What is Envelope Budgeting? Envelope budgeting is a simple and systematic way of saving to pay bills and to maintain a personal budget.
I grew up in the typical fifties middle class household: Dad worked at the office, brought home the paycheck, mom stayed home and raised the three kids. My childhood was mirrored on television land shows like Father Knows Best, Leave It To Beaver and The Donna Reed Show. Those were the days when, since I both lived in and watched it on TV, I thought everyone’s life was like that. All the girls in the neighborhood were Donna Reed-ettes looking for their Carl Betz.
My mom deposited dad’s paycheck at the bank, paid the regular recurring bills by check, and got cash for the discretionary spending. She had a system of envelopes for the cash: One envelope for clothing, one for school activities, one for entertainment, etc. When we came home from school asking for money for something special like a school sweater, mom would take us to the envelopes. She kept them in her chest of drawers in her bedroom, and would put them on the bed while we sat and looked at what money remained in each one. If there was no money in the corresponding envelope, she would see what money was available in the other envelopes.
Then she would give us choices: We could have the school sweater by taking money out of one of the other envelopes. But that meant trading one thing for another, and whatever envelope we took from would be empty. We could have the sweater, but it meant no new dress or no going out to dinner. We had to choose what we wanted most.
I learned a lot from mom’s envelopes:
- Dad worked to put the money in the envelopes.
- The money in the envelopes was all the money there was.
- If there was no money in the envelopes, we didn’t get to buy anything.
- Having one thing meant not having another.
- I got to choose what I wanted most.
- Create some envelopes for your discretionary spending and put cash in it. You will quickly learn what your spending priorities are.
Today’s Affirmation: “I am a smart money manager and always make smart financial decisions.”