How to Make a Cash Envelope System

how to make a cash envelope system

Let’s talk about cash envelope systems, shall we?

Last week I shared how to create a budget in 10 minutes or less.  If you haven’t seen it then I recommend reading it first.  I do take all the complicated figuring out of the equation.  Budgeting doesn’t have to be hard or stressful.

If you’re budget wakes you up in the middle of the night in a cold sweat then it’s time for a change.

Today I want to share tips on how to switch to the cash envelope system.

You may be thinking debit cards are just like cash.  They are so much more convenient to carry around than cash.  Who has time to go to the bank every few weeks?

But I would have to tell you that you are WRONG.  Debit cards aren’t anything like cash because they are so easy to use.  You see if you want to kick your budget off and knock out debt than cash is the way to go.

Once your cash is gone, it’s gone.  You can’t assume you still have money in your bank account.  Don’t swipe your magic card at the gas station for that bottle of water.  You have to be deliberate with your spending.  You have to plan, save and account for every dollar.

I’m the girl you see digging for change at the register.  When the cashier says my total is 29.16, I’ll find the exact amount.  I do not want to break my last dollar bill.

If you have your budget ready then go ahead and pull it out.  Add up everything you can pay cash with – your gas, groceries, eating out, so on.  Then tally up how many $20s, $10s, $5s you need.

For us we do a budget every 2 weeks.  I get paid every 2 weeks so it just makes sense.  I add up what all we need for each category.  Then I figure out how many $20s, $10s, or $5s  I need.  Once I get that then I head to the bank.  I hand the teller my little sheet so it’s easy for them to follow.  They do not mind. 

I’ve had one teller act a little annoyed with me.  I told her what I was doing and explained I don’t like being in debt.  By the end she was in total agreement and said she should start doing it that way.

cash envelope system

Then I head home or back to the office to divide out my envelopes.  I have these categories:

-groceries
-gas
-eating out
-dog food
-misc.

The misc. is something J and I both get.  Every two weeks I pull out a set aside amount for both of us.  We can spend or save this money anyway we want.  No questions asked.  If I want to save my money and go get my nails done then that’s what I do.  Everything else is pretty self-explanatory.

I’ve seen cash envelope systems where people keep track of their spending.  Almost like a check register, but that didn’t work for me.  I needed easy.  So I purchased this cash budgeting wallet from Etsy.  It’s been great.  I can label each envelope and they all fit into a matching wallet.  Most of the time when I head into a store I just grab this wallet.  I leave my debit card in the car or at home.

Once the envelope is empty then I know I don’t have any more spending in that category.

I also ‘borrow’ from one category sometimes.  Let’s say I’m out shopping at the grocery store.  I didn’t plan too great and need about $20 to cover food for the next week.  I look and see that my dog food budget has about $40 left.  I do a quick check and learn that we have enough food and treats to get by until I get paid again.  So I pull $20 out of the dog envelope and go on my way.  I never borrow from the bank account.  I must borrow from one of my cash categories.

For all other monthly bills I have them setup on auto-draft or I write checks twice a month.  I know where every single dollar is going.  That is why I don’t pull more money from the bank account.  That money is already spoken for.

6 Thoughts on “How to Make a Cash Envelope System

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