For about a year now, I've been using a single rule to govern my discretionary spending: entertainment is capped at 4% of my net worth per year, applied monthly, with the balance rolling forward.
It's a strange rule. Most people budget by setting a fixed monthly limit ("$200/month for fun") or a percentage of income ("10% of my paycheck"). I do neither. The cap moves with my net worth, which means good investing months let me spend more on dinner; bad months tighten the screws. And the monthly limit isn't really a limit, it's a balance that carries forward, exactly like a credit card statement.
Here's how it actually works, what I learned from a year of running it, and why no existing budgeting app could handle it.
Every month I update my net worth in a spreadsheet, investment accounts, cash, debt. I take 4% of that, divide by 12, and that's my entertainment allowance for the month.
To make this concrete: say your net worth is $100,000. Four percent of that is $4,000 per year, or about $333 per month. That's your allowance for movies, concerts, dinners out, gifts, anything "fun."
If you overspend, the next month's allowance shrinks by the overshoot. If you underspend, it banks. The balance is a running total, not a per-month reset.
That's it. One rule, one number, one running balance.
The number is borrowed from the FIRE community's safe withdrawal rate, the long-run rate at which you can pull from a diversified portfolio without depleting it. The logic: if I'm comfortable drawing 4% of my net worth for fun forever, I'm not eating my future.
It's not a perfect mapping. Net worth isn't a retirement portfolio. But the spirit is right: tie my discretionary spending to something that grows when I'm successful and shrinks when I'm not, instead of pretending my income is the relevant constraint.
This is the part that doesn't fit in any budgeting app I've tried.
Imagine a month where you overspend badly, restaurants on a trip, a couple of dinners, a few small impulses that add up. By the end of the month you're double your allowance. The next month's raw allowance would be roughly the same as usual, but with the overshoot carried forward, you start the new month deep in the negative. You have no entertainment budget that month. You have to recover the overshoot before earning anything new.
This is the part most budgeting systems can't model. They reset on month boundaries. Spent 200% of your budget in March? April starts fresh at 100%. The overshoot is forgiven by the calendar, which means it isn't really a consequence.
The rolling balance makes overspending feel real, because the consequence shows up next month. And underspending feels real too, a frugal January means a more generous February.
A few things, in no particular order:
It changes behavior at the point of decision. Before buying a small luxury I check my current balance. Not "what's my monthly budget", what's my actual available number right now, after months of carry. Sometimes it says yes, sometimes no. Either way, it's an honest signal.
It survives bad months. When the market drops 20% and net worth shrinks, the entertainment allowance shrinks with it. This feels right. Most budget systems pretend market crashes don't exist. Mine doesn't.
Categorization is fuzzy and that's fine. Is buying flowers "entertainment" or "personal items"? Genuinely unclear. I pick one and move on. The rule survives a little category drift because it cares about totals, not perfect classification.
What counts as net worth matters. I exclude my state-managed pension because I can't actually spend it. I include brokerage, crypto, cash, and debts (which reduce the base, correctly). The "rule-applicable" net worth is a deliberate subset of total wealth, only what's actually accessible to fund discretionary spending.
I've been maintaining this in a spreadsheet. It works but the friction is real:
Every month I duplicate a sheet, update the net worth, recompute the allowance, manually carry the balance from last month, and start logging transactions. By month six I had accidentally-missing months of balance carry, the rollover only ran reliably when I remembered to copy it. By month nine I had categorization mistakes that had propagated forward. The rule was sound but the spreadsheet kept breaking the discipline.
I'm an iOS engineer, so I built the app I wanted.
Finthemis is a budgeting app built around this exact model. Rolling-balance rules, applied to spending categories, computed from a net worth you maintain. Your data lives in CSV and JSON files you fully own.
Launching soon. Get notified:
Subscribe →To be clear: you can do this in a spreadsheet. I did, for a year. The rule is the interesting part, not the software. If you want to try it, here's a minimum setup:
A monthly sheet with: previous balance, this month's allowance (net worth × percentage / 12), spending log with totals, ending balance (previous + allowance − spent). Repeat each month. Copy the ending balance forward.
That's the whole system. Pick a percentage (4% is conservative, 5-6% is more generous), pick a category (mine is "entertainment" broadly defined), pick a definition of "net worth" you can actually update monthly, and start running it.
If it works for you for six months and the spreadsheet starts feeling painful, you'll know what I'm building.