Sometimes it can feel like you have a lot of balls in the air when it comes to money. In the midst of all this juggling, how long can you keep an eye on your budget?
About a week, says behavioral economist Dan Ariely.
Although many popular budgeting programs are designed to help you allocate your money each month, monthly budgets do not set you up for success. You’ll gain more control by budgeting each week.
A month is too long to keep our financial impulses in check, says George Friedman, CEO and founder of Qapital, a banking app that offers personalized savings tools. He says a better time frame is one week.
“It’s a manageable number of transactions to look at,” says Friedman. “It’s very clear that this is the way to go because it’s so easy to see your expenses from the previous week and compare your progress week to week.”
Since Qapital rolled out a weekly spending goal tool on its website in November, Friedman says user engagement with the budget has increased by 30%.
Here’s why and how to set up a weekly allowance for adults.
1. You can better plan and analyze your weekly expenses
According to Ariely, the strongest evidence for the benefits of a weekly schedule is that people who get paid every two weeks also make less money in the second week than in the first.
Although many of your mandatory expenses (bills, utilities, and rent) need to be paid each month, discretionary expenses (the portion of your spending that doesn’t go to bills or rent) happen more often and can quickly get out of hand.
2. There is less transaction volume
Expenses during a week are much less transactions than during a month. This makes analyzing your expenses much easier, less tedious and more manageable.
Weeks are also a more easily comparable unit of time. Also, weeks come more often than months and it gives you more opportunity to adjust your budget.
3. How to set a weekly spending allowance
To use Qapital’s weekly spending goal, you can set up a Qapital Visa Debit card, either depositing your paycheck into it or transferring your discretionary money weekly from your bank account.
Based on your spending patterns, Qapital will set you a weekly spending goal. The average is about $300, Friedman says.
Your discretionary spending will be tracked and you’ll get tips on Sunday evenings about ways to cut your spending and stay under budget.
You can also do it yourself by moving your weekly discretionary income onto a prepaid debit card every week.
CNNMoney (New York) First published on January 19, 2018: 10:21 am ET