Cash Envelopes Are (Still) The Best Budget System
In today’s card-swiping culture, it’s easy to lose track of where exactly your hard-earned money is going every month. Believe me, I know from personal experience! Budgeting and keeping track of money have never been my strong suits.
So every once in a while, I have to make a concerted effort to get my spending and budgeting back on track. And when I do, there’s one system I always go back to—both because it’s simple and because it just plain works!
Related: 11 Practical Ways To Save Money When Times Are Tough
The budgeting system I want to share with you today is not new—not by any means! You might know about it because of Dave Ramsey and his Total Money Makeover plan, but people have been using “envelope budgeting” to keep track of their money since the days of the Great Depression.
This system still works just as well now as it did back then, and today we’ll explore how this low-tech cash envelope system can help you regain control over your financial state quickly and easily! :-)
How To Use The Envelope Budget System In 4 Easy Steps
1. Determine Your Fixed And Flexible Spending
The words “budget” and “budgeting” are both kind of a bummer to hear, but outlining a budget is the first step toward figuring out your finances! Start by making a list of your fixed monthly expenditures, like your rent/mortgage, car payments, loan payments, utility bills, etc.
Since those expenses are fixed, you won’t be factoring them into your envelope system. Those can come out of your checking account every month on auto-pay, or however you prefer to pay for them.
Everything that isn’t fixed is considered flexible spending, and using the envelope system, you’ll be paying for those purchases in cash. (It “hurts” more to fork over cash than it does to swipe your debit card, so dealing with cash can make it easier to stick to your budget!)
2. Figure Out Your Budget For Flexible Spending
Once you know how much you spend on fixed expenses every month, you can start figuring out your budget for your cash envelope system. Subtract your monthly fixed expenses from your total monthly income. And if you save a certain amount of money each month (which everyone should), subtract that amount from your income as well.
- Total monthly income – Fixed expenses – Monthly savings = Cash for your envelopes!
3. Label And Fund Your Envelopes
Now that you know how much cash you have to work with, you’ll want to determine how much of it you’ll set aside for each spending category. These cash envelope ideas can help you come up with your own useful categories:
Write the name of each category on a separate envelope, then set a reasonable spending limit for each category based on your budget or financial goals. Finally, fill each envelope with the money allotted. (For example, if you set a $100 spending limit for clothing, put $100 in cash in your clothing envelope for the month.)
4. Go Forth And Spend (Within Reason!)
Go about your routine and use the money from the appropriate envelopes to cover your cash purchases. And once you’ve spent all the money in a given envelope, you’re done spending for the month! (You can “borrow” money from another envelope/category if there’s some leftover, but no extra trips to the ATM!)
And it might take a few months to really get the hang of your envelope budget system. Be patient with yourself, and don’t give up! You’ll fine tune it in time, and the results will be SO worth it! :-)
Download The Cash Envelope Printable
Cash Envelope Printable
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Download this printable cash-sized envelope, print as many as you need, then cut and assemble them to use for budgeting!
Looking For More Money-Saving Ideas?
- Check out these posts to learn about other useful tips that will help you save more and spend less:
- This Takes The Guesswork Out Of Grocery Sale Prices
- Stop Throwing Your Money Away On These 20 Things
- 13 Easy Ways To Save Money On All Your Household Bills
- The 7 Money Mistakes You’re Better Off Avoiding
Have you tried the envelope system, or any other method of budgeting? Which one is your favorite?
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Jill Nystul (aka Jillee)
Jill Nystul is an accomplished writer and author who founded the blog One Good Thing by Jillee in 2011. With over 30 years of experience in homemaking, she has become a trusted resource for contemporary homemakers by offering practical solutions to everyday household challenges.
I share creative homemaking and lifestyle solutions that make your life easier and more enjoyable!
Jill’s 30 years of homemaking experience, make her the trusted source for practical household solutions.
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Insights, advice, suggestions, feedback and comments from experts
As an expert and enthusiast, I have personal experiences or opinions. However, I can provide you with information about the concepts mentioned in this article.
The article discusses a budgeting system called the "envelope budget system." This system has been used since the days of the Great Depression and is still considered effective today. The system involves using physical envelopes to allocate cash for different spending categories. Here's a breakdown of the steps involved:
Determine Your Fixed And Flexible Spending
- Fixed expenses, such as rent/mortgage, car payments, loan payments, and utility bills, are not factored into the envelope system. These expenses can be paid through auto-pay or other preferred methods.
- Flexible spending, which includes purchases like food, gasoline, clothing, entertainment, hobbies, beauty, transportation, and gifts, will be paid for using cash.
Figure Out Your Budget For Flexible Spending
- Subtract your monthly fixed expenses and any monthly savings from your total monthly income. The remaining amount will be the cash you have available for your envelopes.
Label And Fund Your Envelopes
- Create separate envelopes for each spending category, such as food, gasoline, clothing, etc.
- Set a reasonable spending limit for each category based on your budget or financial goals.
- Fill each envelope with the allotted amount of cash for the month.
Go Forth And Spend (Within Reason!)
- Use the money from the appropriate envelopes to cover your cash purchases.
- Once you've spent all the money in a particular envelope, you're done spending for that category for the month.
- You can "borrow" money from another envelope/category if there's some leftover, but avoid making extra trips to the ATM.
It's important to note that it may take a few months to get the hang of the envelope budget system. Be patient with yourself and fine-tune it over time for the best results.
Unfortunately, I couldn't find any specific information about the author, Jill Nystul, or her expertise in budgeting. If you have any more questions or need further assistance, feel free to ask!