Every dream has a financial component, but careless spending can steal those dreams. Fortunately, gaining control of
your money can be as simple as using a few common envelops. By making the choice to say no to unconscious spending, you
can say yes to your dreams.
I used to take $100 out of the automatic-teller machine and a few days later wonder where it had gone. This unconscious
spending left me frustrated and signaled that I needed a better understanding of where my money was going.
Discretionary spending, money not committed to essential bills and basic necessities, represents a significant part of
most people's budgets and is the most likely source of unconscious spending. Some of the budget items that fall into
this category are restaurant meals, entertainment, many grocery items and spending money - money that you can spend as
Too often spontaneous wants are given priority over our dreams. What dream is unconscious spending stealing from you?
For me, it was the dream of taking a year off from work to travel around the world. Once I realized the impact of my
spending habits, I found the motivation to change.
Becoming conscious of your spending is a matter of changing the way you handle your money. Like changing any habit, it
can take 30 to 45 days. Give it a try for two months and see the difference.
In the classic personal finance book Your Money or Your Life, authors Joe Dominguez and Vicki Robin insist you write
down every cent you spend. Others recommend using a credit card or debit card for every purchase so you can review a
record of those purchases at the end of the month.
There are problems with both of these approaches. Writing down every item you buy is time-consuming and hard to do, and
using a credit card can lead to over-spending. Most people spend 20 percent to 30 percent more when paying with a
credit card instead of cash. Plus, both of these methods are reactive, not proactive.
The cash-envelope system is an easy and proactive way to eliminate unconscious spending. This means putting a budgeted
amount of money, in cash, in an envelope for a specific purpose.
In our household, we have envelopes for groceries, restaurants, entertainment, gasoline, miscellaneous items and
spending money. Be careful not to be overly generous in your budget with these items. Every dollar you spend here is
one less you have to pay off debt or for your dreams.
For example, if you get paid twice each month and have budgeted $400 for groceries, you could place $200 from each
paycheck into the grocery envelope. When shopping, you would take that envelope and spend no more than the money in
The same is true for your other envelopes. Out of each paycheck, get the cash you budgeted for an envelope and then
spend only the cash in it. When an envelope is empty, you are done spending until your budget allows you to refill
Cash envelopes can help you create a new relationship with your money and eliminate unconscious spending so you can pay
off debt and save for those dreams. The choice is yours.
Durango resident and personal finance coach Matt Kelly
owns Momentum: Personal Finance Coaching.