It took me a long time to create a budgeting method that actually worked for me where I didn’t feel trapped. In today’s quick money money I talk about the idea of a weekly discretionary budget.
0:00 – When other budgeting ideas don’t work
0:45 – Yes I do spend money on Lattes
1:11 – How the weekly discretionary budget works
4:46 – It’s a very freeing way to do budgeting
5:25 – Growing wealth outside of this budget
6:41 – Taking it to the next level to make it easier
8:58 – I find it less restricting than a regular budget
The Barefoot Investor Bank Accounts Explained – https://www.youtube.com/watch?v=YMKss1bLycw
In today’s episode of quick money Monday, I want to talk about the dreaded b word budgeting and this idea of weekly discretionary income that me and my then wife Kelly came up with that helped us budget when all of the other budgeting ideas didn’t really work for us. That’s what we’re going to talk about as I drive to go and get my morning coffee, so if you know anything about me or follow me on Instagram, which you should add, Ryan Mcclain and I, C l I n e, then you know that I absolutely love my coffee. So I live in Granola. There’s lots of great coffee. Shops were my favorite is about five to 10 minute drive away, so I’m actually driving that CFI coffee. I like it so much and yes, I do spend money on coffee. I do spend money on lattes and this is what I want to talk to day about, which is this idea of weekly discretionary income.
So there’s a lot of different ideas on how to budget out there. There’s a lot of ways that work for some people. I tried the envelope method, we tried tracking things through apps on our phone, all of that sort of stuff, and none of that really worked for us and it wasn’t until we came across this idea of having a weekly discretionary budget that things started to click. So the idea behind this budget is that you look at the regular expenses in your life, so you look at things like your phone bills, your Internet bills, your electricity, your health insurance, your cars, all of that sort of stuff that you kinda have to pay for on a weekly or monthly basis. Rent would go into that as well. You look at that sort of stuff and you put it on a spreadsheet and you look at how much money that is costing you and then you set aside that money automatically every week, every fortnight, every month, whenever you get paid, whatever works for you.
So whatever is regular in your life, in terms of finances, you go ahead and you automate that. So when you get paid, you put enough money aside that’s going to pay for that. You don’t have to think about it if you want to save money on those things and you do that as a one off. Yeah. And then after you’ve done that and worked out, okay, well how much money do we need to spend each year for those regular things like rent and stuff like that. You then look at what’s left over and that’s what we would call our weekly discretionary budget. So this is for things that might change every single week. So groceries going out for food, going out to the movies, entertainment, even petrol and things like that would be kind of discretionary each week. So some weeks you might spend more on petrol than other weeks because you’re driving more.
Some weeks she might spend more on groceries because you’re eating at home or other weeks you might spend less on groceries because you want to go out or you want to buy a case of beer or something like that. And so the idea here is that with those sorts of things, we found it really difficult to categorize those. So with the envelope method, you’re meant to, you know, put aside $150 or whatever it is for groceries and you have that $150 for groceries. But then what would happen if we wanted to spend $200 on groceries and not go out that week or what would happen if we only spent $100 on groceries because we did go out that week and so it will get really frustrating with the envelope method where we’d be always stealing money from other envelopes to pay for extra petrol, whatever it may be.
So I liked the idea that you then have a budget each week, whatever amount of money you set for yourself to then live within that budget for the week. So you go ahead and you automate everything in your life that you can. So you find those, you can send stuff like that. You then have a weekly discretionary budget which he could do fortnightly or monthly as well. And then you decide how you spend money that week. So often mine changes over on Sunday. So Sunday’s a fresh day for me. So if I get to Saturday and my petrol starting to get a bit empty, but I want to go out that Saturday night, well I might not fill up my tank on Saturday, I’ll wait until Sunday into a new week and I’ll choose to spend that money or I’ll just put like enough petrol in, you know, $10 or $20 a petrol in in order to tie me over until the next week.
