If you have not heard that it is a great option to save money with envelopes trust me you are missing out.
Today people are faced with lots of responsibilities and these responsibilities come with different demands.
The majority of these demands are monetary. That is to say, they are problems that need money to be solved.
In a short sentence, you will need money to settle almost all life-related problems.
In my previous post, I discussed how important it is to save emergency money with Piggy Bank.
Another way of saving your money to improve reasonable spending is through a cash envelope.
Why you should save money with envelopes
Saving your money with envelopes enables you to stereotype each of your needs in different categories.
That is to say, it allows you to place all your needs in different categories. These categories are represented using different envelopes.
Each of the envelopes is attached with a title (what the money’s for).
The money you save with envelopes allows you to use the right money for your need.
That means that if you wish to buy a car in the future and also a house, you will need to save the money for these two wishes in two different envelopes.
When the money for each item is equal to the price of the item, you can only take the money in the right envelope.
You cannot take the money for a car to buy a house. This is because you have separated them using an envelope that has the title of the item attached to it.
Imagine how you spend your money located in one bank account and how you spend money separated into different categories using envelopes.
To save money with envelopes is important and recommendable for all who wish to start spending their money wisely.
Procedures to start saving money with envelopes
- Identify your needs. You will need to know what you need exactly to enable you to know what to title your envelope.
- Get as many envelopes as possible. At this time you will need as many envelopes as possible. This is because you’ll have numerous needs as time goes on.
- Title each envelope according to your needs. To avoid any confusion you will need to write what each envelope stands for eg, grocery, water bills, power bills, water bills, school fees, etc
- Separate your earnings according to the titles of the envelope. Each of your earnings should be distributed in different envelopes according to your needs. Let’s say you made $50 in a month, you will need to divide the money into different cash envelopes.
- Spend only from the right envelope. Another procedure of saving money with your envelope is by spending correctly. Always ensure that the money you are using for any need is necessary for that need.
To succeed with a cash envelope saving strategy
To succeed with a cash envelope strategy you will need to make sure that the right money is saved for the right envelope. This is because when you put the money meant for cooking in a grocery envelope, for example, the tendency of collecting money meant for groceries will be very high.
Also, to succeed with this strategy you will need to ensure that you avoid any form of temptation. These include your ability to try to avoid spending your money on things that might not matter.
You must have the right sense of thinking. This will go a long way in helping you understand your needs. Your needs are very important hence, the reason for the envelopes. So you should ensure that you can differentiate between what you want and what you need.
Disadvantages of saving money with envelopes
Irrespective of the very fact that saving money with envelopes is a great option for lots of people, it is also understandably risky.
You can imagine what happens when you keep your money at home and you are attacked by burglars. No one prays for that but it is something that can happen.
Another disadvantage of saving money with envelopes is the number of envelopes you will need to worry about.
Since human needs are as many as the stars of the universe, so also are the number of envelopes you have at your disposal.
It populates your house with lots of envelopes making it difficult for you to quickly identify the right envelope at the rapid time of need.
Due to the urgency of settling a need, you are likely going to take the money belonging to another need with the hope of replacing it when you return.
On most occasions, you forget to replace the money you have collected and this of course will affect your plan for a particular category of need.
Also talking about the risk involved in saving money with envelopes you can also think of walking on the streets with money packed in your pocket or wallet.
These days nobody moves around with money. Almost everyone is moving around cashless. If the need for money arises they either use their debit or credit card to do the transaction.
Carrying money in your pocket could be unhealthy due to pickpockets and the possibility of the envelope falling off.
To save money with envelopes is a very good approach for saving money for the right need.
This will go a long way in helping you spend the right money for the right needed item.
Just like I pointed out earlier, it is also risky to practice this strategy at home due to fear of thieves and other possible risks.
So instead of taking the risk of keeping money at home, why not create an account with Mvelopes or YNAB.
At least the risk of fear of thieves will no longer be there.
Hope this was helpful? Feel free to share with us your strategy for saving your money for your different needs.