One of the best things about being a Singleton is that you alone are responsible for your financial choices. You need not debate each purchase nor do you need to compromise with anyone about how your household’s money will be spent. You have the freedom to choose which of your life’s goals to pursue and how to fund them.
Based on my own experience & observations of others, personal goals often have a financial component. Money has to be sourced somehow. Children have the benefit of someone else generally paying for their lives. They get to write lists to Santa Claus to get what they want. They can even leave teeth under their pillows in order to wake up to money. Adults – not so much. (Some of my friends pay their kids $5/tooth… the power of inflation is real, ladies & gentlemen.)
Enter the per diem…
Pray tell, Blue Lobster – what is a per diem?
I first learned of them when I started travelling for work. On top of reimbursements for my meals & accommodations, I earned a per diem for the incidentals that I might have to buy while away from the office and home. Most of the time, I didn’t have to use my per diem so I would simply sock it away in a savings account.
In terms of personal finance, a per diem is simply is a daily amount of money that you pay to yourself.
You can create your own per diem by deciding how much money you want to pay yourself each day. You know how you choose to pay a certain amount each day for rent/mortgage? Student loan payments? Credit card bills? Utility payments?
Add up each of these payments then divide that amount by the number of days in the year. This is how much you’re paying on a daily basis for each area of your financial life. If you haven’t already done this exercise, trust me when I tell you it’ll be an eye-opener!
Next, I want you to pick a number and pay that to yourself. It could be $1 per day, $10 per day, or $100. The amount is up to you since you know your numbers better than I do. Keep in mind that a higher per diem means that you’ll reach your goals and accumulate money faster.
Why do I like this money hack?
I want people to be aware of how they spend their money. I hear so many people complain about never having any, yet I never hear them articulate where it goes. To my way of thinking, setting a per diem forces a person to be very specific about what they want their money to do. They are assigning a purpose to their per diem money. They are giving those particular dollars a task that goes beyond the basic elements of survival. The per diem dollars are going to be allocated towards a person’s most important financial goals, not just towards the nice-to-have-but-not-important-stuff.
Spend your per diem however you want!
Yes – that’s right. At the end of the day, this is your money and you’re the one who gets to decide what to do with it. I’m not familiar with your heart’s deepest desires. I’m a fan of the theatre. Your joy may lie in beach volleyball championships, taking self-development courses, Grand Prix auto-racing, or raising salamanders to sell online.
After selecting your per diem amount, your task – should you choose to accept it – is to focus your efforts on the goals that have the highest meaning for you. The order of your goals isn’t set in stone. Again, it’s your life and your money. You’re the lucky duck who gets to determine the order in which your goals are satisfied. Once you’ve accomplished the highest priority goal, you can move on to the next one and keep moving down your list until you’ve achieved what’s most important to you. In this way, your money is working hard to create the life that you want to live.
For some people, the goal is to take a really awesome vacation once a year. That might mean renting a houseboat for a week every summer. It could mean a weekend with friends or family at a favourite campsite. Maybe it means a six-week trip overseas. However an awesome vacation is defined, the per diem money can help pay for it if you so choose.
For other people, the goal is to pay off a debt, to build an emergency fund, to save for a down payment, to go back to school, or to renovate a home… The goals are as endless as your imagination. The sad reality is that your paycheque isn’t infinite. (And if it is infinite, please leave a comment explaining how you’ve managed to create such a wondrous thing!) No matter its size, your income has limits. That’s why per diems are such a great money hack. They help you to satisfy those desires that are most important to you. Nothing wrong with that!
Two things to keep in mind about per diems.
One – don’t be deterred by how long it takes to reach a goal. It’s obvious but I’ll say it anyway. Some goals take longer to reach than others depending on the size of your per diem. Buying tickets to a concert might take a few days or a few weeks. Gathering the down payment for a second home in Cinque Terre might take a bit longer.
Two – if you use your per diem to pay off debt, then you an added benefit once the debt is gone. Your former debt-payment can be used to increase the size of your per diem. A larger per diem means that you can achieve your next goal even faster. There’s always the option of simply frittering your former debt payment away on stuff and keep the same per diem amount. As always, you’re the one in control of allocating where your money goes.
In my humble opinion, paying yourself a per diem gives you the psychological boost of knowing that each day is taking your closer to your goals. When your head hits your pillow, you can be satisfied knowing that your money is working towards building the life of your dreams. And who doesn’t want that?