17 – January 17
“A budget is telling your money where to go instead of wondering where it went.”—C.E. Hoover
I grew up in the typical fifties middle class household: Dad worked at the office, brought home the paycheck, mom stayed home and raised the three kids. My childhood was mirrored on television land shows like Father Knows Best, Leave It To Beaver and The Donna Reed Show. Those were the days when, since I both lived in and watched it on TV, I thought everyone’s life was like that. All the girls in the neighborhood were Donna Reed-ettes looking for their Carl Betz.
My mom deposited dad’s paycheck at the bank, paid the regular recurring bills by check, and got cash for the discretionary spending. She had a system of envelopes for the cash: One envelope for clothing, one for school activities, one for entertainment, etc. When we came home from school asking for money for something special like a school sweater, mom would take us to the envelopes. She kept them in her chest of drawers in her bedroom, and would put them on the bed while we sat and looked at what money remained in each one. If there was no money in the corresponding envelope, she would see what money was available in the other envelopes.
Then she would give us choices: We could have the school sweater by taking money out of one of the other envelopes. But that meant trading one thing for another, and whatever envelope we took from would be empty. We could have the sweater, but it meant no new dress or no going out to dinner. We had to choose what we wanted most.
I learned a lot from mom’s envelopes:
- Dad worked to put the money in the envelopes.
- The money in the envelopes was all the money there was.
- If there was no money in the envelopes, we didn’t get to buy anything.
- Having one thing meant not having another.
- I got to choose what I wanted most.
Create some envelopes for your discretionary spending and put cash in it. You will quickly learn what your spending priorities are.
“I am a smart money manager and always make smart financial decisions.”
Reviewing this page, I can see I really dated myself by talking about growing up watching 50s television. Ah, well, too late now. Mentioning Carl Betz is another example of a code – only people who are older and remember the 50s would remember the actor’s name who played Donna Reed’s husband in her TV show. There’s a camaraderie of shared experience that one extends to other members of the same tribe.
There weren’t any credit cards in those days, and most people would get a mortgage for their house and a bank loan for their car, but that was about it. It was all cash all the time after that.
There were limitations to that financial reality, but perhaps easy credit hasn’t been so easy on us. Endless streams of advertising on the television, newspapers, Facebook, and every web site tell us we can have our dream for only $99 down and $49 a month. We’ve got the $99 and we’ll figure out a way to get the $49 later…
You can see the problem. It works as long as everything goes perfectly, but what’s the plan if you get sick, or lose your job, or your kid needs braces, or ? We want to be optimistic, but we also want to guard against possible losses.
I love credit cards – they are wonderful for keeping track of monthly expenses, tax deductible receipts, and for borrowing money when it’s a judiciously deliberated decision. Many a small entrepreneur got their start through a credit card loan.
But sometimes you can just save the money and buy the thing you want after you’ve got the money. Don’t forget that’s an option!