Quick recap: I want to see if I can better manage my everyday spending by giving myself a small daily allowance of £4 (£120 a month) rather than drawing out money as and when I feel like it and hoping I last the month without overspending – which never happens. I hope to prove, one way or other, if there is any truth to the old adage “Look after the pennies and the pounds will look after themselves”. In other words, I want to know whether learning to control small amounts of money can help me to manage larger amounts of money. I started at the beginning of May 2018 and have now completed the first month. Here are my thoughts so far…
There is no doubt that managing on small daily amounts of spending money has kept me on budget. Well, more or less… It was all going so well before getting a little ragged in the last few days of the month. I had been merrily using up my £4 a day and then had a very unexpected yet very necessary expense of around £10. The only option was to withdraw £10 from an ATM, which meant that I ended the month £10 over budget. I’ll admit that a little bit of complacency crept in at the end (on the home stretch and all that) and I didn’t see the expense coming, nor was I prepared for it. On the one hand, I’m beating myself up because I didn’t even make it one month without messing up; on the other hand I think lesson learnt. It’s also worth debating whether this trivial-spending budget should be able to cope with the unexpected – it is a spending budget and not a saving budget, after all.
As an aside, it’s interesting to note how the problems I’m facing on this very small scale reflect those that I face with my much larger monthly budget covering all household expenditure. And that’s good because the whole point of this exercise is to see what I can learn from successfully managing small amounts of money.
Perhaps the tweaks discussed below will address these points.
Two ways to tweak the method
As discussed previously in the two-week update, my personal spending can vary significantly from day to day – I can go for several days and not spend a single penny, and then suddenly need to spend several times my self-imposed daily allowance of £4. Dealing with these larger expenses takes some forethought and planning, and I’m trying to make this easy so that it works. This led me to consider splitting my total monthly spending budget of £120 in half and allowing myself £2 a day while keeping £60 aside as a ‘slush fund’. The idea is that I can focus on controlling an even smaller amount of money on a day-to-day basis while still being able to cope with slightly larger expenses of, say, £10 by dipping into the slush fund. Importantly, the total monthly budget of £120 stays the same. The only problem I can see here is that this method is actually more complicated, requiring me to control not only a daily budget, albeit an extremely trivial £2, but also the slush fund. Also, even when I’m just thinking about it I start to feel the ‘burden’ of managing that slush fund.
I have since thought of another method, which involves a daily amount of £5 but only for six days of the week. Hence, £5 x 6 days x 4 weeks = £120. The ‘day off’, so to speak, could be easily accommodated on one of my ‘non-spending days’ while £5 notes are much easier to deal with compared with £1 and £2 coins. This simplifies things significantly although it doesn’t address the issue of unexpectedly needing slightly larger amounts, which is where the slush fund would come in. However, to what extent should trivial daily spending be able to cope with the unexpected? Larger unexpected expenses ought to be covered by some other contingency, right? This needs further thought as it would be helpful to define what can be reasonably demanded of the trivial-spending budget. This is also good because it means I’m starting to really think about what expenses might occur and how to deal with them.
The next month
After giving it some more thought, I’ve decided to adopt the second tweaked method for the month of June. I will alow myself £5 a day (actually £10 every two days because that’s how it comes out of the ATM) and then skip a day each week where I know I won’t spend anything nor have anything that I’m ‘saving’ for. So the monthly budget is still £120, but I hope these changes will make it simpler to manage. Simplicity is the key!
I’ll do a two-week update on the new method around the middle of June. As always, feel free to comment with any thoughts or suggestions.