that if you get into a spending pattern that fits your budget you should be fine.

    I do advise people that if they are having spending problems that they need to withdraw cash, leave the cards at home and only spend the cash. This gives them more of a sense of how they spend their money. It is usually eye opening for them.

  11. Elaine Colliar March 14, 2012 at 10:09 AM

    I take out a set amount every week – and it’s referred to as the “Because I’m worth it money” – I can spend it on anything that makes my heart sing (mostly on treating the boys, but today I bought paint stripper)

  12. Emmy March 14, 2012 at 10:34 AM

    That’s typically how I view cash as well. When money was really tight I used to do the whole envelope budgeting with cash – but it didn’t work well for me. So I have more of the philosophy that you do. Take out some cash and that can be use for whatever I want. I just need to get into the habit of getting cash more often!

  13. J. Money March 14, 2012 at 11:03 AM

    @Eric J. Nisall – DollarVersity – Haha… you might as well just copy and paste that comment into a brand new blog post for yourself! Brilliantly said ;)
    @Frugal Fries – $50 or $60 is no chump change for sure, keep it up! :)
    @jefferson – That’s AWESOME you know yourself like that! You gave it a shot, and it didn’t work so you changed it up. If everyone did that they’d be MUCH better off than trying to keep forcing something that wasn’t working – appreciate you sharing your thoughts :)
    @Ryan – There you go, best of both worlds :)
    @Shondellclarke – Great! Yeah, I guess that would be considered the same stuff :)
    @Hunter – Nicely put, good sir! Not that it surprises me ;) See you at FINCON 2?
    @Michelle – Well, you could probably use a service like Mint or something that automates most of it for you, but yeah – def. get your point. As long as it’s working for you, keep on chugging!
    @Alexis – Perfect! That’s an excellent way to manage things, I dig it. (And I’m with you – I’d much rather have newer clothes than video games, but don’t tell your husband that ;))
    @Kevin @ – Even better! Haha… you’ve perfected the system ;)
    @Matthew Doyle – Agreed! Or do a “no spending” challenge for 30 days straight and see what happens :) I took on that 4 years ago and have been saving $300+ a month ever since! Whatever it takes to get yourselve into that groove though, I’m glad you two have slowly mastered it.
    @Elaine Colliar – HAH! You do realize you have “boys” and “stripper” in the same sentence, yeah? ;)
    @Emmy – Hehe, there you go :)

  14. Mrs. Money Mustache March 14, 2012 at 11:29 AM

    We don’t track everything. In fact, we hardly track anything at all and we don’t have a budget (not even a sexy one!). I have started using Mint and that is quite fun, but that’s about it.

    My trick to deciding if I need something is to consult with myself, MMM (he’s always sitting on my shoulder, it seems), and the Environment. My #1 reason for not buying something (or not driving somewhere) is the impact my actions have on the Environment.

    I rarely buy anything other than essential stuff and I avoid “shopping” in stores, but when I’m at a store and wondering if I should buy a t-shirt, it’s pretty easy to realize I don’t need one. I’ve become pretty extreme over the years to the point where going into a store and seeing all the crap in there actually makes me feel somewhat nauseous. Yeah, I’m weird that way.

    Anyway, if I have extra money in my pockets by some random event (since I don’t take cash out of an ATM), then I might use it to pay off my library fees, buy a coffee at the local coffee shop, maybe buy a book for my son at the used book store. Or, more likely, I use it to pay part of the grocery bill and then use credit for the rest. :)

  15. Jen @ Master the Art of Saving March 14, 2012 at 12:00 PM

    I don’t set aside money from our budget to do this, but I sort of do the same thing. All the money I earn from online (surveys, searching, paid emails, etc.) the previous year is used for my luxuries. For example, if I made $1,200 from doing stuff online last year (this doesn’t count anything from blogging) then this year, I can only spend that much without it having an impact on our budget.

  16. DebtnTaxes March 14, 2012 at 12:01 PM

    We budget some for personal spending, but it’s not a set amount. If we feel like buying something we buy it. But we also think if we really need it or not, because money that we don’t spend on things can be put towards debt repayment.

  17. Leah March 14, 2012 at 12:24 PM

    Cash always feels like “Fake money” to me, probably because I don’t think I’ve ever deposited cash in the bank. I deposit checks because that is REAL money. Mint tracks my credit card spending so that’s REAL money. I say that all to say that I agree- cash is totally guilt-free spending. For that reason, I don’t often take money OUT of the ATM though :) Balance, right?

