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The pocket method of budgeting

One of J. Money's rules is that any cash and coinage found in his pocket can be spent any way he wants.

By MSN Money Partner Apr 17, 2012 11:11AM

This guest post comes from J. Money at Budgets are Sexy.


Image: Money (© Nick Koudis / Photodisc Red/Getty Images)Here's Rule No. 27 on the J. Money "List of Money Rules": I'm allowed to spend any money in my pocket however I please.


It's probably one of my favorite rules. It sounds wasteful -- and maybe it is if not done correctly -- but it's the one area in my finances where I allow myself to be more willy-nilly and not count it down to every last penny.


That's something 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). It's something I'm still haunted about to this day, when I hear the echoes of my mother calling me "stingy" and "an old man with his money." (Post continues below.)

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 toward Wackoville. 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.


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. Let's call Rule No. 27 the "whatever's needed at the time" fund, sprinkled with some "spontaneous packs of gum or a beautiful bag of marbles."


And Rule No. 27 also states that this money will be limited in size, and will also help out Rule No 13: Always have cash on hand.


Here is how the rules are implemented: Every pay period I take out $200 in cash from the ATM (my "pay periods" are once a month now that I'm self-employed, revised from the $100-a-paycheck schedule every two weeks). That money is to be used for anything 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?). Either way, once I'm flat out, I'm out. The pockets will have to wait until the next pay period again in order to be refilled.


But there are plenty of times the money carries into the following months too -- which means I get to save a little bit more unexpectedly because I take out the appropriate amount less the next time around.


I don't know if any of you have portions of money 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!

This hasn't resolved 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 going to guess no.


More on Budgets are Sexy and MSN Money:

Apr 18, 2012 12:36PM
Sick of Hollywoods - I have to echo rangerone314.  I've worked in the corporate world on the finance side for 20 years, and in my opinion 8 out of 10 CEO's are...  well, not worthless... but it flat-out wouldn't matter if they didn't show up for work or if you put a crash dummy in their chair.  They just don't have any impact, and they are therefore a colossal waste of $$.  The standard for CEO's is much higher than other employees - as a CEO, you can't just perform a mundane, necessary job.  You either add value, or you don't.  If you don't - you're not worth having around.  The American "who-you-know gets you to the CEO office" mentality greatly exascerbates and perpetuates the problem of under-performing, very overpaid CEO's in the US.  Many CEO's I've encountered actually squander shareholder value rather than increase it, because they are great politicians, but they lack real skills, and their companies miss opportunities as a consequence.  So don't be too hard on people dissing on US CEO's being worthless and overpaid.  Because - in my opinion - 8 times out of 10 they'll be right.
Apr 18, 2012 10:56AM

This is nothing too extraordinary; wife & me for years have both gotten the same amount of personal "mad money" cash every two weeks that be used for anything. (I saved up for 4 months one time and bought a $300 pair of Oakley polarized Xmetal sunglasses)

Everything else is just a predictable bill amount on a spreadsheet or a web bank account that gets funded X or Y dollars every two weeks.

Apr 18, 2012 11:02AM
Sick of Hollywoods:
I hope someday you understand that a lot of CEO's are CEO's simply because they are great politicians (operating in a slightly different realm than the government) and not because they are great at running a profitable or useful (non-parasitic) business (which explains how they can get paid so much even when their company loses billions and lays off thousands)
Then you will know that they rob everyone and theirs (including employees, customers and stockholders) blind.
Apr 18, 2012 1:36PM
I allot myself $200 per month to spend on anything I want. The rest is all predictable and budgeted. X% goes into savings, Y% goes towards mortgage/rent, Z% goes to food and utilities, etc. I find I spend much less this way. I usually wind up with a carryover amount which I put off to the side and when it reaches a certain amount, I use it for a splurge buy, ie. vacation or new electronic device or something fun. 
Apr 19, 2012 3:46PM
@Upgreyed and @rangerone314 I will be the first one to say that the corporate world is full of corrupt "business politicians", as you so astutely say.

What I am absolutely sick of is the completely disingenuous and blanket mockery of the wealthy, and implicit attacks on their character. I don't care what side of the aisle you're on - I DON'T. There are filthy rich democrats and filthy rich republicans, and there are "worthless" CEO types on each side. I just HATE the STUPID dismissal and mockery of anyone who is perceived to be wealthy.

Instead of debating the merits of policy and its supporting philosophy, it's just dumbed down to STUPID bumper sticker arguments and mockery about MITTENS and his silver spoon or NOBAMA and his golf trips. Take your pick!

It's sad that there are no more political-philosophers in government anymore - only people who can do the better job of fooling their constituents about the opposition.

I'm SICK of politicians winning by fooling the LOWEST COMMON DENOMINATOR.
Apr 24, 2012 4:14PM
Every two weeks I  do the same thing for myself , lunch with friends, coffee, road trip to beach . Spouse thinks it's wrong wants all the money for household.. NOT!!!
Apr 17, 2012 2:12PM
Mitt Romney also uses this rule.  Every 2 weeks, he puts $5M into his pocket...
Apr 18, 2012 7:50AM
How many petty little rules does this dipstick have? 
Apr 17, 2012 3:08PM
@Someone You disgusting worthless loathsome little wretch. I hope someday you understand what it is to make enough money for the government to rob you and yours blind.
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