Managing money is tricky business when swiping a debit or credit card seems so easy… You don’t have to pass a second glance at your budget and all seems well, but this almost always leads to overspending and overdraft fees. Before you know it you have blown your budget and the guilt seeps in. I had to deal with that guilty feeling on more months than I like to admit so I sought out a way to combat the mindless overspending. The financial solution that I found was a cash envelope system.
The envelope system sweetens my budget and together they make sure that I don’t
lose my mind (whoops…that’s the coffee)…lose my money. So how does this system work?
Getting Started with Your Cash Envelope System
The Cash Envelope System Set Up
First, you are going to need envelopes…of course. I started out using plain white mailing envelopes, but I found that I would take a few in my purse, a few in the car, and a couple more were left to hold the house down. I quickly realized that I needed another way to keep all of my categories together.
Less than $5 and a Wal Mart trip later, I had a pocket accordion file folder, Washi Tape, and a paint pen ready to go. This original set up wasn’t the most stylish, but it was definitely effective…Recently, my mother and I worked together to make this cute little wallet as an upgrade from the accordion file folder. I LOVE it!
For those of you who want something pretty, but don’t want to make it yourself, I recommend the Savvycents Wallet 🙂
You can use regular envelopes, an accordion file folder, a sectioned wallet, page protector sheets, index card file, whatever works for you! The Dollar Tree and Wal Mart have lots of neat options. The washi tape and paint pen are totally optional. I just wanted to jot down some inspirational quotes and verses on the file folder to keep me motivated.
Now you need to label each category. My categories include Tithe, Diapers & Wipes, Gasoline, Groceries & Household Items, Eating Out, Savings, and Miscellaneous Spending. You choose what works best for your family.
My husband and I sat down with our budget to determine what we wanted to put in this folder and how much money should be devoted to each category.
Be realistic when setting your numbers. If you only give yourself 1/2 the amount per month that you actually need then you will end up feeling defeated.
Get that $$
You are ready to go to the bank! Ask the teller for a specific number of $100s, $20s, $10s, $5s, and $1s so that you can place the right amount in each folder. Fill up the envelopes/folders and give it your best shot! You can refill weekly, monthly, bi-weekly, whatever works for your pay schedule. I refill every other week so I have to be sure that the cash on hand will last for two weeks.
Here comes the tricky part…Don’t touch the plastic! Obviously you can use your card to pay bills and things like that, but use only the cash for groceries, diapers, clothing, gasoline, and other miscellaneous spending. If you use your debit or credit card as a safety net (I have been guilty of this) then you are defeating the purpose of this system.
Why Does It Work?
There is something about seeing that green that makes you want to hold onto it a little tighter. When you are able to see the cash left in each envelope, you are much less likely to spend that extra $5-10 on something that you really don’t need.
You can’t overspend with this system as long as you keep the plastic put away.
Leave Room for Grace
Understand from the beginning that there is a learning curve to this system. Trial and error is the name of the game and while that can be frustrating. It also helps you refine your budget and find your own strengths and weaknesses. If you set the budget too low in a category or two and you run out of money before the next paycheck, don’t sweat it…Just readjust and try again. I still adjust my budget and envelopes periodically to mesh with our ever-changing circumstances. Don’t beat yourself up if you don’t get it just right the first time.