Allocating Income

Why Allocate Income?

Once you have a spending plan with planned amounts for each bucket, you need to have a way to fill those buckets with money. Any money available in your income buckets can be allocated to your expense buckets, which is like physically moving money from a cashed paycheck into labeled envelopes.

You don't want to spend any money until you have checked that specific expense bucket to make sure it has money left to spend. It's not enough to plan for spending a certain amount, you have to allocate your income and only spend what you have allocated. Here's how the flow should go:

1. Set up your Spending Plan (see Designing a Spending Plan)
2. Receive income (i.e., your paycheck, a bonus, etc.)
3. Enter that income as a transaction in MoneyWell and assign it to an income bucket
4. Use Allocate income to flow that money to your expense buckets
5. Check your Buckets List to see how much you have in that bucket before you spend any money
6. If you need more money for a specific bucket, drag another expense bucket to it to take money from it

We'll get into more detail during this tutorial, but make sure you always follow this flow or you will lose control of your spending.

When Do I Allocate Income?

A good habit to get into is to allocate income after you add new transactions to your income buckets. So when you get paid and your paycheck transaction appears in MoneyWell, you would allocate it so you can spend this money.

If you're in the (good) habit of saving part of your paycheck or applying part of it to pay down debt, make sure you allocate money immediately to those buckets as well so you don't forget and spend it by accident. This is all about tracking your cash flow so you keep control.