Money, envelopes and family

not your salary that makes you rich

Our attitude and management of money is actually much more important to work out than how much we actually have!

I have learnt the hard way in my life that old saying “look after the pennies and the pounds will look after themselves.”…. an English saying that really reminds us to look after the small money we have, to be diligent with it, and the bigger money will take care of itself.

So much over the years has been written about money, so I do not think I can add anything new to the subject.  Except my own experience.  I have come to realise in the last 2 years that it is not that I am not good with money and poor at maths, it is that I have not been diligent to learn how to manage the very little I have; to watch every penny.  Over the past two years I have been learning a new lesson – track every dollar no matter how small.  Make a plan for each dollar, and it’s amazing how I manage to pay the bills!  I have applied this personally, and in our businesses.  I drive my staff crazy splitting down every invoice into minute detail to ensure that our bills are covered, suppliers are paid, and if there is as little as $10 left over, EXACTLY where this goes.  E.g. $1 to marketing, $5 to debt payments or whatever.

In the last 2 years I have seen this intentionality transform our business, and our staff.  It’s essentially called the “envelope system”.  Write down your income each month or week, then develop a budget that matches that income.  Critical word = “matches”!! Then before you do anything… take your income and put aside into the various envelopes marked with the spending allocation you have on your budget.  So into one envelop goes “rent”, one envelope goes “groceries” and one could be “transport”.  Now the trick is – and this is obvious but hey, I didn’t say this is rock science – only spend the money in a certain envelope on its designated budget area!!! Imagine?! The impact of this kind of self-discipline is massive.

In Zim recently when I did some more detailed training on the envelope system, they complained that often it is the extended family, or whoever who appears on pay day or sometime in the month asking for money for some emergency that actually drains money.  I suggested that if you have an envelope for “emergencies” or “Extended Family” and when they ask you can honestly say, you only have x amount – rather than giving away your rent!  As the months go by you will learn to manage these envelopes. And some months you will walk, because you didn’t budget transport well, or eat more simply because you overspent the groceries envelope.  In a place like Zimbabwe, we have cash.  We don’t use cards.  And I think we are tremendously lucky.  We can obviously see and manage the notes in our pocket.  As cards become more popular, I hope we have learnt the self-discipline to keep to a budget; to manage our envelopes.  Because when you can’t see it, I think it is very difficult to track it, or have the self-discipline not to spend it.

So, if you are married please remember your income, budget and your envelope system needs to be worked out together! Seems obvious, but actually research in places like Zim show us that overwhelmingly most couples are not honest with each other about money, about their income and especially about how they spend it.

If you are running a business….work out very carefully how you split down the invoices you send out, and where the money goes when it comes in.  Do not be afraid of setting aside $1 here and $2 there, so that you can build up reserves or pay off debts.  If you can get the system going, I promise you it will have a huge impact when your business grows.  If you want more info on small business in Zim, head to our INDIGO website.

If you are single… just because less people might be watching your every move, or coming to empty your pockets, does not mean that you should not be diligent with money.  If you are shrewd with your cash, there are amazing opportunities in which it can grow.

So, whether you are married, single, an employee or an employer, the envelope system can make a tremendous difference to your cash management and future prosperity.  As a wise man once said: “it is not your salary that makes you rich.  It’s your spending habits.”

to be content with little is difficult