Stop The Leaks In Your Wallet
September 24, 2008 – 5:17 am
I’m reading the book “Making Work Optional“, and I’m enjoying it quite a bit. The book is easy to read, and is written for anyone interested in retiring early.
One idea I find intriguing is that they recommend limiting the number of ways you spend money. Using credit cards, debt cards, cash, checks, and electronic transfers can make keeping track of your money difficult at best. I never thought about it before, but this is probably why the envelope systems works so well for so many people. Beyond the studies that show people spend less money when the buy with cash, the envelope (or all cash) system has several valuable traits:
- You always know where you stand
- It’s easy to know when to stop spending money. Just stop when the envelop is empty!
- It allows you to shift money from one bucket (envelope) to another, without losing track of the funds or overspending in total
- It’s easy to understand. Even kids get that you stop spending when there’s no more money. The money doesn’t come out of a magical machine (ATM) and is not “limitless” like a credit card.
- If forces you to plan ahead for the money, because you need to allocate your income to the various categories/envelopes
- It removes the guilt, because you know that your budget is balanced and that spending money allocated for small luxuries like dining out is completely fine.
I recommend moving to a system that limits the number of access points to your checking account(s), especially if you run a tight budget and have little room for error. The envelope system may not be for everyone, but finding a way to keep track of your balances, especially with your spouse, can be challenging.
Image Credit: vrogy
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4 Responses to “Stop The Leaks In Your Wallet”
I never really was much of a fan of an envelope system but always also had a little extra room in my budget every month. Lately my budget has been tightened up a little bit and I am not adjusting all that well. Maybe I should give it a shot.
By Matt on Sep 24, 2008
I use an electronic envelope system. In today’s increasingly electronic world, you are limiting your options quite a bit by operating exclusively or mostly in cash. I realize some people find it much easier to control overspending when confronted with an empty envelope, but for those of us with the required financial discipline, there are a lot of advantages to the envelope system that can be had without actually carrying around wads of cash.
By The Simple Bachelor on Sep 24, 2008
stick to the budget plan will be good too.thanks
By iip on Sep 25, 2008