We Don’t Use Banks

I know that’s unheard of in our plastic-obsessed consumer society, but it’s something I feel strongly about. The more I learn about banks, the less inclined I am to hand over my hard-earned bread. So, we deal in cash – for everything. There are other reasons we deal in cash, of course, but this is a biggie.

So, if we don’t use banks, how do we handle our money? Simple. We use the envelope system. I do all the finances in our house, and this is the only thing I've found that works for me. I keep a set of envelopes inside our fireproof safe and another envelope inside the car’s glove box for gas money. Every time we get paid, I divide up the cash and tuck it inside all the envelopes – food, gas, rent, bills, savings, medicine, pets, etc. Every dollar is accounted for. If I have any left over, I add it to the savings envelope (which is growing quickly with our IRS refund and stimulus money!).

Each person has her/his own envelope, as well, and if they're saving up for something in particular, I'll write what it is in pencil on the bills themselves and put those inside.

When it’s time to spend the cash, I just scoop up the envelopes and take them with me. Bread that’s earmarked for bills is turned into money orders at the grocery store.

So, What Makes the Envelope System So Great?

It’s free. Find a few envelopes, and you’re set. No books to buy, no software to purchase, no “kit” to send away for.

There’s no preparation time. The concept is so simple, there’s no need to fill out workbooks or take an online course. Just grab some envelopes and go.

The money has to be there. If we want something - any of us - we have to have the money allotted for it. If we don't have it, too bad. Have to wait until next paycheck when I'll either find enough to cover it or start putting money aside. And, speaking of not having money for whatnots....

It cuts out the whining. The envelopes offer a ready-made excuse when someone wants something we can’t afford. If the money's not there, it's not there. Simple as that. It’s hard to argue with the obvious.

Small purchases are often forgotten. If the budget doesn't allow for smaller purchases that week (like a soy smoothie or a knick knack at the thrift store), they eventually end up being forgotten about. No one remembers to put aside money for a pack of gum they were wanting last Thursday. So, in the end, we save money.

It’s not a long-term budget. I'm not great at budgeting when our income and our outflow are so closely matched. So many things come up that I haven't planned for, and they throw the budget completely out of whack. With the envelope system, I don’t have to worry about it since I'm only really budgeting for the week. I do take into account things like car maintenance and seasonal clothing purchases, and I put funds aside for those sorts of things.

It’s concrete and visual. When the money was in the bank, it was like this amorphous pool of funds, and I had to figure out how to divide it perfectly so that we wouldn't go over but would still be meeting everyone's needs. It was a challenge for me. The envelope system is so much simpler. And, since it's a very visual system, it solidifies how much we're getting/spending/saving in my head. I can see that we have $100 for food and $140 for the electric bill. Also, being a visual system, it helps our son see where the money is going.

It makes us very aware of our spending. Paying with cash forces us to really think about each purchase, so we end up spending less.

Moving money around has consequences. If it's something important, and we have to borrow money from one envelope to pay another (and this has happened a few times), it makes us really consider where the money is coming from. Literally, I feel as if I'm taking food out of my family's mouths if I have to borrow from the food envelope. Talk about a spending deterrent!

And finally, payday is fun again!