POCKET CHANGE

The general idea of this app is to help the user not only budget their money, but also to conceptualize of it as if it were physical cash. Using cash gives us a much more immediate sense of how much money we’re dealing with, which leads to wiser spending decisions. But plastic is way more convenient and safer to carry around. So this app will attempt to make the best of both worlds.

It’s organized into three separate modules/stages: Budget, Pocket, and Change.

BUDGET
This is the equivalent of the envelopes in the Envelope System, where you set the dollar amount that you want to set aside for each category in your budget. Pretty straight forward. Nothin’ fancy.

POCKET
Before you start spending, you have to transfer money from your budget to your pocket. You can only record transactions for which you have enough money in your pocket. (The money in your Pocket is still separated into categories, in case you were wondering).
From a practical point of view, this part of the app is completely unnecessary. Why not just deduct straight from the budget whenever you make a transaction? Because the purpose of the Pocket is psychological, not practical. This is what helps you conceptualize of your money as if it were physical cash. When making purchasing decisions, there’s a big difference between thinking “Oh, I’ve got plenty of money in my checking account” and “I’ve only got $12 in my pocket right now”. Plus, putting money in your Pocket before spending it forces you to plan ahead and avoid impulsive purchases.

CHANGE
When you record a transaction, money is deducted from your pocket, rounded up to the nearest dollar, and the change goes into your Change. So, for example, when you record a purchase of $3.25, 4 dollars get deducted from your Pocket. The left over 75 cents goes into your Change. Over time, your change accumulates just as it would if you put physical change in a jar above the kitchen sink at the end of each day. At any time, you can donate your change to charity or you can return it to your budget.

The idea for this app came to me when I was considering using the Envelope System for my own budget. The problem with the Envelope System is that it only works if you’re using cash for everything. That got me thinking about the psychological benefits of using cash versus the obviously superior convenience and security of using plastic, and feeling frustrated with having to choose between the two. Why not have both?