I learned something incredibly new and life altering that is going to completely change how I set my monthly budget.
One of my debt payoff strategies includes using the envelope system, where I have a certain amount budgeted for discretionary categories like groceries, holidays, shopping and fun. When I would get paid, I would withdraw one total, divide up the money and place the appropriate amounts in each of my envelopes. That way, the amount left in my account would be sufficiently applied to debt repayment. Luckily there is usually a little left over, so I have been able to apply that to one of my debt accounts. I have been seeing my credit card balance go down by $150 to $200 a month!
Now, obviously that doesn’t mean that I will never buy groceries again. It means that I don’t have a preset amount to spend on groceries. It means that the groceries I do buy will be paid for with money that could go to pay off my debt, so I need to be intentional about what I buy from the grocery store. I need to have a more solid idea of what intend to make with those ingredients so I stick to buying only what I need.
And if I come across a good deal, I can still buy extra of whatever it is. But I will have first weighed the opportunity cost of buying those items in bulk versus paying down my debt just a little bit more.
For some people, knowing that they have money to spend on groceries, or shopping or fun helps them stick to their budget because it may feel less restrictive. They may feel like they are being rewarded a little each month for working so hard to pay off their debt.
For me it seems limiting in terms of how much I am able to pay toward my debt each month. By filling each of those envelopes with their allotments, I am saying that spending the money in those categories will help balance things out and make me feel good. But what makes me feel good is seeing my debt total go down in significant chunks, and that will only happen with significant chunks being applied to the debt.
So this month, my grocery envelope is empty. My shopping envelope is empty, no money set aside for fun.