Key Takeaways
- If you need to buy an expensive item, you’ll want to make sure you can afford it.
- Save for the item by using this simple method.
- By using tangible cash, you’re more likely to stay within budget and not overspend.
Have you ever used the envelope system to help you budget? It’s an old-school system, so perhaps you have seen an older relative use it. If you’ve never heard of it, it’s pretty simple: you take a few envelopes and write a monthly expense on each one. For instance, you would have one envelope each for rent, groceries, transportation, etc. You put the money you plan to spend for each category in the corresponding envelope.
This system might seem odd in this day of credit and cashless transactions, but it’s an effective way to ensure you don’t overspend and it’s a tangible way to see how much you’re actually spending.
A similarly old-school method could be used if you were looking to save for something. Let’s use a new smartphone as an example. Say it’ll cost you $600 and you know you want to buy it in three months. That means you’ll have to come up with $200 each month. How will you do that?
Try this: start by taking cash out for your expenses for the month. Don’t use credit cards. Every time you go to buy something, take the amount of cash you think you’ll need. When you come home, take your change from your purchase and put that change in a mason jar. Do this every day for three months.
At the end of three months, count up what you’ve put in the jar and see if you have enough. If not, keep going until you do. By doing this, you’ve accomplished two things: you’ve forced yourself to save money, and you’re not spending as much when you go to buy your new phone.
It might feel odd using cash if you haven’t done so very often, but the tangible aspect of it is very helpful when it comes to understanding how much we’re spending and saving. So next time you’re looking to save up for something, try this out and see how it works for you. Until next time, enjoy.
Gary
If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy:
