Use a Cash Envelope System for easy budgeting and help in taking control of your spending.
About 24 years ago I took a class on budgeting and one of the things that was talked about in the class was Cash Envelopes. I thought it would help us take control of our money and spending. It was a great system and it worked beautifully, then we started making a lot more money and we gradually stopped doing it. We have had many years of not really knowing where our money was going monthly, weekly or even daily. I finally decided to start the Cash Envelope System again and wanted to share with you how we do it. It can be as simple or detailed as you want but I choose to keep it simple so we will continue to do it.
Step 1 is to start with a budget. Create a spread sheet of your income and debt for the month. We get paid every 2 weeks with myself also getting paid consistently and sporadically from blogging opportunities. I’ll share with you how we treat that sporadic income later. Since we get 2 main paychecks a month the bills are divided between them depending on the due dates. All of our debt is paid on line then we use cash for things like groceries, medical co-pays, date nights, family activities, gifts, etc. We have a gas envelope but actually use our bank card for purchases. I keep track of our 2 week budget for gas and any money that wasn’t used goes into the envelope to carry over to the next pay period. When we take a road trip we already have the extra money available. It’s just much easier to use a card than cash for gas.
Step 2 is to budget the cash you need for each envelope. For example we have $400 budgeted for food every 2 weeks, $200 for gas, $100 for medical co-pays, $100 date nights, you get the idea. These amounts are just an example of what works for our family, your family will be different. I go the the credit union the day we get paid and take the cash out to put in each envelope. That’s the money we have to work with and when it’s gone, it’s gone. I’m much more intentional in my spending now. Since using cash we actually seem to have more money and we know exactly where it’s going.
Step 3 is record keeping. We are strict on keeping track of debt on the spread sheet and there are slight adjustments every month. I’m not as strict at keeping tract of every penny in the envelopes though. If the grocery money is getting low I know it has been spent on groceries so I don’t feel there is a need to record every time I run to the store for milk. Since I plan the meals for 2 weeks and shop accordingly the majority of the grocery budget is spent during that shopping trip. I do keep track of gas closely so the extra money can be put in the envelope. The miscellaneous envelope spending is recorded because it could be used for anything from school supplies to birthday gifts to travel souvenirs and I want to know where it’s going.
A few more things. When there is money left over in the envelope from the previous pay period I write that at the top of the paper then add the new amount so I know where I started. Having extra money isn’t bad but it might also mean that adjustments could be made in the budget.
When I purchase something on line instead of using cash that money needs to be subtracted from the envelope and deposited back into the bank. It’s an easy process but it’s important that the money is accounted for in the right place.
I don’t carry the envelopes with me all the time. I only bring them when they are needed so I’m not carrying hundreds of dollars of cash around every where.
Make envelopes that fit your needs. You might need to budget for Christmas, which brings me to what I do with my sporadic or extra income. Depending on your situation you can use it for many things: to pay off debt, save for Christmas, emergency fund, vacation fund, etc. Right now mine is going toward paying off debt and medical bills.
I love these Cash Envelopes! They’re really sturdy and they were easy to stitch.
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