  18. StackingCash March 14, 2012 at 1:02 PM

    Working in the tipping industry I always have cash on me. My debit cards are in a safe and I don’t even know the pin numbers. I think I allow myself too much cash to play with, but I figure as long as I’m spending less than I make I’m ok. It was worse a few years ago in that we would save as much as possible which did lead to frugality fatigue. Tough balancing act for sure.

  19. Beating Broke March 14, 2012 at 1:50 PM

    I get away with this rule, merely because there’s usually less than $20 in my wallet. I use cash so little, that often, if there is any in my wallet, it will remain there for months at a time.

  20. Nick March 14, 2012 at 2:36 PM

    Yep – we do the “blow money” thing too – it’s the only way we stick to our budget. With no fun money we felt way too limited. It’s pretty funny how wasting a little money was the secret to saving way more money…

  21. Aloysa @ My Broken Coin March 14, 2012 at 3:00 PM

    I try to keep at least $20 for my coffee and donuts. I keep track in that way how much I spend on lattes and donuts. I do it not to limit my spending but to limit my calorie intake. :) Other than that I don’t have any cash on hand.

  22. Eric J. Nisall - DollarVersity March 14, 2012 at 4:50 PM

    Nah man, I’ll leave it here for you to admire, knowing that it’s genuinely one-of-a-kind!

  23. Christa March 14, 2012 at 4:51 PM

    I basically grew up using a debit card, so I consider that my money. I track every dime that I spend on bills and on the debit card, and that helps me stay in line with my spending. But if I have cash on hand, it’s free game, and it disappears so fast I don’t even get a chance to blink. Maybe I consider cash more like free money…or monopoly money? In any case, I don’t carry cash anymore because it burns a whole in my pocket.

  24. KimmyQ March 14, 2012 at 6:11 PM

    I hate paying with debit or credit (even at Redbox) so I always pay cash. I track my spending with the YNAB app so I can always tell you, down to the penny, how much cash I have in my wallet. Otherwise, it’s like, “I took $100 out of the ATM on Tuesday, where did it all go?” Now, I know: gas, starbucks, trader joes, a library fine, the parking meter and a burrito.

  25. Slackerjo March 14, 2012 at 7:42 PM

    I use my credit card to pay bills, buy gas and groceries for a 2 week period. I use the card to get points and every 3-4 months I get a $25 gas card from my points. As far as cash,I withdraw about $80-$120 on payday and that is my disposable income for 2 weeks. I can spend it on anything I want but that cash covers things like haircuts, laundry, new clothes, household items, books,birthday gifts, any dinners out. If I see my nice neat pile of $20s disappearing then I need to cut back. I’ve been using this system for 15 years and it is great. There is no way I would ever change. With 1 week til payday and everything I need purchased, I still have $38 left!!!!

  26. BE @ BusyExecutiveMoneyBlog March 14, 2012 at 7:52 PM

    What i love about what you said was that if you don’t spend it all one month, you take the appropriate less amount the next pay period. That’s excellent rigor!

  27. TeacHer March 14, 2012 at 7:55 PM

    Haha, this is why I DON’T carry cash :) To me, once the money is out of my bank account it’s already “spent” and I don’t track where it went….which can lead to a lot of money wasted. So I just put everything on my credit card, enter my receipts into my budget spreadsheet, and avoid cash.

    This is a great example of how personal finance is so PERSONAL. What works for one person doesn’t work for another. I love all the different ideas out there!

  28. SavvyFinancialLatina March 15, 2012 at 12:29 AM

    We decided to set up a similar system this year when we got married. We are definitely going to reevaluate it come June. Right now hubby is using his debit card which I have access to, but what I have seen is that he doesn’t check his account…not good when keeping track of your expenses. So I think we might switch to a cash system. That way I won’t know what he spends it on. Which would help my money freakiness.

  29. Money Infant March 15, 2012 at 4:29 AM

    This is exactly what we do. 9000 baht each every month. We use it for whatever strikes our fancy. It might be a nice lunch or dinner, gifts for the each other or the baby, books, toys, whatever. It works out pretty well and takes the stress out of managing that miscellaneous category in the budget.

  30. Stephanie March 15, 2012 at 9:19 AM

    We do pretty much the same thing. It goes on the budget spreadsheet as “spending money,” and we take it out as cash. My husband and I each get a personal allowance, plus money for joint entertainment expenses (dinner, movies, concerts, etc.). When it’s gone, it’s gone, and we don’t have to track where the personal spending money goes. It works out pretty well, because the money is technically accounted for, but we don’t have to track where it goes in detail.

