Remember the enveloping system? As I wrote in that article, "By putting all your money, broken down by specific categories, into different envelopes at the beginning of the month, you can easily account for your budget and make sure you don’t overspend."

I tried creating categories such as “Work,” “Car,” “Going Out,” etc., and I put money at the beginning of each month into each category's envelope. I eventually failed, but I also realized I never needed the enveloping system because I'm not an overspender. The enveloping system is designed to help people who always spend too much money and need to restrain themselves. For me, that was never an issue, but for many others, it is.

The Simple Dollar wrote an article about how an all-cash lifestyle can help you beat the habit of spending too much. In it, he mentions that a cash-based system is like a set of training wheels--it is useful to help you curb your desire to use a credit card, but you won't be able to use it forever. It becomes too difficult to maintain. Using cash only is a small step that you can use to rehabilitate yourself from spending too much, but you probably will need to use credit cards again in the future, just as a matter of necessity.

Enveloping is a great tool for you if you have three qualities:

1. You consistently overspend - If you always spend too much, an enveloping system can help you curb your spending by making you limit yourself to a specific amount each month.

2. You can force yourself to not cheat - You can't cheat even a little bit, or else enveloping won't help you---you'll still overspend and be in the habit of overspending. You have to be willing to force yourself to beat the habit of overspending.

3. You are willing to take notes on what you are spending - Taking notes and knowing exactly where your money goes is important because it will help you detect where your mistakes are made. If you take notes, you will begin to see patterns that you can correct to help solve your problem.

If you see these three qualities in yourself, consider enveloping as a way to curb your overspending habit. But when you do return to using credit cards, be sure to stay within your means. If you have some specific purchases you need to make, you might also want to check on your other options for obtaining financing or consolidating debt. If you have good credit and a healthy financial situation, you may be eligible for a person-to-person loan on Lending Club with a lower interest rate than you’re getting with your credit card.

Staying physically healthy can help your financial health as well. The reduced healthcare costs, less time away from work, and more available time to pursue your financial options are all contributing factors to this relationship. However, staying healthy, particularly at this time of year, can be a challenge.

A recent article provides 6 tips to staying healthy this winter. Here’s a summary:

➢ Get a flu shot
➢ Get at least 7 hours of sleep each night
➢ Walk at least 45 minutes a day, five times a week
➢ Eat the probiotic Lactobacillus reuteri, found in Stonyfield Farms yogurt
➢ Wash your hands often, or use a hand sanitizer frequently

The last tip seems counterintuitive: “The more relationships you tap into (friends, family), the less susceptible you are to catching a cold, researchers at Carnegie Mellon University in Pittsburgh say.”

So it would seem that increased social interaction is beneficial for your physical well being. In a similar way, increased social network interaction is beneficial for your financial well being. By leveraging relationships in social networks, borrowers and lenders are able to find mutually beneficial terms for their person to person loans on Lending Club. That is one of the founding principles of Lending Club that has led to its success.

Following these tips won’t necessarily make you immune to illness, but they are proactive steps that you can take to help ensure your physical health. As we often advocate here on the Lending Club blog, taking action is often the only effective way to incite change. As such, we encourage you to be proactive in all aspects of your life that you’d like to improve, particularly your financial health.

We are pleased that we have recently earned the Better Business Bureau’s designation as a Reliable Online Business, certifying that Lending Club meets the BBB’s high standards for ethical online business practices.

We are committed to providing a safe and transparent platform where you can conduct business as borrowers and lenders. As a proud Reliable Business, Lending Club abides by the BBB Code of Online Business Practices and is dedicated to the principles of sound online advertising and selling practices that are exemplified by participants in this distinguished program. These principles include a strong commitment to truthful and accurate communications, full disclosure about Lending Club transactions, stringent privacy and security practices to safeguard personally identifiable information, and excellent customer service.

For more information, we encourage you to read about these principles in greater detail on the BBB website.

Better Business. Together.

In December, 78-year-old Paul Navone donated $1 million to Cumberland County College in New Jersey. He still has millions left. Navone has been a factory worker most of his life and never earned more than $11 per hour. His financial discipline has been praised in blogs and on the news. JD Roth from Get Rich Slowly calls Navone a "real personal finance hero." What is his secret?

