I Tried An Old School Budgeting Hack. Here’s What Happened.
As someone who is a little *ahem* fiscally challenged, I’m always on the lookout for that magic system that makes managing and saving money easy. I’ve experimented with everything from spreadsheet budgets to saving apps but alas, none of them have turned me into the next Warren Buffet overnight.
So, when I came across rave reviews about the envelope budget system, I was more than a little sceptical. This method has been around for decades — in fact, there’s a good chance it’s what your grandparents used to manage their money. But despite being more old school than a tamagotchi in a bumbag, it’s somehow maintained relevance over the years — the term ‘envelope budget’ currently yields more than 60,000,000 results on Google. So, what’s the deal?
How the envelope budget works
Just like any other budget, you work out how much you’ve got leftover once you’ve paid your rent and bills and transferred any savings. But instead of letting it sit in your account, you withdraw all of your spending money from an ATM or bank. You then prance around flaunting your fistfuls of cash like you’re in a music video.
Just kidding! What you actually do is grab a packet of envelopes (or let’s face it — buy some, because it’s 2017 and you don’t just have them lying around) and mark each one with a category. Some common categories are groceries, petrol/transport, personal grooming and eating/going out. You then allocate your cash to each category. Once you’ve spent the designated amount of cash in each category, that’s it — it’s donezo.
Does it actually work?
Perhaps the continued popularity of the envelope budget can be explained by how stupidly simple it is. It doesn’t require any complicated algorithms or multiple bank accounts — just good, old fashioned discipline. But I wondered whether such an old fashioned system could actually work in the digital age? I decided to road test it for a week to find out.
I encountered my first speed bump before I even reached the ATM. One of my main expenses is groceries and that’s something I share with my partner through a joint bank account. It was going to be way too difficult to manage it through cash, so that was off the table. The same goes for transport — I don’t drive and I have my Opal card on an automatic top-up, so I was already sorted with $40 for the week. I decided to pop $20 in the transport envelope anyway, just in case I needed to catch a taxi. I also allocated $60 for eating out/coffees and $40 in my ‘fun’ stash (ie. my weekly dance class and going out with friends)
Then, there was the predicament of getting cash out on a Sunday. As the bank was closed, I had to withdraw money from the ATM. It seemed simple enough, until I realised I needed to break my $120 into smaller increments — and the machine doesn’t let you tell it what notes you want. This meant I had to use the ATM twice in a row, which I felt made me look slightly shady. Lesson learned: if you want to do an envelope budget, get your money out from a human at the bank.
My next point is admittedly petty, but it did make the envelope system more of a hassle. I like to use a phone wallet to keep my phone and bank and membership cards all in one place. It’s something I’ve done for the better part of a decade and it works for me — especially as a lot of the time, I’ll go down to the shops or for a walk without my handbag. However, my phone wallet doesn’t have a lot of space for cash (which is probably one of the reasons I never have any) and it definitely can’t accommodate multiple envelopes. This meant I had to make a real effort to remember to pack my wallet in my handbag when leaving the house.
That said, there were things I liked about the envelope budget. It made me hyper aware of how often I spend on impulse — like how on Monday, I burnt through half my entire ‘eating out budget’ because it was a nice day and I bought my partner and I fish and chips. I think there’s definitely something to be said about how it makes you way more mindful of your spending habits and forces you to stop once you’ve hit your allocated budget.
However, for someone like me (who has a lot of automatic expenses linked to my bank accounts and relies on a round-up app to save money) the envelope budget is more a hindrance than a help. It also makes it really difficult to use services like Uber that require a bank account — which can be a good thing or bad thing depending on how you look at it!
If you’re someone who likes to keep things simple and pay for things in cash, the envelope budget may absolutely work for you. But personally, I’ll be continuing my search for my magic money system!
Emma Norris is a Sydney-based magazine journalist and freelance writer. When she’s not playing with words, she’s either doing pushups or stuffing her face with pizza. You can follow her on Instagram @emmajnorris92