Monday, April 19, 2010

Envelope Budgeting

I've been doing this for months and never realized it was an actual method of budgeting. My cousin mentioned it to me this past weekend and I was shocked. I thought I was being terribly clever.

I can't manage money to save my immortal soul. If I have money in the bank I'll spend it, no question. However if I have the money physically in hand it's much harder to spend it. If I have the physical money stashed somewhere it becomes painful to spend it.

So, I end up with a large number of envelopes, each holding some amount of money. My paycheck is direct deposited and I pull out the vast majority of it and stash it in envelopes. When the time comes to pay a given bill I pull out the envelope containing the money that has been set aside for this purpose.

As an extension of this behavior I have a large number of accounts and multiple banks, money goes into accounts and automatic bill payments take the money out and I simply don't have to worry. I find this method advantageous as it's a pain to drive to a bunch of different banks to pull money out, so the money doesn't get spent.

Saving via obfuscation. It works for me, I've managed to put away $1,100 in savings, I've paid off thousands of my debt consolidation loan and my bills are all current. I know what I have to spend for the week and once everything is covered what ever is left over turns directly into play money.

I hope to have five thousand saved by years end, let's see how close I come!

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