And, for a change: back to Funny about Money’s long-defunct theme: personal finance. You’ll recall, those of you who are Dave Ramsey fans, that one strategy for keeping yourself on budget is called the “envelope method.” In that scheme, you cash out a month’s worth of dollars and fill a separate envelope with the amount designated for each budget item. So, $200 for groceries in one envelope; $100 for gasoline in another, $30 for dog food…and so on, ad ditzy nauseam.
Well, some of us have neither the patience for that kind of ditz nor the stomach for putting an entire month’s worth of funding at risk of being heisted by some enterprising burglar or dropped unnoticed on the pavement. I use credit cards and electronic payment to minimize loss from theft and incompetence.
Conveniently, though, if you happen to bank at a credit union, you have an easy route to create electronic “envelopes.” My CU allows members to add any number of savings accounts. So right now, for example, I have one to collect the constant dustfall of tiny checks from Medicare and the Medigap insuror — whenever a couple hundred bucks accrues, I fork it over to the Mayo. And one for emergency savings. And one to hold enough to cover income tax, accounting bills, property tax, homeowner’s insurance, Medigap insurance, and car insurance, all set aside at the beginning of my personal “fiscal” year, when I have to take an RMD from my 401(k).
This allows you to earmark and set aside specific amounts for specific purposes, placing them where they’re unlikely to get diddled away in day-to-day spending.
Now we have this question: in the absence of a desirable Visa credit card, how — really — am I going to continue to shop at Costco? I haven’t cut up the credit card or closed the account — it’s never a good idea to close a credit account in good standing — but because I don’t do business with outfits that treat me like sh!t, I will never use the card again.
I do have a debit card. But for a variety of reasons, I prefer not to use it. For one thing, there’s not a chance on God’s Green Earth I’m gonna put the thing in a gas station pump — certainly not at the Costco where I shop, which is flanked to the south and the west by dangerous slums and a park that has been taken over by bums. But I do prefer to buy Costco gas, because it’s the cheapest deal in the city. And there’s always an attendant — invariably a large, imposing male — standing around that Costco gas station, so I don’t feel so much at risk as I do at the rip-off QTs within reasonable driving distance of the ‘hood.
So. Here’s my plan:
Create a new savings account to hold money budgeted to spend at Costco. That would be an entire year’s worth of money budgeted for Costco ventures: shopping and gasoline, combined. So let’s say on average I spend, maybe…what? $340 on food, clothing, household goods, dog treats, personal products, impulse buys, and gasoline. When the 2019 RMD comes in — which will be about in September — I set aside $4,080 (= $340 x 12 months) in this account.
Then I trot in to Costco and buy a cash card for the amount I imagine I’ll spend at Costco, both inside the store and at the pumps, over a month. That would be around $340. That is what I carry to the store to make purchases. Each month I pay for it out of the Costco Envelope savings account.
I spend no more than that in any given month. Run out of money: quit shopping at Costco. How hard is that?
If money is left over at the end of the month, the next month’s cash card is loaded with accordingly fewer dollars. So, say, in March I spend $250, leaving $90 unspent; the April card has $340 − $90 on it: $250. Thus whenever I spend less than $340 over a month, the overage stays in the bank account.
So at any given time, the Costco cash card never has more than a month’s budget on it. If I don’t spend the entire budgeted amount, then whatever is not diddled away stays in that savings account.
I figure at the end of the year, anything that’s left can be transferred to the Emergency Savings account, and the Costco Budget account can start over from zero at the start of the new “fiscal year.”
When you know there’s an upper limit on what you can spend, you find yourself feeling a lot more cautious about your spending.
Therein lies the threat of Costco, the Mother of All Impulse Buy Hells. When the budget is open-ended — in your mind you think you have plenty to live on (which you do, if you don’t run amok) — you go “oh, it’s only $20…no problem, I can afford that.” And you could, if you just didn’t keep doing it over and over…
But if you’re thinking, “Helles Belles, I’ve only got x number of dollars to spend today,” then you realize the $20 doo-dad is not a life-or-death purchase. The beauty of the Envelope Method is that it sets a limit on what you’re willing to diddle away.
So, what started out as an annoyance — yet another stupid faceless bureaucratic hassle — may work out to my advantage. Not so much to Costco’s advantage, but certainly to mine: by getting the Costco spending under control, this new, enforced budgeting strategy will let me stay within the annual RMD for another year or two, despite soaring health insurance and property tax rates.
After that, it’s anyone’s guess. I may have to think more seriously about moving out of the country, to some venue where I can stay in the middle class on the retirement income. But we’ll cross that bridge when we come to it…