The Cash Envelope Budget System
Cathy’s sister Carolee is guest posting this for us. She will be introducing you to the CASH ENVELOPE BUDGET SYSTEM in 2 parts. This post she covers the pros of using the system and gives you pointers to get started. She also gives you some helpful tips to implement the system and help choosing envelope categories. This is FAB Carolee. Thanks so much!
I am a mostly stay-at-home Mommy of four young children and wife of a school teacher. As my husband has been working on his Master’s Degree, our budget has had to be tighter than ever. So, about 14 months ago, I decided to try out the cash envelope system for all of our “discretionary” and some of our “mandatory” expenses. Soon, I was hooked. Even though it took a little while to adjust and get used to this new system, it has been SO helpful to maintaining the tight budget we need to stick to. Now, I’m going to tell you all about it!
Why I love the cash envelope system:
It’s concrete. None of this opening up my budgeting software, looking up the month, finding the category, and seeing how much $ is left for the month. I never did that anyway. Now, I just have to look in the envelope and I know exactly how much we are allowed to spend on something. If there’s not enough, then it will have to wait. End of story.
Peace of mind. I don’t have to worry or wonder if I’m going to overdraw or exceed my credit limit.
It helps me save up for things. Some months you won’t use everything in your envelope, and that’s great, because you may need more in other months. I notice this especially in the “Holidays and gifts” category. In my family, there is only one birthday in February and March, but there are 8 birthdays between April and May, plus Easter and Mother’s day. So I can just spend a little from that envelope for gifts in February and March, and save up for the busier months. Or, I can plan ahead and buy some gifts for April and May birthdays in February and March (Plan ahead? What’s that?). This also can help you save up for specific things (like a “home decor” envelope to save up for a larger item) instead of putting “extra” money in your savings account which you end up using for something else.
I spend one day a month on the budget and that’s all. Then, once or twice a week, I check my bank accounts online to keep up to date on my bills and any debit card transactions. But this way, I spend SO much less time working on the checkbook, because now there are fewer transactions to record.
It’s been great for my marriage. My husband and I have a “spending” category for each of us, so we each get our very own spending money every month to do with as we please. I can save mine up for something I really want, or I can go out to lunch with my sisters or buy myself a milkshake (on the way home from the bank!), or whatever, and NO GUILT! As for my man, now he can go to town at the comic book store, but when his spending money is gone, it’s gone! We are both a bit more discretionary with our “own” money now, and we don’t have the “how much did you pay for that?!” conversations anymore! It is awesome.
- Use your current budget (if it’s working/balancing) or set up a budget with THESE tips.
- Write down your cash categories and how much cash you’ll need for each one for a month.
- You can still pay your monthly bills from your checking account (i.e.: utility bills, rent, debt, insurance, medical bills, piano lessons, etc.).
- Be sure to budget in some fun (like a family recreation envelope, date night, and/or spending money!). You are much more likely to stick to a budget and this system if there is some money in there for you to do some fun things with.
- Pull out some plain old regular envelopes, and write a category name on the front of each one.
- Head to the bank, withdraw the cash for the month, and distribute it into your envelopes.