Saturday, 02 January 2010

• The Mandatory Envelope Method

  
  

  
  A while ago Cara posted about a way to manage money called The Envelope Method. Here, you put the amount of cash you want to spend for a certain period of time inside an envelope, and if the envelope is empty it means you went over your budget—and you have to stop spending!
  
  I was intrigued by the idea, but I didn't think it was quite right or me. I have trouble doing things that aren't "real"—I mean, when your envelope is empty, you're not actually out of cash. I knew I'd just wind up charging additional expenses to my debit card.
  
  I'd almost forgotten about The Envelope Method until I lost my wallet. Suddenly I had no cash, no credit or debit cards, no nothing. My mom visited me in the city to lend me some money until my bank could send me a new card, and for the week or so I remained cardless that was pretty much my envelope. And it was real.
  
  Obviously, having only a set amount of cash had a huge impact on my spending. Could I buy new shoes? No. Treat the boyfriend to a nice dinner? No—unless you mean ramen. Could I even buy an individual soda bottle from a deli without feeling wasteful? No, no, no.
  
  And yet, the world did not end. Even without spending as usual, I was still able to get by with pretty much the same quality of life. I realize this was only a temporary thing, and that not buying new shoes for a week is different from, say, a year—but the experience did make me rethink a lot of my spending habits.
  
  In a way, I think the country as a whole has been put on a mandatory envelope method, which is why our savings rate is at its lowest since 1993. It's all well and good to say "I should start clipping coupons, blah blah blah," but people often don't make changes until they have to.
  
  Have you ever been forced to cut your spending? Was it easier or harder than you thought?
  
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