A Quiet Fortune: The big fat envelope scheme
“Good grief, here she comes again. This is going to take awhile,” I could almost hear the teller mumble to herself each time I walked in on the first of the month.
Even though it was many years ago, the ritual was so much a part of our lives that I’ll never forget it. I’d come into the bank, paycheck in hand, and give it to the lucky teller whose window was vacant. Then I would hand her a list. I need: Six $50 bills, 23 20s, 17 10s and so on. Even down to quarters, I was specific about how much of each denomination I needed for the month. It never varied: I had figured it all out, and I was sticking to the plan, darn it.
Then I would head home and pull out the envelopes. Some of the 50s, 20s and 10s would be placed carefully into the “Groceries” envelope. A few 10s went into the “Birthday Presents” cache. So again, the ritual: Divide the money into envelopes on which I had written labels and amounts. When I’d go to the grocery store I would take the Groceries envelope, hoping I would spend less than a quarter of the contents every time. If the kids had a birthday present to buy, we knew it had to be purchased using the Birthday cash and no other. If a surplus was left in any envelope at the end of the month, great. That particular category would start out fatter the next month.
We had envelopes for almost everything: clothes, charity, Christmas presents, appliance repairs. By the time the holidays or new-school-year-and-the-kids-need-new-jeans time rolled around, I would know that we could at least swing most of the needed purchases. Too bad for the teller, but the system worked in our family for years.
Oh. And we had our envelope labeled “Saving and Investing.” That one was never emptied until it was fat enough to do something that could make our futures a little less daunting.
So then remained the mortgage, the electric bill and those other things that couldn’t be paid for with cash. Part of the monthly income was always deposited in the bank. Written checks would cover those expenses, sort of. (I did plenty of sniveling and sobbing when I paid the monthly bills during those slim years. But after awhile the plan began to work.)
Why am I sharing this rather ancient personal story with you, a story that started long before personal computers existed? It’s for several reasons: 1) Making ends meet when paychecks are limited has always been hard, but 2) we still need to think about saving and investing some of our money, and 3) I could never keep one of those line-item budgets for more than two weeks.
The last and most important reason: The envelope system actually worked. Odd as it may seem, we didn’t have to wonder what we could spend on something; we always knew instantly. So I never had to panic trying to pay for one thing because I had gone overboard on another; we could slow way down if one envelope was getting too thin before the next paycheck. And we could save money by making it one of our expenses.
Believe it or not, I still read fairly often about the envelope method in newsletters and financial magazines. Somehow those old-school envelopes make money real to us. And that’s an important concept these days, as we so often now purchase things by charging online or swiping credit cards or waving smartphones. Yes, digital methods of purchasing are convenient, but we should remember that they were designed to encourage us to buy more stuff without thinking about it.
OK, I know most of you aren’t about to use old-fashioned envelopes to keep a budget (although many financial experts recommend it, for a few months at least). But you should find some way to keep track of your savings and expenses. Hundreds of apps for budgeting are out there. For example, here are just a few iPhone apps that get 4-5 stars from users:
• Daily Budget Original
• Easy Spending
• Goodbudget Budget Planner
• Personal Capital Budgeting
• Piggy Bank – Money Tracker
• Spending Tracker
A few months ago I wrote this: “Step One on the road to future security is to make a decision: Decide that you are a person who can and will become financially stable.”
Part of your decision will be to keep track of how you use your money.
Terrie Drake is the author of the book “A Quiet Fortune,” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at email@example.com.