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Nancy V.

Owner of White Book (PR & Marketing); Project Manager/Diversity & Events Specialist

Hmm…about me, well, I am always and never the same, which makes for my own interesting world where I constantly recruit individuals to join my planet. Take myself very seriously, but prefer not to, so I dress in outfits that often do not match and say things that I shouldn’t under the guise of �...

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The Dreaded Envelope System

Nancy Vaughn

I should’ve known not to agree to a sit down with my husband, to ignore his, “We need to talk” prompt. He’s not really much of a talker, and that statement is typically followed by a “serious” conversation, much more than I was prepared for on a sunny, weekend afternoon. He wanted to talk about…“The Budget.” This typically involves a prior episode of me engaging recklessly in one of my hobbies, which means a call for modification to my SOP of spending. Considering I hadn’t made a purchase of any sort (minus groceries) in weeks, I was surprised that this was the topic of choice.

After hours of grueling negotiation and a commitment on my hubbie’s part to give up the TV while I watched back-to-back re-run episodes of Sex and The City, I am presently operating under the “envelope system.” I’ve done this before and it was hard. This horrible tactic is implemented when there’s a need in my household for “controlled spending,” which is often sparked by unexpected expenses (car maintenance/repairs, holiday gift shopping, tax season, etc.) A sad time for me and shopping sprees, yet very beneficial in the long run.

This news coincides conveniently (inconveniently?) with this first blog entry, where I will often focus on the joys of shopping (utter bliss!) in this tough economy, as well as money – spending and saving. (Yes, shopping and saving can be polar opposites, but…where there’s a will, there’s a way!)

For those of you not familiar with the envelope system, here goes…

1) Start with a review of your spending patterns. This means going back into your check book, reviewing your credit card statements, etc. and recording items you typically “spend on.” This includes everything – your utilities bills, gas purchases, mall visits, pub crawl fund….everything.

2) Then categorize your monthly spending. Your mortgage/rent is a category, and monthly bills (i.e. utilities, phone, etc.) can be another one. Other categories include: groceries, church/tithe, clothes, savings, gas, entertainment, and more entertainment (e.g. pub crawl fund). I rallied for my own “shopping fund” category to replace the second option for entertainment. This is your system, have fun with it!

3) Once you see your approximate amount for each category (and you should guess-timate a little high for each category, to be safe) – you fund each envelope with the calculated amount. If you’re disciplined and dedicated (which I am!) – you may leave the amount in the bank and carry a list with your itemized budget items, adding and subtracting as necessary via debit card.

Here’s a rough example:

• Mortgage/Rent: $1,200
• Monthly Bills: $400
• Groceries: $400
• Gas: $150
• Entertainment: $200
• Credit Cards: $200 (total of the minimum payments)
• Misc: $200
• Savings/Emergency Fund: $150

You need to make at least $2,900 a month to fit within the budget options above. And if this is the case, you’re likely living paycheck-to-paycheck. Ugh.

OK, let’s say you spend everything in your entertainment fund your first weekend of the month. You can pillage your grocery fund (bad idea) or one of the others, but otherwise – you’re done for the month with entertainment. (Crazy, I know!) Same with all of the other categories. Within reason, of course –  don’t opt not to fill up your car with gas, miss work, and have a whole other set of problems.

Fairly simple, seems utterly painless – but I challenge you to try it. By the way, this controlled-spending envelope system doesn’t allow for credit cards as a buffer. That’s right. NO CREDIT CARDS. So, if you do use your credit card for a movie or gas, you need to take the payment out of the appropriate envelope to apply the payment toward the credit card. 

With high percentages of U.S. Americans living beyond their means and everyone’s attempt to stretch the dollar, at least an effort in occasional controlled spending seems sensible. I’m on the three-month plan, which will come as a surprise to my husband who is on the six-month plan. : )

Wish me luck! And good luck to you if you opt to try this system. You’ll be surprised to find where all your hard-earned money goes and how much you save in the end!