5 Envelopes

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5 Envelopes for Baby-Boomers

The 5 Envelopes is a unique concept for financial freedom for Baby-Boomers.

I came across the 5-Envelope concept through T. Harv Eker in about 2003 when a friend gifted me his book, Secrets of the Millionaire Mind: mastering the inner game of wealth.

Harv suggests one get five envelopes and label them accordingly:

  1. 10% – Passive Income/Investments
  2. 10% – Play  
  3. 10% – Long-Term Savings for Spending Account
  4. 10% – Education Account
  5. 10% – Give Account/Tithe

50% – Necessities Account

Living on a limited, disability income where every dollar is stretched to the max already, there’s no way I could divide up my income into these five envelopes and only live on the fifty percent in the ‘necessities’ account. At different times since I first heard about this concept, I have implemented the five envelopes for ‘unexpected’ income.

Stretched Dollar

(Source – PublicDomainPictures.net)

Harv continues, ‘In addition to opening up a Financial Freedom Bank Account, create a Financial Freedom Jar in your home and deposit money into it every day. It could be $10, $5, $1, a single nickel, or all your loose change. “The amount doesn’t matter; the habit does.”

1. Passive Income/Investments

This money is only to be used for investments and buying or creating passive-income streams… I use this money for expenses related to this online business (business cards, web expenses – domain name, hosting fees) I’m developing.

2. Play

Harv says, one of the biggest secrets to managing money is balance. One can’t be too serious with ‘save, save, save, one needs balance and a little bit of ‘fun.’ Your play account is primarily to nurture yourself – going to a restaurant, renting a boat for the day, staying in a high-class hotel for a night, massage. This must be spent every month. Your play account is designed to strengthen your ‘receiving’ muscle

3. Long-Term Savings for Spending

Put into a separate bank account called Financial Freedom Account – put 10% of every dollar you receive. This could be used to save up for a new vehicle or a down payment toward a mortgage.

4. Education

I’ve used this envelope to purchase books and/or pay for workshops that will advance my life, whether it’s wealth-related, health-related, or spiritual in nature.

5. Give Account/Tithe

I believe in the spiritual concept of tithe which literally means to give ‘ten percent’ to whatever feeds your soul, a spiritual home, or church, or a group that does ‘good works’ that are in alignment with your values.

The balance, fifty percent, is what is left for one to live on.

June 2017 update

I’m so glad I decided to write about this concept. I have used it in the past, but have let it slip by the wayside. As of this moment, I have re-committed to using this principle DAILY. I even labelled a jar that I’ve been putting ‘extra’ coins in at the end of the month with the words Financial Freedom and put in a nickel every day. I have placed it on my computer desk right in front of me where I can be reminded to seed my financial freedom with daily deposits and daily attention.

At the end of June 2017, I opened a second savings account dedicated to my Financial Freedom.

I’ll check back in a few months and let you know how it goes.

Thriving-Baby-Boomers - 5-Envelopes - Money in Jeans Pocket ($50, $100, $500)

Money in Jeans Pocket ($50, $100, $500)

(Source – Pixabay)

April 2018 update

In September 2017 my disability income was increased by $100 per month, so I upped the ante on using the 5-envelopes principle and started putting away this total increase at $20/month in each envelope.

By March 2018 I’ve backed off how much I’m putting into my 5-envelopes to $50 per month and using the ‘extra’ $50 to go to paying down my credit card with my usual monthly credit card payment.

PS – I have been debt-free since July 2021!!

Books on Budgeting I Recommend

  • Five Wealth Secrets 96% of us Don’t Know, by Craig Hill
  • Wealth, Riches and Money: god’s Biblical Principles of Finance, by Craig Hill & Earl Pitts

What method do you use for your Financial Freedom? Leave a comment below.

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