If the cardholder isn’t careful, using a credit or debit card might spark a buying spree that swiftly spirals out of control. Do you ever arrive to the end of the month and ponder, “Where did all the money go?” It’s far too simple to make purchases we probably wouldn’t make if we had to pull out cash from our wallets first because of the easiness with which we can now pay for goods with plastic.
Multiple studies have shown that consumers will spend more money when making a purchase is less of a hassle for them. Because using a credit card is so convenient, we often don’t give much thought to our purchases — at least not until we get the statement at the end of the month. Credit cards that enable “pay with a wave” functionality are similar in that they simplify the payment process and normalise wasteful spending.
The conventional approach has you divide your cash into various envelopes for various types of purchases.
In the past, people used cash envelopes as a way of financial organisation for their bills and savings. Simply said, the cash envelope technique is keeping separate envelopes for each of your spending categories and then allocating funds from your main source of income to those envelopes. Then, whether you have a bill to pay or need to buy food or a necessity, you can easily manage your finances by pulling cash from the appropriate envelope and using it for the purchase.
Use virtual envelopes for most of your spending categories as an alternative.
In today’s electronic age, a variant of the envelope system called Virtual Envelopes may be employed. This strategy can bring a time-tested technique from the past into the modern era. Based on the tried-and-true envelope method technique, Virtual Envelopes works seamlessly with your existing cash envelopes and budgeting sheets. The only real difference from Cash Envelopes is that instead of keeping cash on hand for certain budget categories, you will deposit it into your bank or credit union and manage it “virtually.” This is the one and only distinction between the two methods. Because of this, we talk about them as “Virtual Envelopes.”
Starting Is Easy and Quick
To get started with Virtual Envelope budgeting, talk to your bank about setting up separate savings accounts for each of your desired spending categories. There shouldn’t be any costs involved in doing these things. If your bank is unable or unwilling to offer you this service at no cost, you may want to investigate other local financial institutions, such as a credit union. Over the past thirty years, I’ve been a member of multiple credit unions and have used virtual enveloping. I’ve also seen this tactic employed by a couple of my coworkers. Therefore, you should not take the bank’s “sorry, we can’t do that” as an acceptable response.
Security, ease of use, and malleability
The key advantage of using Virtual Envelopes is that your money is safe and secure at a bank rather than in envelopes you keep at home. Let’s pretend for a second that you’ve lost your rent money because of theft, a fire, or simple forgetfulness. It was a miserable ordeal trying to get that back!
It’s smart to take stock of your financial status at various points during the year. Use Virtual Envelope by making use of the resources it provides, such as our personal finance book and the accompanying Budgeting Worksheets. Many of the articles on our blog can serve as a starting point for your own investigation. If you need one-on-one guidance, we can provide that, too, with our customised Budgeting Coach. The work you put into it now will pay huge dividends afterwards.
