Highlights from the Dave Ramsey Show

Question: A Twitter listener asks what blow money should be used for. Dave explains that it's miscellaneous pocket money.

Dave Ramsey's advice: It's miscellaneous pocket money. In your budget, you have a category for miscellaneous—for blow money. If you can buy a couch out of your blow money, you missed the point. If you're buying clothing, with rare exceptions, out of your blow money, then you missed the point.

Your blow money is a small account for a little bit of letting off steam. For instance, let's say that you buy lunch every day while you're at the office. Well, that's lunch money. That's not blow money. You buy your clothing. That would come from clothing money, not blow money. You really don't need a lot of blow money. It's just a little bit of pocket money. It's kind of fun money. It's not for eating out, because that's restaurants or lunch money or whatever you're doing.

Here's another hint on doing your budget on these kinds of things: When you first start your budget, it's okay to have too many categories. As you get better and better about acting your wage, living on less than you make, your categories can start to combine and you can have a little more wiggle room—a little more sloppiness—and you'll still be fine. But when you first start, for example, I would recommend dividing your food budget into grocery store and restaurant and maybe a third category for lunches if you buy lunch at work. So you have your family eating out, your lunch money at the office, and the grocery store. Later on, you could just have a food budget. But when you first start, go ahead and divide it up. Break it up. It's okay to have it be a lot more detailed. You, by nature, will combine some of those categories and start to be a little bit looser when you've got more room in the budget after you've started hitting some of your financial goals.

When you first start, your blow money should be very small because you're trying to hit some of your initial Baby Steps—having an emergency fund, getting your debts paid off, and that kind of thing. Most of your money ought to be going to those things, not to blow. Blow money ought to be used for miscellaneous pocket money. That's all it's for. As you go forward, you're going to loosen up a little bit and have a little more wiggle room in these situations.

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