I know that Kelly does that as well. She only puts in $20 perpetual at a time because she doesn’t want to invest money into petrel which could be spent on something else that week. And so it’s a really interesting way of doing it. It’s a really freeing way of doing it because I can go out this morning and I can spend $5 on a coffee because I know how much money I have left for the week. I know that yes, this is luxury, but yes, it’s a luxury that and choosing to afford and also do groceries and all of that sort of stuff as well. So yeah, that’s the idea of a weekly discretionary budget is that you automate everything and then you have a set amount of money each week that renews on a certain day and then you aim to live within that budget. So outside of this, in order to grow wealth, before you have your weekly discretionary budget, you should be paying yourself first.
So that’s putting money towards paying off debt, will putting money towards investing, and then also outside of this you can look at making more money as well. So having a side hustle, working at your job, etc. Or you can make your weekly discretionary budget smaller than what it may be needs to be or smaller than what you would like so that you can save money. SO when it comes to the automating of things and we talked about rent and bills and stuff like that, you can put your savings in that as well. So if you’re saving for a house deposit or if you’re paying off debt, then when you get paid, that’s part of your automated stuff. That’s part of your automated bills that you’re automatically saving. And then you’ve decided that, okay, we’re automatically saving this amount that gives us this much money left to live off, and then so each week your focus becomes, can I, can, can I live off this amount of money and how can I live off this amount of money so you’re investing as automated and then you’re just focused on how can I live and enjoy my life on the money that I have left on the weekly discretionary income that you have.
That’s how budgeting works for me. Taking it to the next level. Um, I did implement some ideas from the barefoot investor, so I will link out to a video where I talked about the barefoot investor bank accounts explained as well. I am going to be coming out with a video on exactly how I manage my bank accounts. So I’ll be talking more about that in that video as well, which I’ll link up in the description down below, but taking it to the next level in order to make this easier. What I did was I would have two bank accounts, so I would have a main bank account, which I called the pot. So everything goes into the pot, big mixing pot, that’s the idea behind the name. Everything goes into the pot and the automated stuff comes out of the pot. So car insurance comes out of the pot, you know, regular bills like paying for candy, comes out of the pot.
So all the regular stuff comes out of the pot. And then I have a second account with a card that you can use called like the everyday spending account. And so basically each week what I do is I move money from the pot into the everyday spending account. And then um, when I’m out. So this morning when I’m going to get my coffee, then I’ll go ahead and I’ll use, as you can say, that’s my ing card there, my everyday spending account. So I’ll go ahead and I will use this card for all my purchases. So when I’m purchasing stuff, it’s all that everyday spending. This makes it really easy to track how you’re going during the week. So that one of the problems I had with a lot of the other methods is you don’t know how much money you have left over. The good thing about this is because you’re moving money over each week, you’re only spending from one account.
you can simply log into your internet banking, not only driving, but you can log into internet banking and you can say, okay, exactly how much money do I have left for the week. So actually automates tracking how much money you have left as well. And then if you have extra money left at the end of the week, you can then move that out or you can just leave it in there and then have a bit more money next week because you’re already saving and you’re already investing. So taking into the next level, getting a separate bank account that you move that everyday spending money into is going to make it so much easier to track your budgeting and track how much money you have left over. So I hope that this idea on a slightly different way to budget has been interesting to you. I find it less restricting in my life because I get to choose each week what I spent money on and I like having that freedom of choice.
I like being able to choose whether or not I’m going to buy a coffee this morning, whether or not how much am I going to spend on groceries, stopped being smart with my money so that I get the life that I want and get to buy the things that I want and do the things that I want that week, and then that requires sacrifices as well. So if I decide to spend money to buy concert tickets or to buy this coffee this morning, then obviously that’s money that I can’t spend on something else. So we are here now. We’re going to go get some delicious, delicious coffee, small double shot almond latte with sugar. If you’re ever in the shire in granola in caringbah, you want to shout me a coffee? Hit me up, but yeah, hope this has been helpful. Hope you have an absolutely epic day out there. Go ahead and check out the videos I did on the barefoot investor bank accounts, as well as how I managing my own bank account, which I’ll link up in the description down below and until next time, stay positive.