My Blog, Your Money

In these tough times, many people are reining in their expenses and postponing large purchases.  As for me, I think I’m going to bring back my old budgeting rule.  Back when I first started working and didn’t have much money, I embarked on a plan to retain as much of each paycheck as I could.  Many sources recommend living below your means and saving anywhere from 10% to 35% of your paycheck.  I’ve always been a person of extremes so I took that a bit further and strove to save 90% of my paycheck.  The plan was pretty successful and for a few months, I only spent around $100.

My rule?  A $10 daily limit on discretionary spending.  So if I were to spend $7 on lunch, I’d only have $3 to spend for the rest of the day.  Needless to say, I took advantage of quite a few 25¢ Taco Tuesdays.  Using this rule, the most I’d be able to spend in a week would be $70.  Just to clarify: this only applied to discretionary items so expenses I had already budgeted for such as vehicle maintenance, insurance, or gifts were not counted towards the daily limit.

Over time, I gave it a little more flexibility and changed it to a weekly maximum of $70.  So I’d be able to spend $50 one day as long as I spent less than $20 the other 6 days.  This will almost certainly lead to spending more money than under the $10 system.

Eventually, I reached my goals and ditched the budget in favor of spending money based on the value provided.  As long as the good or service proved to be a compelling deal, it got the green light.  I definitely spent quite a bit more using this, but that was fine by me, as I was pretty comfortable with my finances and enjoyed the boost in my quality of life.  Now that the economy’s been much more rocky, it might be time for me to get reacquainted with the $10 technique.