Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Sometimes, a traditional budget just doesn’t work.
Even with careful planning each month, your personal spending can go haywire. Before Covid-19 upended much of 2020, dining out too often, buying those cute shoes you “just had to have” or making impulsive Amazon purchases could derail a budget in a matter of minutes.
But that’s not to say it’s impossible to overcome overspending. Setting money aside weekly, rather than monthly, can help give individuals a better idea of their cash flow and get a tighter rein on their overall financial picture.
For those who find themselves working from home for an extended period, with fewer boundaries between work life and home life, it can be especially important not to let the ease of ordering in, or simply scheduling another package delivery, get out of hand.
Here’s how you can make a weekly allowance budget work for you.
How Weekly Allowance Budgeting Works
Weekly allowance budgeting is just what it sounds like: Individuals give themselves a set amount of money to spend each week. This method differs from traditional budgeting, which tends to look at finances and spending allowances by month.
Weekly allowances are typically for discretionary expenses, like dining out or shopping. Fixed expenses, also referred to sometimes as mandatory expenses, play a part in determining a weekly allowance but aren’t included in it.
To create a weekly allowance, start big with your monthly budget. Categorize your expenses by mandatory expenses, like rent, car payments, insurance, student loan payments, utility bills and groceries. After accounting for your monthly recurring obligations—don’t forget about savings!—you can use the remaining money to cover your variable expenses.
Here’s an example to consider:
- Someone who takes home $4,000 per month has $2,800 in mandatory expenses.
- Their remaining money per month, $1,200, can be allocated toward variable expenses.
To determine a weekly allowance amount, take your discretionary spending amount each month and divide it by four. That amount will be how much you can spend each week without blowing your overall budget—while still getting to indulge in some things you want. So, someone who has $1,200 in discretionary funds will have a $300 weekly allowance.
Discretionary expenses include the costs of activities such as dining out, shopping and entertainment. In these stay-at-home focused days, discretionary expenses may also include additional streaming service fees or home gym equipment and online classes for at-home workouts. These expenses aren’t required each month—they’re a subset of your budget that enhances your life.
The Science Behind Why Weekly Allowances Work
Jeff Kreisler, a behavioral economist, says working with a weekly allowance sets individuals up for success because it actually makes it harder for individuals to make financial decisions—which Kreisler says humans are “really bad at.”
“Instead of confronting every choice as something that impacts ‘all our money,’ we reduce it down to impacting just a smaller allotment,” Kreisler says. “That reduces the cognitive and emotional toll on us and makes it easier to make the right choice. Or, at least if we make a ‘wrong’ choice, it has fewer consequences.”
Budgeting into spending categories is helpful for the bigger picture. Cutting down discretionary spending into smaller amounts forces individuals to make more specific decisions. In doing so, spending decisions are not only easier, but are “less consequential” to an overall budget, according to Kreisler.
In other words, if you know you have $100 to spend for a week, blowing it on a $50 dinner will force you to adjust your later spending, but won’t throw your entire spending plan into the abyss. If your monthly income currently is decreased or less certain, the flexibility the weekly allowance provides can give you some peace of mind.
This budgeting method also gives individuals a better perspective on their wants right now, without forcing them to think too far into the future. This can be a helpful strategy for individuals who want to set themselves up for financial success in the future with savings, but have been having difficulty setting that money aside each month because their spending habits feel out of control.
Best Payment Methods for Weekly Allowance Budgets
Some people find that giving themselves a set amount of money to spend each week is easier managed by only making those funds available on a weekly basis, instead of pulling from a monthly pool of money.
To keep yourself organized, consider using these payment methods for your weekly allowance:
Cash
Going old school and utilizing cash each week can be a great way to keep an eye on how much you’re physically spending with each transaction. There are downsides of cash, however, like not being able to make online purchases.
Prepaid Card
Opening a prepaid card and loading it with funds each week can allow your weekly allowance to be spent online and wherever cash isn’t accepted. Prepaid cards traditionally have had a poor reputation for being costly in fees and annual costs.
However, there are prepaid cards, like the American Express Bluebird prepaid card, that are virtually free to use and can be loaded via direct deposit or directly from a linked debit card. Keep in mind that if you need to pull cash from a prepaid card, you might pay an additional fee if the ATM is out of network. Bluebird offers free withdrawals at MoneyPass ATMs, which don’t have a surcharge and can be found throughout the U.S. and Puerto Rico.
Fintech Banking and Apps
Fintech banking companies have popped up recently to make money management more personalized and simplified for consumers.
Individuals who want a one-stop-shop platform for weekly spending, saving and investing can turn to an app like Qapital. The company charges a $6 or $12 membership fee per month (depending on whether it’s a complete or master membership), and it comes with a Visa debit card attached to the account. Qapital focuses on a “spending sweet spot,” which is calculated on a weekly amount, rather than a monthly one.
Bottom Line
If you’re struggling with your discretionary spending, implementing a weekly allowance can help curtail unnecessary spending. While it may have been years since you managed a weekly allowance, you’ll find that the habit is easy to restart.
There are several ways to implement weekly spending amounts, such as prepaid cards, fintech apps or strictly using cash to keep an eye on how much discretionary spending capacity you have remaining.
