What a daily spending allowance is, and why it suits some people better than a monthly budget

A daily spending allowance is the amount you can spend today once your regular bills are taken care of. You check one small number each day instead of keeping a monthly total in your head.

The basic idea

Most budgets are monthly because most pay and most bills are monthly. That makes sense for rent, the phone contract and your salary. The rest of your money, the part that goes on food, coffee, transport, a birthday present or a takeaway on a tired evening, gets spent a day at a time.

A daily allowance takes that flexible part and divides it by the days it has to last. If you have $1,200 left each month after your bills, that comes to about $39 a day. That figure is your allowance.

Nothing else about your money changes. Bills still get paid when they're due. You only change how you look at the money that's left.

Why one small number helps

Payday stops feeling like a windfall

Just after payday, your account looks full. $1,200 for the month sounds like plenty, so the first week's spending feels free, and the shortfall arrives in the last week, when there's little you can do about it. A daily figure makes the 3rd of the month look exactly like the 27th: you have about $39 today, whatever the account says.

Decisions get smaller

Asking "can I afford this?" against a monthly budget means remembering what you've already spent this month and what's still to come. Against a daily figure, you compare the price with one number you already know. A $14 lunch on a $39 day is an easy call either way.

Mistakes stay small and visible

Going $15 over on a $39 day is obvious that same evening, and it's a $15 problem. In a monthly budget, the same overspend hides among the other entries until the end of the month, when it has grown into "the month went wrong somewhere".

Rolling over makes it realistic

A strict daily limit, where anything unspent disappears at midnight, would be miserable to live with. Real spending is lumpy. There's the weekly shop, a dinner out, and days when you spend nothing at all.

The version that works carries the difference forward. Spend less than your allowance and the rest is still there tomorrow. Spend more and tomorrow starts lower. Here is a week with a $40 allowance:

Tuesday went over, so Wednesday started $7 behind. Thursday was a quiet day, and the cushion it built paid for Friday's dinner. Over the five days, $200 came in and $184 went out. The running balance tells you the one thing worth knowing: you're $16 ahead.

The running balance answers "how am I doing?" without any adding up. Positive means you're ahead of plan, negative means you're behind, and the size tells you by how much.

Who it suits

• People paid monthly who run short before payday. Spreading the money evenly is a direct fix for the start-of-month splurge.
• People who find categories tedious. You don't have to decide in advance how much goes on eating out and how much on groceries. You can still look back at categories later to see where the money went.
• People who prefer a short daily check to a long monthly review. Logging a purchase and glancing at one number takes a few seconds.

Who it suits less

• People with very uneven income. Any fixed daily figure is a guess when you don't know next month's pay. It can still work if you base it on a cautious income figure and revisit it often; How to budget on an irregular or freelance income shows how.
• People whose flexible spending is mostly a few large, planned purchases. A $600 flight looks alarming against a $40 day. Rolling over copes with ordinary lumps, but big one-offs are better planned separately, as a bill spread over several months or paid from savings.
• People who already budget by envelopes or categories and are happy with it. A daily allowance is another view of the same money. If your current system works, keep it.

How Daily Allowance does it

Daily Allowance is built around this idea. When you first open it, you can run Quick Setup, which asks for your monthly income and monthly expenses and shows the daily allowance they leave. After that, you can add each bill and each source of pay as its own recurring entry that repeats daily, weekly, monthly or yearly.

The app turns every recurring entry into a daily amount. The Daily Allowance figure divides monthly amounts by 30.4375, the average length of a month, so it stays the same from February to March. Behind it, each bill and each paycheck is spread over the actual days until it comes round again, so a 31-day month adds slightly less per day than a 30-day one.

The big number on the home screen is your Daily Balance, the running total from the table above. Each day's share of your income and bills goes in, every expense you log comes out, and whatever is left carries into tomorrow, in either direction. It doesn't reset at the start of a new month. Below it, once you've logged something today, a bar shows how today's spending compares with your allowance, and a short forecast shows where your balance will be over the next two days.

If you're ahead and want to bank it, Transfer to Kitty Bank moves your whole balance into the app's savings. If you're behind, Top up from Kitty Bank moves back exactly enough to bring you to zero.

Trying it without an app

You can test the idea for a week with a notebook. Work out the money you have each month after bills, divide it by 30, and write that number where you'll see it. Each evening, add the allowance to yesterday's balance and take off what you spent. By the end of the week you'll know whether thinking in days suits you.

The next post, How to work out your daily budget, goes through the arithmetic with a full example.