Monday, December 20, 2010

Stuffing Envelopes

I mentioned recently that one of my goals for the New Year was to use a cash envelope system for budgeting. I’ve used the system before, with great results. MP Dunleavey wrote an article about living on cash rather than credit back in March 2009. I quite enjoyed the article, though it can be summed up in a few short words:

If you don’t have the money you can’t spend it.

I’d still recommend it as a good starter for going back to cash after a plastic addiction, as it talks about expectations and adjusting our mind set.

When I was waiting tables in my early university days I’d save my pay checks in my bank account, and live off my tips. I didn’t have nearly the expenses to look after that I do now (housing, utilities and phone were all paid for, I only looked after food, fuel, etc… ), but I never had to worry about going over budget or into debt. I’m a very visual person, and having that stash of cash in an envelope showed me quite tangibly how much money I had to spend, and whether or not I needed to tighten my belt.

Quite simply: It worked.

For some reason or another I quit using the system when I stopped waiting tables. I picked it up again for short periods of time here and there, but sadly I never did it as faithfully as I did before. So, I’m going to change that.

Through the year of 2011, I am going to use cash. Just cash. Bills that are deducted automatically (mortgage, car, insurance) or paid online (power, water, credit card) will continue being paid that way. Everything else (food, fuel, clothing, gifts, etc…) will be paid for using cold hard cash. This is how I’m going to break it down:

This is exactly what it sounds like; if I ingest it (with the exception of medication), it gets paid for here. Food, Alcohol, Eating Out, etc…

Personal Care
Largely toiletries, with a few extras. Feminine products, soap, shampoo, makeup, hair cuts, massages, etc… The massages are reimbursable through work, so some of the money that gets spent in this category will be coming back and can be used again.

I’m fixing my place up, and sadly that’s not free. Home care and renovation supplies will come out of this category. Flooring, mortar, lighting, paint rollers, gardening, etc…

Thankfully quite a small category. Fuel for my car. It’s been averaging under $50 a month if I don’t drive somewhere out of the city, such as too my parent’s house.

I’m a little ticked that this category has gotten large enough to warrant its own envelope, but it is what it is. Acne medications, antihistamines, asthma medication, etc… Again, some of the items in here are reimbursable through work, so the money will return to the category and can be reused.

A largely self explanatory category: clothes, shoes and accessories. Do I need more clothes? No. My body is covered, and the level of coverage can be varied depending on the weather. That being said, this category also provides a certain level of personal enjoyment. I really enjoy fashion. I read about it with great interest, and put a lot of effort into finding things that fit me well. I’m working on building a work wardrobe, and if it’s properly budgeted it won’t contribute to my debt levels.

Christmas, birthdays, work gatherings… All require gifts, usually aren’t budgeted. I’m also going to throw Thank You cards in this category, because I’ve been sending them out to people as of late as well.

Books, magazines, movies, sports, dating… You get the idea.

Oh Shit!
Literally anything that would make you say that. Blown tire, roof leak, broken window…

Mortgage Extras
This is all of the spare change I’m going to collect to put towards my mortgage.

Money will be separated into the various envelopes on pay day. If I find myself running short in one category I can pinch some from another category, but it means that category is now smaller. All of the categories are going to be stuffed in labeled envelopes with the exception of “Oh Shit!” and “Mortgage Extras”. As I mentioned above, I’m a very visual person, I do not want to see the money in these categories. I want to pretend it doesn’t exist so it just builds up in there while I remain oblivious to it. The holding containers for these will be a little different; I’m going to take old jars, paint the insides so they’re opaque, and then glue their lids on so that all I can do is put money in the slot at the top.

 Basically, it’s a cheap piggy bank that you have to break to get the money out. I’m not very often inclined to break things, so this should work well.

So, that’s the plan for goal number 1. Does anyone else out there use the money envelope system for their day to day finances? If so, how do you break it down? Do you do anything differently? I’d love to hear it!


ss4bc said...

When I was in grad school I did envelopes. But they were very simple. I pulled out cash once a month. Payed my yearly envelopes (car registration, contacts, Christmas, ect) then put money per week into 4 or 5 envelopes. Usually $80-100. That money just payer for everything: clothes, food, toothpaste, ect. If I had extra I could roll it to the next week. If I had under I had to just wait and be poor for a few days.

The only problem I had was getting to the atm each month to pull out the cash. Otherwise it worked well.

I also did not carry a card with me to resist temptation. But I did carry one emergency check.

Cassie said...

Did they not have ATMs at the university? I know our campus had them all over the place.

My credit card gets left at home, and I'm contemplating leaving my debit card at home too. The only part that makes me nervous is that the transit system is still somewhat limited near my house in the evenings, and if I get stuck it's too far/cold to walk home. I wonder if taxi companies will let me buy a pre-paid voucher in case of emergencies?