Could you live off $35 a day? It’s a topical question here. Our family spent a year living off an income that was little more than this so I know I could, but feeding the family and paying our bills on this tiny amount tested our marriage, and drained our resources both financial and psychological. It was one of the most stressful years of my life. But it did teach me to be thrifty.
That year I experimented with the Envelope System. The idea is that on payday, you pay all the bills that are due and then withdraw the rest and stuff it into envelopes or jam jars labelled Food, Family Entertainment, Petrol, Clothing or whatever makes sense to you. Then you put your plastic away and just live off the cash until next payday.
However, I found some issues with managing our spending like this:
- What do you do with the coins? They will rip your envelopes, unless you buy fabric envelopes with zipper closures. You can find these on Etsy.
- I’d get very tempted to ‘borrow’ from other envelopes when one category was drained.
- Cash burns a hole in my pocket! If I had the money on me, I’d always find a way to spend it.
- The money is better off in my bank account, earning interest, not tempting me from my handbag.
- You have to carry a lot of cash around with you, which isn’t always safe. Or,
- You have to keep a lot of cash at home and I’d always worry about being robbed.
If you keep most of the cash at home then you need something like this box, which is a hand-me-down from my father-in-law. The categories on the box didn’t suit our family, so I put my own labels on each section.
Keeping a Budget Book for a few weeks is a good way to get your spending under control, especially if you suddenly find yourself earning less than you’re used to. Suddenly earning more than you’re used to can be a problem too, because if you’re not careful you might just waste the surplus, and a book like this will help you work where that money is actually going.
So after some time on the Envelope System, we switched to debit cards and tried to carry as little cash as possible. But I realised that having some cash on hand made me feel wealthier, and it’s nice to be able to have something for charity collectors, or shout a friend a coffee. So now I use a modified version of the Envelope System.
I only have two spending categories now: Housekeeping and Personal. Even if you’ve merged finances with your partner, I think it’s nice for each person to have some money that is theirs to spend on whatever they like. I always look for wallets and purses with two sections like this one made by Octopurse:
If you think you’d like to give the Envelope System a go, I recommend the SavvyCents wallet. Using a wallet that’s purpose-designed for this system is much better than carrying around a few dog-eared envelopes! It’s designed by Melinda, an entrepeneurial mother from the US. She’s very friendly and sells her wallets through Amazon which will ship to most countries.
I’d love to know if you’ve used the Envelope System, and how it worked for you. Let me know in the Comments.