If you finally want to be able to put money aside I will share with you a little trick I learnt along the way. With life and all the unexpected expenses, everybody, at one time or another has gotten caught at least once with some unforeseen expense that was not calculated in their budget. Sometimes, even the expenses that are expected are hard to handle.
When Christmas arrives, it’s always surprising how fast the bills keep adding up. Even though, Christmas arrives on the same date each year, it should not be a surprise. Just like the snow tires, dentist, birthdays, back to school…
No matter how hard we try to be prepared and keep a little aside for unforeseen expenses and still keep some money for the foreseen ones. It’s very hard to keep the money in the bank so it is there when we need it.
A few years ago, I found a simple, easy and effective way that really works. Envelopes. In fact, it doesn’t even come from me. This is the way that people were doing things when they had no access to credit. They had to effectively manage their finances, they had no other alternatives.
The principle is quite simple.
You must choose which expenses that you want to put money aside for. EX: Dentist, birthdays, Christmas, tires, wedding, travels…
On the front of each envelope indicate the expense it will be used for. You will have 1, 2, 3, or more envelopes, depending on how many categories you have picked.
You have to determine what amount you will need for each expense. EX: You want to save 400$ for your winter tires. You will need it in 4 months (roughly 8 pays) . 400$ divided by 8 = 50$ Each time you receive your pay, you will take 50$ and put it in the envelope marked tires. In 4 months you will have your 400$ and will be very happy to have cash money to buy your winter tires.
The most important envelope of all.
In my opinion the first envelope you should prepare and the most important one is the emergency fund. It can take a while to accumulate, but I sincerely believe that it is essential. With 1 000$ we can face a lot of situations that would have gotten us into trouble before.
It is very important to have the fortitude to use it only for emergencies. If the car breaks down, the washing machine goes on the fritz…. You want a new pair of shoes or go to the restaurant for supper – these are not emergencies ; -)
A few little tricks
- Be sure to put your envelopes in a safe place. If you don’t have a safe. I strongly recommend that you buy one and hide the key.
- Start with only one or two envelopes and add some as you go, once you have gotten use to the routine.
- Use discretion; be careful who you talk to about your envelopes. For certain persons, it might be tempting to help themselves.
- Give yourself some time. It is an effective principle, but it takes time. If you want $ 3 00. in 2 weeks, chances are that it will not happen, but $300. in 5 months, that is more realistic.
- Be realistic when you set your goals.
- Be consistent in your deposits.
The most difficult part is to start and get into the habit of saving, later it becomes comforting to know that you have a system in place that will help you face the unexpected. It literally takes a load of your shoulders.
Just imagine, Christmas arrives and you actually have $500. or even $1 000 in your budget… No worries, you don’t even need to use your credit card.
Certainly, putting money aside each pay is not easy and really takes determination and fortitude…But it so worth it. In a few months you will be so proud of yourself for having done it.
It’s your turn now. Do you have any tricks to put money aside? Do you find it easy to do so?
Dane : -)