  31. Andrea March 15, 2012 at 3:20 PM

    I spend way way way too much time looking at my budget and counting my dollars, used to roughly track cash too but I’ve stopped… I don’t really withdraw a certain amount regularly, but when I do it’s something like $80 or even up to $200 and as of the last few months I decided that I’m not going to track that AT ALL! I’m a little bummed that it means I won’t know how much exactly I’ve spent on coffee in a year (cause I’m a nerd like that) but it’s wonderfully freeing because cash is impossible to track and it used to be the one snag in my budget. Now it takes me maybe a half hour a week to enter my bills, transactions, balances etc for all my ‘plastic’ use and budgetpurposes and the rest is just daydreaming… Hehe.

  32. BrokeElizabeth March 15, 2012 at 4:47 PM

    I track everything – and I mean absolutely *everything* – but I try not guilt myself out of spending money on fun stuff. It helps that I can look at my budget and see that over the last school year I have only spent £20 on entertainment since August, so I’m not going to break the bank if I go out to a pub with friends.

  33. J. Money March 15, 2012 at 7:41 PM

    @Mrs. Money Mustache – No shame in that! I need some of your environmental love to rub off on me… (boy that sounded bad, haha…)… I’m getting better about thinking of it, but still far from where I want to be. I think I just need to hang out with you guys for like 1 solid weekend :) Maybe we can build a fully sustainable house or something? That’s actually on my list to do one year – build one from scratch. I just don’t have the slightest clue as to how to do it, haha…
    @Jen @ Master the Art of Saving – Oooh well that’s a good idea! Keeps you motivated to do more of it knowing you can use it towards whatever you want too :) I like it.
    @DebtnTaxes – Yeah, I think it changes a bit if you have debt you’re trying to pay off. The luxury we have is that we’re just left w/ the mortgages (*just*, haha…) so we tend to be more relaxed now.
    @Leah – HAH! I totally get what you mean ;)
    @StackingCash – Oh man, if you ALWAYS spend less than you make for the rest of your life, you will be on a great path! It’s the most simplist concept to understand in this finance world, but the hardst to follow ;) So keep up the great work, my friend!
    @Beating Broke – Haha… guess you’re a fan of plastic, eh?
    @Nick – RIGHT??? It sounds like the opposite would be true, but it’s not :) Glad you figured it out too!
    @Aloysa @ My Broken Coin – HAH! Love it! 2 of my favorite things in life :)
    @Eric J. Nisall – DollarVersity – Fine by me ;)
    @Christa – Seems to be the case with a lot of people, actually. At least you know yourself well enough! :)
    @KimmyQ – You’re like the third person to mention library fines today – how come no one’s returning their book in on time? Haha…
    @Slackerjo – WOOHOO!!!! We’re like cash soul-mates! :)
    @BE @ BusyExecutiveMoneyBlog – Thanks! I used to blow it all in weekly poker nights, but sadly that was disbanded ;) At least my wallet is happier now…
    @TeacHer – YES! Exactly. We all work differently so it’s just a matter of figuring ourselves (and our habits) out. See you soon, friend!
    @SavvyFinancialLatina – Haha… there you go :) Sometimes it takes a while to come up with the perfect plan. Testing a few out will help you get there a lot faster.
    @Money Infant – Yup! I like that you said “baht” too. For a second I thought you said dollars and I was about to e-shake your hand for being a pimp!
    @Stephanie – PERFECT!! I love it – glad it works out for you all too :)
    @Andrea – There’s definitely something to be said about freeing up your time. Especially if you use it to make more money or do something fun w/ your family or loved ones… I’d gladly even PAY money if it saved me hours and hours a week, whatever “it” was :)
    @BrokeElizabeth – Whatever works! It’s a good thing you don’t live near me, or else we’d be at the pub all the time talking shop ;)

  34. Mrs. Money Mustache March 15, 2012 at 8:10 PM

    Haha J! We’ll put it on our agenda for FinCon. :)

  35. J. Money March 16, 2012 at 12:06 PM

    I like it ;)

  36. philip August 14, 2012 at 5:39 PM

    I do everything with my debit cards or a credit card I very rarely withdraw money froom ATM
    When i withdraw it will be 20$ and out of that 5 $ will be morrocan chicken rice and maybe 6 $ for something silly from the 99c shop and the 100th hands free for my phone (MY hands free work for only max 2 week) and may be 3 $ for a pen fro the store
    and the ball point pens have very less expiration time I havent still solved my issue of spending for the trivial things in the 99c shop and also for the 100th pen

  37. J. Money August 15, 2012 at 10:13 AM

    haha… well, at least you know yourself well ;)