A Simple 4000-Year-Old Money Saving Technology
Discretionary wants are the bane of every well-thought-out budget. Paying with credit or debit cards makes it too easy to give in to those less-than budget-friendly urges, and if not properly checked, can throw the whole thing out of whack. Limiting the opportunities to “put it on the card” will undoubtedly free up some extra money and improve your finances.
Replacing cold-hard cash with a card as your legal tender of choice can keep you from diligently keeping track of what’s in the bank. It’s easier to spend more than you should when you don’t have to actually see the money you owe leave your hand. Handing someone a small wad of cash will always sting more than slipping the card into the chip reader.
Take advantage of a technology that has been in place since 2000 B.C. to help you save some of your hard-earned money. Leave the plastic at home, and replace it with cash in a bunch of envelopes. Write on each what they’ll be used for (ex. Fast Food), and place the budgeted amount of money in them.
The next time you head out the the (insert-discretionary-spending-store-here), put your debit card on the counter and grab the envelope of cash.
There are benefits to making this subtle change.
It requires you to make a budget.
Putting together a budget will help to answer the ever constant “Where does it all go?” question and allow you to proactively course correct as needed. Assuming you really dig in you should end up finding at least a couple of places to tighten things up. This should give you extra money to set aside for any of a number of reasons without completely upending your lifestyle.
It creates good money habits.
It forces you to think honestly about and stick to your budget. That discipline will inevitably bleed over into your other spending tendencies. Knowledge is power, and understanding where your money goes to the point that you know how to fix any inadequacies is a powerful thing.
You can never overspend.
No matter how hard you try, there is no way to spend more cash than what you have with you. Think about those times that you went to the store for a “couple of things” and walked out with a bunch of stuff you didn’t need. You can’t do that with an envelope of cash.
Simply put, it’ll save you money.
The method works for all types of fluctuating spending. Grocery shopping is a perfect example. Knowing that you have an envelope with a finite amount of cash will force you to think twice before putting that family size bag of Doritos or ten-dollar sushi container in the cart. It’ll also make it easier to walk by the in-store coffee shop on the way to the car.
Once you’re comfortable with the envelope method it will help you tighten up your extra spending. But, it doesn’t have to be an all-or-nothing pursuit out of the gate. Start with your most significant “pain points” and when you’ve had a couple of successful months roll other monthly expenditures. Each subsequent month cut some more until you’ve found a sweet spot — then stick to it.
Above all else though, make sure that you start slow, so you don’t overwhelm yourself into breaking away from the system. Also, fight the urge to cut the things you enjoy out of your life completely as you lean into your new money-saving, cash-in-hand lifestyle. Pushing too hard in any direction isn’t sustainable, and you’ll likely hurt your chances of long term success.
The envelope method is a great accountability tool to help ensure that trips to the store don’t result in extra unnecessary purchases. It costs very little to get started, and the benefits will be realized almost immediately. If you are paying with cash-on-hand, you can only spend as far as it will allow. Impulse buying then requires a choice between what you came for and what you see, and typically when we have to think about things, we make the correct choice.