Did you miss Part One? Head HERE first!
Cathy’s sister Carolee is guest posting again this week with the second half of the CASH ENVELOPE BUDGET SYSTEM. Carolee is a mother of four and wife of a school teacher. Because her husband has returned to school to obtain his Master’s Degree, they are living on a limited budget. She began using the cash envelope system 14 months ago to budget their “discretionary” and some of their “mandatory” expenses. We LOVE this system. Thanks again for sharing Carolee!
- Give the person who doesn’t usually do the grocery shopping a little grocery money each month. Then they can help you out when you call and ask them to grab a gallon of milk on the way home, etc.
- Figure out how many of each denomination you will need. For instance, I like to have plenty of 1 and 5 dollar bills for the “date night” envelope, so I’ll have exactly what I need for the babysitter or the tip at the restaurant. So I will make columns on scratch paper, and figure out how many 50’s, 20’s, 10’s, 5’s, and 1’s I want. Then when I go to the bank, I tell them (or have it written down for them) exactly what bills I want. I used to feel self conscious about withdrawing so much cash and asking for “13 one’s” but, I got over it, and the bank teller’s don’t usually give me weird looks, either.
- Start out with actual envelopes. Try it out for at least 3 months. Keep the envelopes in your purse, and just replace them if they get ragged. Then if you decide you love this system, you can get yourself something a bit sturdier to keep your cash in. Some websites like Dave Ramsey’s have “cash envelope system” wallets you can buy, and on Amazon, you can find some coupon organizers (that you can use for cash instead) that fit in your purse. Make sure whatever you buy has enough compartments for each of your categories. After using the envelopes for over a year, I just finally got an accordion style coupon organizer that I like so far!
- Make a Christmas envelope. Determine an amount you think will be reasonable to spend on Christmas—shopping, baking, parties, decorations, etc. Divide that number by 12 (or if you are starting in June, divide that number by 7, etc.) and make a Christmas envelope that you put that amount in each month. (And of course, decide if you can afford this amount each month. If you can’t, how will you be able to afford a large amount all at once at Christmas time? If your monthly budget can’t take it, then it’s time to trim down on Christmas.) Then when you are ready to start your Christmas shopping and decorating, you shouldn’t have to use your credit cards at all-just keep that Christmas cash envelope with you.
Here are some ideas to get you started with your envelopes:
- Children (clothes, school expenses/fees, etc) I still pay for their piano lessons, swim lessons, preschool, and other such activities from the checking account and this is a separate budget category
- Personal Care (haircuts, etc!)
- House and Yard Maintenance and repair
- Family eat out This is for those nights when we just have to buy a pizza (although, if you have some freezer meals, you can pull one of those out instead of buying pizza on those crazy days) or for saving up and taking the whole family out to dinner every once in a while
- Date Night
- Clothing This one is for my husband and I—and it’s for clothing NEEDS, not wants. This is so we don’t have to use our own spending when we need new underwear or a new pair of athletic shoes, etc. It is NOT for those new stilettos you can’t live without.
You may be thinking:
- “I don’t want to carry that much cash around—what if I get mugged?” Ok, I suppose that is a possibility, but no more a possibility than when you carried 10 credit cards, right? Unless you go around with a big sign on your purse that you have a whole bunch of cash in there, no one will know that you aren’t just carrying around plastic like everyone else. Just be smart with your purse, like you should be anyway!
- “If I have cash, I just spend it.” If you know that’s all you get for the whole month, don’t you think you’ll be a little more discretionary with it? If it’s a consistent problem, it might also be that you just didn’t give that budget category enough $ and maybe it’s time to adjust some things in your budget.
- “I just can’t imagine not using my credit card.” Sounds like it’s time for you to read Dave Ramsey’s Total Money Makeover
. He will help you get over the social expectations to use plastic.
This may sound hard, but trust me, it’s great! You’ve just got to commit to trying it for at least 3 months to give it a fair chance. It will be a big adjustment and take some time to work out the kinks, but you can do it! If you feel like you need to get a better handle on the money that seems to keep leaving your bank account without your permission, this is the way to go. Good luck!
If you missed part one check out Cash Envelope System Part 1.