Based on this, we split up all of our income into either a cash envelope or a digital one, as we run a zero-based budget. This is where we go over last month’s expenses to see how we did, and we look at the anticipated expenses of the month ahead. How it worksįor my wife and I, we use old-school envelopes for things like clothes, kids items, cosmetics, going out and for her fun money.Īnd we have digital envelopes for things like travel, car maintenance, gifts, my fun, home maintenance and property taxes.Īt the start of the month, we sit down and have a budget meeting. Remember, you ARE weird, and normal is broke. This is no different except that you’ll want to set up separate savings accounts for each of your digital envelopes.īeware: The bank will almost certainly think you’re crazy when you open 10 different savings accounts. It’s not uncommon for people to have a checking and a savings account. MORE: 3 of the dumbest things I’ve done with moneyĪll banks will let you set up multiple accounts under your name. In addition to taking out cash to put into envelopes, it involves setting up several electronic savings accounts (your digital envelopes) at your bank and transferring money to them using your main checking account. It uses both cash and online bank accounts as savings stashes. The envelope system 2.0 is really pretty simple. There is a method that allows the convenience of paying digitally while still making you feel some level of pain of paying and keep tabs on your spending so you don’t overspend. A better wayīut it doesn’t have to be an either-or choice. I know Dave might disagree with me, but that’s the reality. I personally don’t want to give up the level of convenience plastic and digital transactions afford. There’s a lot of research which supports the fact that people spend less when they use cash as opposed to using a credit or debit card.īoth forms of electronic payment minimize the pain of paying and lead to people spending more because plastic spending doesn’t “hurt” as much as paper spending does.īut in this digital world, where we can deposit checks on our phones and send money by email, using technology that minimizes the pain of paying is almost impossible to avoid.Īnd even if it could be avoided, it’s just way too convenient to be able to pay using some digital method. My parents would budget each month how much needed to go into each envelope. I can remember my parents having envelopes stuffed with cash tucked into our kitchen cupboard to be used to buy groceries, put gas in the car, and to pay for our clothes. READ: 5 books that will transform how you think about moneyĪ big part of being weird that Dave promotes is using the envelope system. His Total Money Makeover book is a classic, and it’s the book that kickstarted me down the path towards financial independence.įor those who haven’t read his books or listened to his podcast, his most famous catchphrase is “live like no one else now, so you can live like no one else later.” Essentially, be counter-cultural, or “weird” as he puts it, with how you handle money now, so you can crush your finances and live a life of financial independence down the road. Say what you want about the man, but he’s been highly effective in helping thousands of people get on the road to financial peace.
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