Werner C. Duever

Financial Security Advisor
Investment Representative
Freedom 55 Financial

The cash advantage

saver or spender

My wife and I save for a lot of things - small and large. We find that once we put away some of our earnings, we usually put away too much and have money left over for the next saving project.

In 2008 we discovered the Dave Ramsey method of saving by putting cash in envelopes. Dave created the envelope program as part of his Financial Peace University. He called it the Dave Ramsey Envelope System.

At first, we were sceptical that this could really help us financially. Even so, we started to use the envelope system. For many years we would put away a portion of our income for things we liked to purchase. It was good to have the money to pay for things we had on our wish list. We would even set aside some money for vacations. Although a lot of times we went over our spending limit on our vacations, we were still able to pay off the trip a lot quicker than if we did not save.

Today we have envelopes for smaller items and events such as a new grass trimmer and dance lessons. For our bigger plans like car purchases and trips we use our TFSAs. Unlike saving cash, putting money in a TFSA in a good mutual or segregated fund can grow your savings – so if you put away $2,000 over time for a trip this could grow to $3,000 and give you a $1,000 savings advantage!

Recently my wife put money in an envelope for two pairs of golf shoes. In both cases she saved more than she needed because she found deals on practically new shoes on Kijiji. With her remaining money she added it to another envelope. Are you starting to realize the power of this saving method?

After determining the rough amount of taxes, we had to set aside this year, and because we thought it would be sizeable, we put it away in our TFSAs. Because it was a short-term savings, we kept the money in cash in our TFSA. After our accountant completed our tax returns, we found out that the amount of tax we owed was a lot less. One of us even got a small refund. Some of the free money was used to pay down debt and the rest put towards a fun project.

I encourage you to give this envelope method a try. Start with a small saving project. If this works for you as well, I would love to hear about your success.