The concept is simple.  You make a budget each month for everything you spend money on.

But what about those purchases that just don’t fit into a category?

The one-off purchases, the surprise gifts, the flash sale…

Instead of bumping up every budget category, you should just add one:  Mad Money.


Mad Money is Crazy, Yo

Mad Money, as our friends call it (and as we now call it), is money that is not allocated for a single budget category.  It’s money that can be spent on pretty much anything without consulting your co-budgeter(s).

For example, a husband and wife might allocate $150 per month as “mad money”.  Then each of them would have $75 to spend however they choose.

This makes it easy to buy random things that don’t really fit into a category, or that you wouldn’t normally buy.  It’s also a good way to surprise your spouse!


What If You Don’t Spend It All?

There are two approaches for leftover mad money.  You can either put the leftovers into savings, or you can rollover your mad money to the next month in order to spend on larger one-off purchases.  Either way, a budgeting tool like Mint should be able to help you keep track.


Why It Works

Having mad money in your budget can help address differing views on how money should be spent.  And knowing that you have money that you are free to spend without anyone else’s permission is always nice.

I personally like the “spend it or save it” model.  Your budget should already have a minimum savings bucket, and then whatever you don’t spend from mad money can be a boost to your savings.

Technically, there is a third option for leftover mad money: use it to pay down any outstanding debt.  This can speed up the process for getting out of debt, and once you are debt-free, you can start saving the leftovers instead.  Not a bad plan!


It’s Simple and Fun

Mad money is a simple change to your budget.  But it can make dealing with finances a little less tedious, and help you remember that money is for life, and not the other way around.

Give it a shot and adjust it to your own personal budget.  If you have other ideas for how to use mad money, leave a comment below!