Week 2: January 7th- January 13th, 2007
New Habit: Envelope Method of Spending
Frugal Habit? Yes, especially if...
**You tend to blow your budget on small stuff, or
**You are an impulse spender, or
**You have an impossibly low budget and need to pinch every penny, or
**You have a lot of money unaccounted for at the end of the month.
The envelope system is simple. Instead of putting money in the bank and spending
via check or debit card, put the money in envelopes and pay in cash. I went only
halfway and paid cash for the variable parts of my budget--groceries and the big fat
budget black hole most of us call "Entertainment" or "Miscellaneous."
I am not by any means a big spender, but I have difficulty budgeting. We always seem
to just cover expenses, with a small amount left for tithing and virtually nothing for
savings. Some areas of our budget are non-negotiable--for instance, rent--but a lot of
our expendable income seems to evaporate. To prevent this, I made two envelopes:
one with $100 marked "Groceries" and one with $25 for spending.
One of my immediate challenges was that my grocery shopping days are not evenly
spread throughout the calendar. I tend to make two massive shopping trips a month
and pick up a few sale items and perishables between. My big shopping trip
happened to fall this weekend so I spent just under $115. The extra money came out
of my spending allowance. Luckily, I hadn't already spent it.
As vexing as it was to go over my budget, I doubt this problem would occur often if I
adopted this system full-time. First, instead of a weekly budget, I would be dealing
with a monthly one, so the low grocery spending weeks would make up for the costlier
semi-monthly sprees. Also, as long as I spent only what was in my grocery
envelopes, I would never have to worry about whether I am over budget. As long as
there was cash in the envelope, I would know I was on track. If I started running low
on grocery money, I would have enough time to reduce spending in other categories,
avoiding having too much month at the end of my money. Last, I could indulge in the
occasional treat without guilt.
If the envelope system can help a lifelong tightwad with enough income to cover
necessities and then some, I can only imagine what it might do for people who really
have a hard time making their paychecks stretch.
One pitfall I can foresee is that some people might not think ahead and thus end up
with empty cupboards and an empty grocery envelope. I would postulate that these
are the same people who often find their bank accounts overdrawn. The envelope
system would prevent these accidental overdrafts as well as the anxiety of finding
oneself without money for things like rent.
The only other drawback is security. I am surely not the only person who is
uncomfortable having large amounts of money in the house. I suppose I could keep
the envelopes in our safe deposit box (which is inconvenient) or in a locked file
cabinet (we already have one). If you have a dog or firearms--and what American
doesn't?--you have no reason to worry. But I know I still would. If you use this system,
it's best not to tell anyone that you wouldn't trust with your PIN number.
Amount Spent: 10 cents (5 cents x 2 envelopes)
Amount Saved: Will depend on user
Difficulty: 1 (anyone can do it!)
Time: 15 minutes
New Habit: Envelope Method of Spending
Frugal Habit? Yes, especially if...
**You tend to blow your budget on small stuff, or
**You are an impulse spender, or
**You have an impossibly low budget and need to pinch every penny, or
**You have a lot of money unaccounted for at the end of the month.
The envelope system is simple. Instead of putting money in the bank and spending
via check or debit card, put the money in envelopes and pay in cash. I went only
halfway and paid cash for the variable parts of my budget--groceries and the big fat
budget black hole most of us call "Entertainment" or "Miscellaneous."
I am not by any means a big spender, but I have difficulty budgeting. We always seem
to just cover expenses, with a small amount left for tithing and virtually nothing for
savings. Some areas of our budget are non-negotiable--for instance, rent--but a lot of
our expendable income seems to evaporate. To prevent this, I made two envelopes:
one with $100 marked "Groceries" and one with $25 for spending.
One of my immediate challenges was that my grocery shopping days are not evenly
spread throughout the calendar. I tend to make two massive shopping trips a month
and pick up a few sale items and perishables between. My big shopping trip
happened to fall this weekend so I spent just under $115. The extra money came out
of my spending allowance. Luckily, I hadn't already spent it.
As vexing as it was to go over my budget, I doubt this problem would occur often if I
adopted this system full-time. First, instead of a weekly budget, I would be dealing
with a monthly one, so the low grocery spending weeks would make up for the costlier
semi-monthly sprees. Also, as long as I spent only what was in my grocery
envelopes, I would never have to worry about whether I am over budget. As long as
there was cash in the envelope, I would know I was on track. If I started running low
on grocery money, I would have enough time to reduce spending in other categories,
avoiding having too much month at the end of my money. Last, I could indulge in the
occasional treat without guilt.
If the envelope system can help a lifelong tightwad with enough income to cover
necessities and then some, I can only imagine what it might do for people who really
have a hard time making their paychecks stretch.
One pitfall I can foresee is that some people might not think ahead and thus end up
with empty cupboards and an empty grocery envelope. I would postulate that these
are the same people who often find their bank accounts overdrawn. The envelope
system would prevent these accidental overdrafts as well as the anxiety of finding
oneself without money for things like rent.
The only other drawback is security. I am surely not the only person who is
uncomfortable having large amounts of money in the house. I suppose I could keep
the envelopes in our safe deposit box (which is inconvenient) or in a locked file
cabinet (we already have one). If you have a dog or firearms--and what American
doesn't?--you have no reason to worry. But I know I still would. If you use this system,
it's best not to tell anyone that you wouldn't trust with your PIN number.
Amount Spent: 10 cents (5 cents x 2 envelopes)
Amount Saved: Will depend on user
Difficulty: 1 (anyone can do it!)
Time: 15 minutes
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