Basically, for every week of the year, you add the corresponding dollar amount to a jar or other savings receptacle. So, for the first week, you put in $1. The next week, $2. And so on and so forth, until week 52 when you put in $52 and find yourself with the grand total of $1378. That's pretty good...almost $1400 in cash saved effortlessly (maybe?) throughout the year.
I thought about accepting the challenge, almost Pinned it around Christmastime. And then I thought about Christmastime itself. In the month of December, which is one of the most expensive times of year for us, that's an extra $202 going into the jar. Riiiiiiiight. Not around here. That $202 (and then some) would be gleefully handed over for cookie ingredients, craft items, ornaments, wrapping paper, cute gloves, and other holiday necessities.
In fact, starting in about February, I feel like I'd have a new use for that cash just about every week. It wouldn't be long before I'd give up and even spend what little bit I had managed to stash away. I just know myself like that.
But in all seriousness, it seems like almost everyone I know is kind of strapped for cash right now, for one reason or another. It may be unexpected medical costs associated with our new insurance that just went into effect, or the leftover impacts of Christmas, or being a college student who is suddenly and tragically responsible for higher rent, whatever. My friends and family and I shake our heads as we talk about the costs of groceries and gas and ways that we are trying to live more economically. Just don't tell my mom you're being frugal (or trendy, fashionable, or environmentally-conscious, for that matter) via consignment shopping unless you're prepared for a bedbug lecture. And trust me, you aren't prepared. There is no preparation for a lecture from Nana.
So, since today was pay day for me and my financial goal for this month was to get back on track with our budget, I thought I'd share a little of what works for my family.
Disclaimer: I'm no financial guru. I do not live a debt-free life, and I envy those who make such drastic changes and are able to pay cash for everything and have no credit card payments or mortgages or car notes. I just don't think that approach is for everyone and I know it would never work for me. I have a very bad habit of being unintentional with my spending, and we all know that is not going to fly around here this year!
The major thing about our budget system is that we don't cut out many "extravagant" or "extra" things. We just try to plan for them instead. I will never stick with a budget that won't let me buy scarves or go to the movies just to eat popcorn or continue to hide my natural blondness beneath this beautiful red dye. But, rather than swiping my debit card a gazillion times a month and then being shocked as the money drizzles away, I start the month with a list of our bills, other expenses, and fun things we have planned. Then, I figure out how much each of those things will cost and plan accordingly.
The first step, obviously, is the bills. Today, I made a list of all the bills we will have to pay in February and how much each costs. I have also added a "bill" that is just a transfer from checking to savings. You know, the whole "pay yourself first" thing that is so stinking hard to do. That's pretty much all this step entails, but it is important because it informs step two. And it keeps us out of jail, bankruptcy, foreclosure...all those nasty things that happen if you skip step 1.
In step two, I make a list of other expenses, those we will pay for with cash. The goal is that the bank account is only used for bills throughout the month. If we don't have cash for it, we don't buy it. These expenses are gas, groceries, and dining out. Once I have those figures, I also add entertainment and extras to the list, adjusting up or down if needed. When the cash for each of these is gone, it's gone, so I budget a little high for gas and groceries.
Each of these "other expenses" gets an envelope. The cash goes in and the transactions are recorded right there on the envelope, so we can see where our money went. Intentionally.
(This month we have extras and rewards instead of entertainment because
we are still bribing ourselves into working out and most of our extras are entertaining.)
Whatever is leftover cannot be transferred to another category. Some people put the leftover aside for vacation or a splurge, but for us it will go into the home improvement fund.
For February, this system isn't making a staggering difference for us, mostly because we have quite a few extras coming up (family photos, a weekend in Cincinnati, a fundraiser dinner) and we had car insurance due this month. And we bought a treadmill. But in a normal month, it easily saves us a thousand dollars or more!
I didn't come up with this idea all on my own, but I made it fit our situation and can tell you from experience that it works, especially if you're like me and you like to shop. If you'd like to hear what the guru himself has to say about the Cash Envelope System, you can read it here.
Next up: I tackle signing us up for online bill pay! (So long overdue, I know.)
What do you think? Could budgeting like this work for you? How could you improve your financial situation? And, more importantly, how could that improvement help you live more intentionally?