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Mad Money Budget

QUESTION: Alex in Los Angeles and his wife are trying to determine how much mad money they should each have per week. Does Dave have a suggestion?

ANSWER: The more detailed your budget is, the less mad money is needed because things are budgeted. For instance, if your mad money is going to your lunches while you’re at work, if you had a “His Lunches” category, then you would need less mad money. You see what I’m saying? The fewer things that are in the miscellaneous category, the smaller amount you would need for that category. I think that’s the big issue.

I don’t want people running around with $500 a week in their mad money. That just means you didn’t do a good job finishing up your budget.

I would save up for a gun as part of your budget. I would break your lunches out as part of your budget. Then I would have mad money. That’s exactly what I was describing before I asked the questions because what that does is it keeps you real pure on your mad money because mad money should be unexpected things that you don’t see coming—just odds-and-ends things—and a little bit here, a little bit there. It’s okay for it to be $50 a week, but I would break your lunches out for now, especially at the start of doing your budget. Break your lunches out and do an envelope for lunches with cash in it. Then say, “All right, I want to save $X for a gun.” And she says, “Okay, I want to save $X for a purse,” or whatever. And those are just budget items that you all are looking at and agreeing to.

If you’re doing all of that while you’re trying to get out of debt, then we’re confused. We’re not buying purses and guns while we’re getting out of debt. We’re in the process of getting out of debt, and you pour everything on the debt.

If you want to keep it all in the mad money and kick it on up, it’s okay. But another way to do it is to break it out, and then that makes the mad money actually more flexible because the other things have a line item in the budget. Certainly, that’s the way we do it.

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