With the cost of living rising and a future of economic uncertainty, many people are searching for smarter ways to manage their money and hopefully save a little at the end of the month.
In Spain, one ‘old-school’ savings method has been making waves in recent weeks, according to El Español. The technique is known as the “envelope method” and has been passed down from Spanish grandmothers.
How does it work?
This traditional approach involves turning away from digital payments in favour of cash. When you receive your monthly income, you have to set a specific budget for each spending category. From groceries, rent, and utility bills to transport, entertainment, and even unexpected expenses. You can add as many categories as you want, depending on your lifestyle and monthly expenses.
Then, for each category, you prepare a physical envelope with the assigned amount in cash. Once that envelope is empty, you’re done spending in that category for the month.
And how do you save money? For example, if one day you have a budget of €50 for food and go to the supermarket and spend just €45, you put the remaining €5 back in the envelope instead of spending it elsewhere. At the end of the month, you see what’s left in each envelope, gather the money and set it aside — that’s your savings.
It’s all about discipline
The system is simple and is based primarily on discipline. It’s about resisting the temptation to reallocate leftover cash or dip into other envelopes unless absolutely necessary.
This method is also used by José Rodríguez Cuadrado, who is a financial expert and author of the book Si No Llegas a Fin de Mes Es Porque No Quieres (If You Can’t Make It to the End of the Month, It’s Because You Don’t Want To).
The “envelope method” encourages financial awareness and makes you see (literally) every euro you spend. Using just cash and putting it in the envelopes limits impulsive or emotional spending.
But why is it working again?
Many years ago, the Spanish grandmothers used pens and a notebook to track every expense. That’s not the case today, when you can keep this principle by using budgeting apps in order to simplify the process.
The envelope technique is about saving money, but also about changing bad habits. You are somehow ‘forced’ to have more careful consumer behaviour and it’s easier to get a clearer picture of where your money actually goes.
In times of financial stress and uncertainty, sometimes the smartest solutions are the simplest. Old Spanish tricks might be the ‘secret’ to modern-day financial peace of mind.
