On the Road to Financial Peace, Vol. 4

The most critical aspect of my family's commitment to spending our money wisely is actually seeing the money. Holding the cold, hard cash.

We are employing an "envelope system" where basically all the money that we spend that isn't a regular, monthly bill, we take out cash for and put it into well-labeled envelopes. We had tried to "do a budget" a few years ago, but it ended up just being a record of what we spent, with essentially no attempt to curtail the needless spending. But now we actually assign every penny of our income to various categories On Paper, On Purpose (Dave Ramsey's phrase) and all of the money that isn't automatically going towards essential monthly bills is actually, physically brought into our house. We can see it.

It sounds so silly, but to actually see a significant amount of money has an interesting effect. First of all, it somewhat validates all of the hard work. Instead of seeing a piece of paper that says "VOID" on it, we get to see at least a portion of what we earn. Second, knowing that we have assigned a certain dollar amount to each envelope, it makes us think really hard about whether or not we want to empty that envelope. The envelope that forces the most restraint (at least for me) is our "Entertainment" envelope. (For the record, even though it seems counter intuitive to plan to waste money, it's something that everyone does, so allowing yourself to do so in a very controlled manner is one area of "slack" that is critical to any good budget.) So I look at the money in the envelope, and I am extremely hesitant to spend it. Mostly because I know if I indulge on something like renting a movie or buying beer or something, that means I will have that much less to spend from it later on...when I really need beer.

Of course that's silly, but that's the gist of my thought process when I actually see the paper money. I had none of this hesitation when we put everything on a check card. I just spent, and dealt with the receipts later.

The same goes for the "Clothes" envelopes. Instead of just randomly thinking "I need a new {shoes, hat, jeans, whatever}", I look at the money that's going into the envelope and I realize that if I buy this $30 pair of jeans, I won't be able to buy any other clothes for like 3 months. So, back when clothes just went on a credit card, I just didn't think twice. Now, I think about eight times before I realize that there are really no clothes that I need right now that I don't already have. And if I'm gonna buy some new running shoes eventually, I'm going to purposely save up for them, thus eliminating all guilt associated with this otherwise entirely selfish purchase.

For anyone reading this that was brought up with traditional, sensible values regarding spending, I realize that all of what I'm saying is totally no-brainer. But I'm sharing my thoughts on our fiscal belt-tightening in order to make a little sense of this process in my own head, and maybe motivate others who have had similar irresponsible spending habits in the past.

So, if you want to spend less at the grocery store, the movie store, the liquor store, the department store, or pretty much anywhere else, I cannot urge you enough to take a look at your money. I am absolutely certain you'll see it in a different light.

In Vol. 5, I'll talk about how Dave Ramsey's advice on giving to the church and charities has led to some embarrassing realizations.