Navone embodies the tips that I wrote about in the seven steps to wealth from The Millionaire Next Door - The Surprising Secrets of America's Wealthy. Here's another look at the seven steps and excerpts from The Press of Atlantic City that describe how Navone lived these principles:

1. They live well below their means – Despite a net worth in the millions, "he still frequents flea markets and rarely buys anything at full price. His wardrobe is almost entirely second-hand, he said, except for 'maybe the socks.'"

2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth – Navone told Newsday, "I don't know when I buckled down and got serious about making money. It just grew into my lifestyle. With age, it got more serious. I never denied myself anything, but I certainly never spent on something outstandingly lavish." He set aside money and invested it in stocks and bonds. Along the way, Navone also bought rental properties in Millville and Atlantic City.

3. They believe that financial independence is more important than displaying high social status – "Navone - who has neither a phone nor a television at his home - is a multimillionaire." He has never taken advantage of his wealth in the way most people might - large houses, fancy cars, lavish vacations. He drives an old-model SUV and lives in a small house in Center City Millville."

"…And he still goes to the High Street McDonald's in Millville every day, where he announces bingo on Wednesday mornings for a group of seniors who meet there regularly."

4. Their parents did not provide economic outpatient care – "The middle of five children born to immigrants from Italy's Piedmont region, Navone grew up modestly in Depression-era Vineland. His family was by no means wealthy - 'poor as church mice,' he said - and his father worked as a laborer laying railroad ties while his mother was a homemaker. While his father was away at work, he said, Navone and his siblings cultivated half of the five-acre parcel in south Vineland they shared with another family, growing vegetables like sweet potatoes for sustenance."

"Paul never inherited money," [his broker] said last week. "Paul started from zero. He just worked hard."

5. Their adult children are economically self-sufficient – "Navone never married and has always lived alone."

6. They are proficient in targeting market opportunities – "In the interim, he regularly worked 60-hour weeks. He made enough money to buy several rental properties throughout his life, either in Millville or Atlantic City, although he never owned more than three properties at any given time. The rental income, he said, was what enabled him to save his paychecks for a rainy day. 'Very seldom did I have to dip into my weekly wages,' he said."

7. They chose the right occupation - "As his wealth increased, he continued living frugally. He also never aspired to rise through the professional ranks, preferring to remain a wage earner. 'Time and time again, it was proven that salaried people made less than hourly workers,' he said. 'I never wanted a title. What good is a title?'”

Paul Navone's example is inspiring. Few of us have a desire to live as frugally or invest as much as Navone, yet we can still learn from his life. By carving out a portion of your income and investing it in a disciplined manner, you can enjoy the huge benefits of compounded returns. The earlier you start the better. Peer to peer lending through Lending Club can be an important part of your investment portfolio. Lenders are currently earning an average of 12.18% on over $5 million dollars.

People use many different methods to save. Some use automated savings plans or recurring transfers from their checking accounts to their savings accounts. Others pay themselves first by having their paychecks go into savings and then taking out only what they need. Still others keep a coin jar lying around to help them store their loose change. An example of this latter method is the Keep the Change program available to Bank of America customers.

The way Keep the Change works is that debit card purchases are rounded to the nearest dollar. The purchase still costs the same and the extra money gets transferred from your checking to your savings account. So buying a coffee for $1.79 would result in a $1.79 charge and a $0.21 transfer from checking to savings for a total transaction of $2.00.

The idea builds on the concept that these small amounts are rarely missed and add up over time. As an added incentive, Bank of America will match your transactions for the first three months, up to $250. After that, the bank gives you 5% of your transactions as a bonus for using the program.

When you consider that the average debit transaction is going to transfer fifty cents, you realize that to get the $250 bonus, you’d have to make around 500 debit transactions in the first three months. Keeping up that pace, which would take considerable effort, would only yield about $50 (from the 5% bonus) over the course of a year. While the initial matching is rather large, the subsequent bonus hardly seems worth the effort. For a much easier way to earn a 5% bonus, see the special lender program Lending Club currently has running for people who lend at least $5,000 in their P2P loan portfolios by February 3rd, 2008.

Using your debit card for the Keep the Change program is good in that you are not subject to interest rates as you would be with credit cards. There are issues with using debit cards, however. Overdraft fees and blocking are common complaints and liability for debit cards may be higher than for credit cards.

Are there better ways to save? For most people, yes there are. As I said in the opening, though, different people save in different ways. For people who regularly use their debit card and have trouble with saving methods that require more discipline, Keep the Change may be a viable savings option. Whatever method you choose, consider putting some of your savings to work through social lending on Lending Club, where you will earn better returns while helping others.