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The tale of the envelope, by 720 Credit Score

By Philip Tirone

With Christmas just a couple of weeks away, I wanted to share this tip for protecting your wallet when you hit the malls.

I call it the “envelope system.” It works like this:

1. First, create a holiday spending budget. I know a lot of parents who want to create lasting memories for their children, so they go overboard, buying tons of presents for their kids.

But think back to your own childhood. How many gifts are etched into your memory?

Probably not many. Your children will remember the time they spend with you more than the gifts they will receive.

And if you are racking up your credit card bills, you probably feel stress and anxiety, which will detract from the time you spend with your children.

So create a reasonable budget, determining how much you can afford to spend on each person on your list.

2. Leave the credit cards and debit cards at home.

I’m totally serious about this. If you don’t take credit cards or debit cards, you cannot overspend. It’s that simple.

If you do take credit cards and debit cards, you can. So just leave them at home.

The more radical this idea sounds to you, the more important it is that you implement it.

Taking credit cards with you is just too tempting, even to the most disciplined shopper. The allure of “buy now, pay later” will allow you to make impulse purchases.

If you take only cash, on the other hand, you will limit your spending to the cash in hand. Those impulse purchases will be impossible.

3. Create “wallets.”

This is where my “envelope system” comes into play …

Before jumping in your car and hitting the local mall, pull out some plain white envelopes and write the name of each person you are going to purchase a present for on individual envelopes. (If you have eight people to buy presents for, you should have eight envelopes.)

Within each envelope, place the appropriate amount of cash you have budgeted for this person—no more and no less.

Each of these envelopes represents the wallet you have for each person on your list.

You might want to bring a little extra money for lunch, but be sure to leave your credit and debit cards at home.

When you purchase a present, use the money from the appropriate “wallet.”

This method will create a psychological barrier to impulse shopping. If you are tempted to splurge on a gift, you will be dissuaded when you consider whose wallet you will withdraw money from in order to cover the impulse shopping.

What do you think? Does this help you avoid the “holiday credit card hangover”? Leave a comment below and let me know.

Cheers!

Philip Tirone

P.S. You can use this tip for other events: birthdays, anniversaries, and other events that call you to the mall!

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