The Envelopes

My mom was terrific with a budget. Dad always said that they would have never saved any money had it not been for Mom and her way of budgeting and paying bills. If Dad would have been in charge of the finances, he says they would not have been able to pay the bills every month.

Mom's system consisted of envelopes and a notebook. Each envelope was labeled with an expense name or category. She would use the notebook to record the payment transactions of every expense.

Envelopes would be labeled for car insurance, house insurance, health insurance, mortgage, car loan, utilities, phone bill, meat (they would purchase a beef each year), groceries, real estate taxes, car expenses (gasoline, oil, tires, battery, etc.), vacation, Christmas gifts, birthdays, church, emergencies, and miscellaneous. She would divide each expense into 12 months and then when Dad was paid, she would cash the check and distribute the cash into the envelopes. The notebook would have the annual budget for each category, and she would post when each month was paid and how it was paid (either by cash or by check).

Some of the bills were only paid annually, semi-annually, or quarterly. She would put cash in each envelope each month that would keep building toward when the bill would be paid. Many bills could be paid with cash. When she would have to mail a check to pay a bill, she would deposit the money from the envelope into the checking account and then write a check and mail it.

Mom and Dad never made much money, but they were able to accumulate over $100,000 and were able to pay off their mortgage twice.

This system is what she used until I took over paying her bills for her. I took over after Dad died and Mom could no longer see well enough to read. It just devastated her when she could no longer pay the bills anymore. I did not continue her system and that just about killed her, too.

My wife and I have never used the envelope system, but I have used it in my mind for planning with our money. If we would use the envelope system, it probably would help us. Envelopes labeled for retirement and savings would be a great benefit to us. We have never really had a budget plan, so we have probably wasted a fortune that could have been used toward our future.