For the past two years, my husband and I have survived on a threadbare budget. We’ve said no to dinners out, to new clothes, to unnecessary trips across town. Whenever faced with the decision to spend or save, we always opted to put money away for a rainy day – we were convinced a deluge of biblical proportions was looming just over the horizon.
But as the years passed, no such deluge came. Instead of being flooded by rain, we found ourselves flooded by money. All the scrimping and saving we had done over the intervening years had allowed us to do all the things financial experts say you’re supposed to do: building up a six-month emergency fund (check), maxing out our 401(k) contributions (check), saving or investing at least 10 percent of our pre-tax income (check).
We were rife with money… but we weren’t having any fun with it. So six months ago, I loosened the purse strings. I made it rain money in my house. Booyah.
Going Overboard
The first few weeks after I stopped acting like Ebeneezer Scrooge, my husband and I went a hog wild. We spent $75 at a nice restaurant, not to celebrate a birthday or anniversary, but just because. I bought myself a new pair of jeans for the first time since getting pregnant with our oldest child… nearly four years prior. My husband purchased new tools, without a plan as to how he’d use them.
At the end of the first month of our new-found financial freedom, we reevaluated things. Although we’d still paid all our bills, maxed out our IRA contributions, and hadn’t dipped into our emergency fund, we’d failed to make extra payments on our existing debts (specifically, our car loan and my student loans). When we’d loosed the purse strings, the plan was to have fun with money. But by overspending, we’d gone back to where we were years prior, when money was tight: we were so worried about how much we had – or rather, didn’t have – that we weren’t having any fun anyway.
We had to rein it in.
Finding Balance
In month number two, we employed the allowance method. I gave my husband and I $50 each to do whatever we wanted. I expected him to spend it all on tools he wouldn’t (and didn’t know how to) use; he expected me to spend it all on shoes.
But we surprised each other.
Instead of blowing his $50 on a new power sander, my husband split his allowance into five allotments of $10 each:

  • He used $10 to go out to breakfast with his coworkers before work one morning
  • He used another $10 to enter a fantasy football bracket with some friends
  • He spent $10 for new insoles for his tennis shoes
  • He paid $10 to take our daughter to the children’s museum one rainy afternoon
  • He used the last $10 to go out for drinks to celebrate his friend’s 40th birthday

Likewise, I also broke my $50 down into smaller amounts:

  • I spent a total of $16 on four separate occasions to buy myself Starbucks before heading to the grocery store to shop
  • I bought a cool new color of toe nail polish for $5 instead of paying $25 for a pedicure
  • I used $10 to go out to lunch with my girlfriends
  • I paid $7 to buy a six-pack of my favorite adult beverage to share with my husband while watching football one weekend
  • I used $5 to participate in a Zumba-a-thon for charity at the YMCA

Faced with the decision to spend or save, I pocketed the remaining $7 to use the next month. I could also contribute to a CD. Check CD Rates here.
What We Learned

Without consulting the other, my husband and I both learned that $50 could go a long way. We employed many of the same budgeting strategies that had helped us build up our nest egg in the first place when it came to spending our monthly allowance money. It’s easy to learn how to save money – you simply reduce or eliminate your expenses and save as much as you can. I’d argue it’s harder to learn how to spend money, or, perhaps better said, to spend money wisely.
Several months have passed since we started the allowance system. Over that time, we’ve figured out what our “fun” financial priorities really are. To me, a $4 latte from Starbucks is priceless; it helps me relax during what can otherwise be a rather frenzied trip to the grocery store. To my husband, the $10 he spends every month to have breakfast with his coworkers before one of his dreaded weekend shifts puts him in a better frame of mind heading into work. I’ve never regretted the money I’ve spent on charity-related expenses, and I know my husband has never doubted the value of the money he spends on our children.

Reader, what are your financial priorities? What lessons have you learned when it comes to spending money?