One of the categories in the Cents Plan (AKA budget) is called Slush Fund.
There are many names for Slush Fund:
- Pocket Money
- Spending Cash
- Pocket Change
- Allowance (I’m totally against that one)
- Petty Cash
- Kitty Fund
- Cump change
Just pick your favorite name for it and let’s understand the rules and advantages.
Regardless of what you call slush fund money, one meaning holds true.
It is a small amount of money earmarked for one person to spend as they choose.
Definition of Slush Fund
The definition of slush money or pocket money is simple – money set aside to spend as you see fit.
Every month or week a predetermined amount is given out.
In the Cents Plan, there are 3 lines dedicated to Slush Fund Money – His, Hers, and Kids.
Everyone in the household can have a little cump change to spend as they see fit. So many times, we hear of using pocket money for kids. However, very few people use it as adults.
Slush fund money is just as important for adults – probably more important than any age group.
And this one thing can save a marriage and many, many arguments!
Four Rules of Slush Fund Money
1. No Questions Asked
First of all, the biggest ground rule is no questions can be asked about how or why you spent your slush fund money in this or that way. Period.
Don’t test the boundaries. Respect the rule of no questions asked.
It is hard for a couple not to argue on every single line when they make a budget. So, agree on a slush fund amount and stop pestering the other party on how they spend their money.
2. Cash Only
Spending must be in cash. And cash only.
The temptation to overspend it way too great especially when it is spent on ourselves. Staying away from credit cards is necessary. Especially because it helps with #1 rule of no questions asked.
Use cash period.
Related Reading: How to Successfully Use the Cash Envelope System
3. No Judging
Human nature is quick to judge. Someone spent their money in a way you don’t agree.
Not up to you to judge.
Slush money is meant for whatever you want spending. This is not the time or place to be judging how to spend under $20-100 per month.
Related Resource for you: How to Budget Money and Still Enjoy Life
4. Don’t Be an Idiot
This isn’t the time or place to be sneaking behind your significant other’s back. If you are unable to honestly say how you spent the money, then you are on a slippery slope.
Honest and open communication is the key to success.
This isn’t an opportunity to start hiding your actions.
Bonus Tip for Kids –
***A side note on the Kid’s Slush Fund Money…this is how we introduce paying commissions to our kids for jobs done around the house.
That in itself is another post for another day. But, the same rule holds true, we can’t judge how they use their “spend” money.
Advantages of Slush Fund Money
1. Agreed Upon Amount
First of all, the amount of money designed to each person’s slush fund money is set at the beginning of the month. Everyone agreed to the budget, so no changing money in the funds.
Sit down and discuss what amount is doable based on your situation. This is based on your budget.
The key is to stick to the agreed amount of money. Use cash to stick to the agreed upon amount.
2. No Arguments
Remember, no questions can be asked!
No judgments can be made!
Very simple way to steer clear of arguing. One person spends their money before the first week of the month is up – more power to them! Another person saves their slush fund money for a bigger purchase – high five!
There are bigger things to discuss to the journey to financial freedom than how someone spends their slush money. Pick your battles.
Money is one of the leading causes of divorce. Save your marriage and use pocket money. That right there is one of the huge advantages of pocket money.
3. Breath of Fresh Air / Freedom
Many people find living in a budget or Cents Plan very constricting and overbearing.
This is why slush fund money is SO very important. It provides a breath of fresh air. A moment to spend money and not worry about the money spent.
Freedom to savor life’s little moments. Enjoy!
If you are struggling to make ends meet, this is a big advantage of pocket money.
4. No Guilt
The last advantage of slush money is not carrying guilt. Regardless of how an adult decides to spend their pocket money, there is no guilty feeling about buying x, y, or z.
Remember rule #3 – no judging, you are free to purchase whatever your heart desires and not be overwhelmed by guilt.
Disadvantage of Slush Fund Money
After listing out all of the advantages of pocket money, you may be thinking there has to be disadvantages, right?
Honestly, the only disadvantage is it is one more category to track and separate out money.
However, that is menial given the advantages of slush money.
Key Point to Remember
Regardless of where you are on your journey to Financial Freedom, slush fund money is utterly important.
The key with money is to build a strong foundation. That includes how you spend money, how you save money, and how you discuss money.
Even if you start at $5 or $10, you will begin to reap the benefits and advantages of pocket money. Just remember the rules of slush fund money in order to see the advantages in your household!