In this new episode of The Casey Lewis Podcast we discuss the envelope system and how it will help you stay on track with your budget. We also talk about the cash pool saving method to planning for future purchases and answer 2 questions from the internet.
The Envelope System:
Stay on track with your spending by using the cash envelope system in conjunction with your monthly budget.
- Get cash out of the bank and allocate it into the appropriate envelopes for each budget category.
- Only buy things using the correct envelopes.
- When the money is gone, stop spending.
The Cash Pool Savings Method:
Use this to plan ahead for major purchases like a Disney vacation, Christmas, or new tires for a car.
- How much will the purchase cost?
- How many months until you need to make the purchase?
- Divide these 2 numbers to find how much you should save each month.
- You’ll have several categories saving at once, like vacation, car replacement, new A/C, etc. Save the monthly amount for each of these into a checking account where you’ll “pool” all of the money together.
- When the time comes to make the purchase, you’ll have the money available in cash without needing to borrow money.
Questions from The Internet:
Kevin: I’m 9 months into owning my own business. Income has been very feast or famine and it’s making things hard to plan for. How can I budget when my income is all over the place?
- Pay yourself a small salary consistently on a set pay schedule.
- When the business does great, pay that small salary. When the business does bad, pay that small salary.
Kristina: We’re working on the last $21,000 of debt that we have left and are hoping it’ll be gone by October. My husband’s car is 10 years old and the air compressor just went so there’s no air conditioning. We’re in the process of getting estimates but the first one we received was for $1600. The car has 260,000 miles on it. Would you get the air fixed?
- Determine the difference in an inconvenience and an emergency. If you have the money to fix the inconvenience, then fix it. If you don’t, then don’t classify it as an emergency.
- The value of this car is low and the repair cost is high. Weigh that out as you make your decision.
“Why can’t you give Elsa a balloon?”