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Adopt the Envelope System

By madhu on December 17, 2015
Some people may still utilise this basic budgeting system from yesteryear: Allocate funds for your monthly needs—like groceries or gas, along with bigger savings goals, such as car repairs or a vacation—by stuffing money into different envelopes dedicated to each priority.

Classic Lesson #5:

Adopt the Envelope System

That Was Then…

little_man_holding_red_envelopeSome people may still utilise this basic budgeting system from yesteryear: Allocate funds for your monthly needs—like groceries or gas, along with bigger savings goals, such as car repairs or a vacation—by stuffing money into different envelopes dedicated to each priority.

“This method forces you to plan how you will spend money in a certain budget category.”. “By strictly controlling your spending, you’re assuring there will be money left over to meet your goals. That’s the power behind envelopes.”

And that power is great to tap into from time to time—going on an ALL CASH DIET can help keep you accountable when you want to pay down debt.

But there’s a catch: By keeping your savings in cash all of the time, you’re missing out on a valuable opportunity—collecting interest on that cash.

This Is Now…

mail_mujima20100504_0046_40These days, smart money managers know how to make their savings work for them by earning interest in a high-yield online bank account.

The added benefit of this new-school approach: automation. “You can establish monthly transfers into a savings account to ensure you don’t procrastinate saving,”

And don’t be shy about opening more than one account to segregate your savings. “If you put your emergency, new car, and vacation funds all in one place, it can be tempting to ‘empty the piggy bank’ on one goal without realising you’ve just blown the others,”

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Article written by madhu

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