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By the author of What School Should Have Taught You
Let’s say that you’ve heard over and over again about the benefits of using the envelope system when it comes to saving money. Your personal finances at the moment are really something of a wreck, and you’re taking a hard look at what you can do to be as financially responsible and independent as possible.
The envelope system is just one of the tools that you’re looking at using to make this happen.
But you’re facing something of a problem. You’ve relied on your credit card as your main means of paying for things on a monthly basis, and you have to keep money in your bank account to be able to pay off your credit card bill at the end of the month.
You could withdraw cash for the creation of an envelope system this month, but then you wouldn’t be able to pay off your credit card bill. And by the time you build up money in your bank account again, you’ve already racked up more purchases on your credit card that you had to use because you had no other means of paying for things.
These weren’t frivolous purchases either. It’s not like you’ve been going out every night buying drinks and going on shopping sprees. You’re having to pay for things that you really do need. You needed your groceries, you needed a new pair of shoes, and you needed to fix the dripping kitchen sink.
If this is where you find yourself, here are a few tips that will help you to get out of this vicious cycle so that you can get onto the envelope system to regain control of your finances.
What can you sell?
Look around your house right now. Are there items that you have that you can live without that will give you a good chunk of change? Let’s say there’s a treadmill sitting in your exercise room that you never use. You know that you could easily get $500 out of it.
Why not put the treadmill up for sale, take the $500, and use that as the seed money for your envelope system? You could then divvy that money up amongst your monthly cell phone envelope, your clothes envelope, your electricity bill envelope, and maybe a bit into your car maintenance envelope.
Selling things isn’t necessarily fun, but being in a financial train wreck isn’t either. It’s actually a lot less fun than having to sell something.
So take a solid look around you and view things through the eyes of making an investment. Will getting your finances on track save you money? Absolutely. You’re investing in yourself. Whatever that tangible item is that you can sell will “cost” you a few hundred dollars in the immediate, but it will pay off dividends in the long run.
And then, when your finances are under control, should you want another treadmill, you’ll be able to purchase one and keep it without having your bank account starve.
Can you work your way into the envelope system slowly?
Let’s say you’ve sat down and calculated how much you need to budget for every category of your life. You’ve figured out car maintenance, health insurance, homeowner’s insurance, mortgage, loans, groceries, healthcare, and so on.
Now, you’re sitting back and staring at that legal pad at the thousands of dollars that you need every month to just keep your house in order. How on earth are you going to withdraw a month’s salary from the bank without making it so that you’re incapable of paying your bills already sitting on the kitchen table?
I don’t think you necessarily have to.
One possibility is to look at easing into the envelope system. Be rigid in insisting that you are going to be fully on the envelope system by X day, but I don’t think you necessarily have to do everything at once. Why not say, “Okay, this month, all are clothes purchases, and groceries are going to rely on the envelope system. Next month, I want to add in car maintenance and insurance.”
This will get you onto the envelope system without breaking the bank in a sense.
I don’t think it really matters how you get onto the envelope system, just as long as you do it. And if taking baby steps is the only way you’re going to get there, then, by all means, take the dang baby steps.
Make some drastic cuts.
Let’s say this is only just for a month or two. Can you shop at Goodwill for your clothes, go without any restaurant purchases, and shop for the cheapest groceries you can find for 60 days? You will still end up with the necessities of life, but you’ll have drastically cut the amount of money that you’re spending. This will then leave you with more money in the bank to get onto the envelope system.
Is it fun? No.
But, again, being broke isn’t either. If eating a heck of a lot of pasta is the way to get there, then eat the pasta. You can get back to eating your filet mignon when you’ve got your finances in order. This isn’t a permanent thing. You don’t have to do this forever (you can if you want to, of course), but you do need to take the steps that will enable you to achieve the financial independence you need.
The envelope system is a killer means of saving money.
I’ve written before about how this was one of the ways I lived on less than $20,000 for a year. You can definitely do this. But there are actionable steps that you have to be intentional about taking to get there.
But what are your thoughts? Do you have other tips? Have you broken the credit card cycle? If so, how did you do it? Let us know in the comments below.
Aden Tate is a regular contributor to TheOrganicPrepper.com and TheFrugalite.com. Aden runs a micro-farm where he raises dairy goats, a pig, honeybees, meat chickens, laying chickens, tomatoes, mushrooms, and greens. Aden has four published books, What School Should Have Taught You, The Faithful Prepper, An Arm and a Leg, The Prepper’s Guide to Post-Disaster Communications, and Zombie Choices. You can find his podcast The Last American on Preppers’ Broadcasting Network.