And the envelopes please…
Healthy finances - October 2005
Sunday, September 25, 2005
When we were dating, I put my all my bills and my checkbook in a cigar box on my kitchen counter. Once a month, I paid them. As Michael waited for me to get ready for a date one night, the cigar box must have caught his eye and by the time I was ready he was seriously fretting over my system. Back then, I saw his actions as a first sign of true love. Once we were married—and he took my cigar box and the bills—I saw it in an entirely different way.
We were about 10 years into our careers and, as a result, were bringing home decent money. I had lived on my own for a long time and I was used to doing what I pleased with the money I earned. I rarely said "no" to myself.
We had both come into the marriage confident we knew how to manage our money. But could we manage money together?
My dear husband was born with a computer chip in his brain and Quicken software at his fingertips—so our bills were his domain. No conversation. It just happened. Then one day, as he was paying bills, I was talking about a new lamp that I intended to buy for our apartment. I heard him say, "No, we don’t have enough money for the lamp." What?
This lamp, even back in 1987, was pretty cheap—it cost less than $30. I tried again, explaining that it was really affordable. He still shook his head.
It was at that point the fight began in earnest. I patiently explained to him that I worked, I made money and I was going to spend it the way I saw fit to spend it. Had he seen my pay stub lately? And, when did the "permission" step get inserted into my purchasing power?
He dragged out the Quicken printouts to show me how much money we were spending on dining out and other discretionary items. It was one of those moments in a marriage that makes you feel like you’ve been sucker punched.
Neither of us was about to give in, so I dug deep into my memory and conjured up a financial plan my parents had perfected. I grabbed 10 plain white envelopes. I labeled them with each category of the budget he had in his computer printout, plus one more: lamp.
Each month, we put enough cash in each envelope to cover that bill. Then we put aside some toward entertainment, some for clothing and finally some toward the "lamp." Once the cash was gone, it was gone. The rest of our paychecks went to 401(k) retirement contributions and other savings.
Those little envelopes had us living like a king and queen. We felt like we had more freedom because when the money was not in the envelope, we did not have to guess or fret—we were simply done until the next month. No more arguments. We found ourselves magically on equal footing with the outflow of that cash. The struggle abated as quickly as it started.
Since we were making changes, we decided to do one more thing to help us save. We employed one of my favorite "out of sight, out of mind" savings technique. I had my bank automatically whisk $250 out of my paycheck and into our savings account each month. That $250 silently accumulated. We learned to live without it after a time. The real beauty of this technique is that it was there when we needed to make a purchase that cost more than the cash we had in our envelopes.
Now, about that lamp. You know, I never got it. No, not because I couldn’t. But because once I had enough saved in the envelope, I decided that I wanted something else entirely. How about that? Setting a goal and saving toward it may mean you find out what you really wanted wasn’t the impulse purchase after all.
I teach our kids to keep a list of the things they want. We started that young when I was trying to get out of a store and all I heard was "Mommy, please!" Somehow, just writing the item on a list made them feel heard. They would keep the list and when it was time for a birthday, holiday or a special treat, they had a ready-made list of things they wanted. And, sometimes, they found they had a list of things they didn’t want. The girls were always amazed at how many "lame-o" things got on that list in the first place.
I learned a lot in those early years of marriage about how much of a power struggle there can be over money. I also learned that the best solutions are sometimes the simplest. Grab some envelopes when you get in trouble. Use only cash for a time until you begin to feel the freedom we felt of knowing the beginning and end to the money by simply looking in the envelope. And set up automatic savings deductions and forget about them. Let the money sit and grow until you really need it.
One last thought. Your children are always watching. The envelope approach was the brainchild of my Depression-era parents. It was their way of managing money and budgeting when I was a kid. When I hit a money crisis, I reverted to my parents’ example and used their model to solve my own adult money problem.
Thanks, Mom. Thanks, Dad.
Susan Beacham is the founder and CEO of Money Savvy Generation, a financial education company that provides innovative products and services to help parents and educators teach children the skills of basic personal finance, www.MoneySavvyGeneration.com. E-mail her at Susan@MSGen.com.