Your “Safe-To-Spend”

One of the problems with traditional budgeting is it’s hard to know what number to concentrate on. One approach is to give everything dollar a job and track all the money you are spending by categories. But this makes the process cumbersome. “Is that Amazon purchase household or groceries?”, for example. Half way through a month, it can be hard to know if you have over-spent in one category and under-spent in another, and if that is the case what does that mean. The process can be so cumbersome people give up. There’s got to be a better way.

When I was attempting to re-imagine the process I thought about what would be ideal. The better solution I thought would be to have one number to concentrate on that as long as you didn’t spend over this amount you would be OK. This number would take into already take into account all of your regular income and committed expenses so you could be assured that as long as you spent less than this number, you would be in good financial health. This would eliminate the confusion of categories and make budgets easier to understand and stick to.

This is the idea behind the “Safe-To-Spend”. Let me explain how we figure out this number.

First, to simply the process of budgeting, we break down spending into two types — Recurring and Day-to-Day.

For example, let’s say you make $5,000 a month but $3,500 of that is already spoken for by way of a mortgage, car payment, insurance, and other recurring expenses. That leaves you with $1,500 per month ($346.16 per week) to spend on day-to-day expenses like groceries and clothes.

Understanding the difference between recurring and day-to-day expenses is the first step to using Weekly. Let’s walk through some examples to make the differences clear.

Recurring Items

Two tell-tale signs of a recurring expenses are that they happen at regular intervals and are generally for the same amount. Also, these items can usually be set up to process automatically and include things like your paycheck, mortgage/rent, car payment, and insurance. You’ll input these items when you sign up for Weekly, but you can always edit them later if they change. Once you’ve input your recurring items, Weekly will provide you with your weekly Allowance that can be used for day-to-day expenses.

Paycheck (Income)

Assuming you have a consistent paycheck, you can set the amount and frequency of your paycheck in the app to determine your weekly income. Having an average weekly amount of income helps avoid overspending on payday.

If your primary income source varies, we recommend you enter a conservative average income based on your past 6–12 months. While you could enter your variable paychecks as day-to-day income, using a general estimate to enter your regular income as recurring will help you get the best value out of Weekly’s budgeting system.

Loan Payments

Loan payments are the simplest form of recurring expenses. They occur at regular intervals for a consistent, predetermined amount. Weekly will prompt you to add recurring expenses for different types of loans including mortgages, auto loans, student loans, and personal loans. You can always add your own custom loan descriptions as well.

Utility Bills

Utility Bills are considered a recurring expenses. If you are paying a different amount each month based on usage, we recommend enrolling in an equal payment plan if it’s offered by your provider and using that number. You can also take a look at your past 12 months of bills to get an average amount and enter that amount in Weekly.

Savings Goals

Savings goals are a critical part of a successful budget. You want to save for emergencies, vacations or big life events to make sure the money is available when you need it!

Within Weekly, a savings goal operates the same as a recurring expense. The purpose of the savings goal is make sure you are not spending money you need for another purpose in the future. Like other recurring expenses, savings goals lower your weekly Allowance so that you have money saved for each of your targets.

These recurring items are all entered.

Day-to-Day Items

Day-to-day expenses are one-time purchases that are generally paid for with cash or card. These expenses are not included in your recurring items and are recorded on the Tracker Page.

Let’s go through some common examples.

Food

Although groceries and dining out are expenses that happen regularly, (gotta eat, right?) because the amount you spend and the frequency of food purchases vary, these expenses are considered day-to-day expenses. For example, the amount you spend on groceries varies greatly based on the food choices you make each week. Note: One exception to this rule are subscription services like Blue Apron. Because this is a regular expense that is automatically withdrawn from your account, it’s a recurring expense.

Household

Those trips to Target or purchases from Amazon are considered day-to-day transactions that should be entered in the tracker.

Gas

Gas fill-ups are considered a day-to-day expenses. This is because using a car is voluntary for some people who could use a bike, the bus or the subway to get to work. Also, gas expenses can vary based on extra-curricular travel. But, if you feel you need to budget some amount for gas as a recurring expenses so you don’t accidentally spend your Allowance and have nothing set aside to fill up the tank and go to work, then it’s okay to estimate the amount will spend on gas and enter it as a recurring expense.

Irregular Income

Day-to-day items can also include irregular income like bonuses, birthday money from Grandma, or income from a side job. If this income is not included as a recurring item then you get to decide how to use it. You may decide to pay off debt, put that money into savings, or simply spend it. If you’d like to spend the money, simply add the amount you’d like to spend as an income transaction within Weekly. This will increase your Safe-to-Spend amount.

Your Weekly Safe-To-Spend

Your Weekly Safe-To-Spend is calculated from figuring out what is left over after you subtract your recurring expenses from your recurring income. Your Weekly Safe-To-Spend is added to your Safe-to-Spend amount at the beginning of your week, and your day-to-day expenses are taken out of it when you enter them manually or by download them from your bank or credit card inside the Tracker. By breaking down finances into weekly chunks, Weekly makes spending easier to manage. By staying focused only on spending less than your Safe-To-Spend, you’ll be able to spend confidently knowing everything has been factored into that number.