I was honored to be interviewed for a piece recently on Marcus.com on creative budgeting. Here’s a snippet:
Crystal Paine and her husband, Jesse, were on a tight budget when they got married. They were committed to living debt free, even though Jesse was in law school. To make sure they never spent beyond their modest means, they began using the "cash envelopes" budgeting system.
Here's how it works:
At the start of every month, after setting aside funds for rent and utilities, Jesse would withdraw all of their spending money for the month. At home, they would use envelopes to sort the pile of cash into categories: groceries, eating out, gas, gifts and so on. Once an envelope was empty, they resolved to not spend any more on that category for the rest of the month. They also reserved a special envelope of cash for themselves to spend as they wished.
Paine credits the envelope system for not only helping them survive the lean years but also teaching them to communicate and cooperate on a budget.
"Working together to spend the money in those shared envelopes — well, it helped us learn to talk about priorities," she said.
It may seem counterintuitive, but Paine considers the limits imposed by the envelope system liberating.
"We don't have to worry, 'If we spend this money on eating out, are we going to be able to buy groceries next week?'" she said. "Because it's all divvied up at the beginning of the month."
