I’ve seen budget people everywhere carrying envelopes full of cash. Questions may come to your mind about the cash envelope system…
why all that?
Are they crazy?
Did they just rob a bank?
Or is this something I should do?
And seriously…Does the cash envelope system actually work?
These are all legitimate questions I once asked too! The cash envelope system is a great way to spend money that actually helps you stay on budget this time around. And I’ve come up with a list of 8 things everyone and their moms should know about the cash envelope system (whether you use it or not).
1. How to cash envelopes In reality a job.
Before forming an opinion about cash envelopes, it is important to know exactly how Cash envelopes work! Essentially, instead of using your debit card for certain purchases, you choose to use cash instead. This means that you have to consciously decide how much money you want to spend in certain categories of your budget. Then go to the bank and withdraw money from your current account for those categories.
Seems like a lot of work? I promise it’s not! Additionally, cash envelopes help people develop positive habits like living within their means! It’s a great way to help you stick to your budget and not swipe your debit card multiple times!
2. You don’t have to withdraw all your money in cash.
When people first hear about the cash envelope system, they assume that you have to withdraw All your money cash Money. And then they ask, “Well, how do you pay your internet bill with cash?” This is it NB How does the cash envelope system work? You only get cash for the categories included in your budget Wants To use money for. This tends to include food, such as restaurants and grocery stores. Sometimes it also includes entertainment as well as money to buy clothes.
3. Where do you keep your coins?
I get this question a lot When I talk about using the cash envelope system. People always want to know where I put all my changes. In fact, I think the idea of carrying envelopes full of change makes people want to stop the cash envelope system. But listen! I have 3 easy solutions for you to choose from!
Option 1: Take all the change you collected and add it to a jar at home. When the jar is full, spend it on something fun! You’ll be surprised how much money you can collect in a small jar. The last time I spent my change jar, I had over $80 left. This money went directly to our vacation fund!
Option 2: Keep the rest in your wallet or purse. Every time you use money, use your coins to try to make the exact change. This way, you won’t always get a lot of coins. When your wallet starts to fill up, transfer any extra coins to your coin jar!
Option 3: Keep the rest in your car. Find a safe place where you can collect coins. Then, when you’re in the mood for caffeine, use your change to pay for your drink! My husband does this and I love that he doesn’t use our debit card to get a soda here and there.
4. Cash envelopes help you stop overspending.
Cash envelopes are a proven method that helps people put an end to overspending and live within their means! I can speak from personal experience that even after using cash envelopes for a few months, I’m spent way less Than I had before! Being able to use cash gives people a concrete way of knowing how much money they have left. No need to add up the amount you spent on groceries after 3 trips. Just count the amount left in your envelope!
Anytime I go to the grocery store, I know this exactly How much do I have in my envelope to spend? I can break that down by how many weeks I have left until I refill my envelope. When the cash envelope method is followed correctly, people learn how to live within their budget.
5. Remove the correct denominations.
If you’re planning to withdraw $300 for groceries for two or three weeks, you probably don’t want the cashier to give you 30 ten-dollar bills, right? And if you’re planning to take out $100 to a restaurant, you probably don’t want a hundred-dollar bill. I personally know from experience that the good people at Chick-fil-a usually don’t appreciate getting a $100 bill. Especially when they don’t have enough change! This is why it is so important to ask about specific denominations.
Plus, ordering specific denominations helps you keep your cash envelopes separate. For example, let’s say you need to withdraw $400 for food. You want to spend $150 on restaurants and $250 on groceries. What would you do if the teller gave you 4 hundred dollar bills? To avoid this problem, make it easy for the cashier and for you!
When you decide how much money you want to have in cash, create a simple scoring sheet. Decide how many denominations you will need to complete your cash envelopes. Then, when you go to withdraw cash, give your statement directly to the teller. They will know what to do!
6. Money is fun Incredibly important.
I learned the hard way how important it is to have a category in your budget for something Hazar. Just because you’re living on a budget or using a cash envelope system doesn’t mean you’re not allowed to enjoy a night out. This doesn’t mean you can’t get a pedicure or do a goal run. If you’re married, plan so that each person gets a fun money envelope. This way each partner can spend on what they want Wants. You may be surprised to learn that you can save your money for a larger purchase in the future! Just make sure to stick to a budget if you want to see results!
7. You don’t need to keep it All the money With you at all times.
Just because you use the cash envelope method to help you stay on track with your budget doesn’t mean you keep all of your money with you at all times! This is not smart. Or safe. Instead, only keep the cash you need for that day. For example, if you plan to pick up dinner after work, simply bring a restaurant envelope. You can also take some money out of the envelope and keep it in your wallet. Just be sure to put any remaining money back in the envelope at the end of the day. Find a safe (and hidden) place to keep the rest of your money at home.
8. You should know if this is right for you.
Here’s the need. We could sit here and chat all day about how cash envelopes work. I can tell you story after story about how using cash envelopes has helped our family live on a budget and in the end Pay off a ton of debt. But you won’t know if it’s right for you and your family until you try it.
Let’s look at it this way: Even if you’re still on the fence about using cash envelopes, it can’t hurt to try them. So instead of just assuming this will or won’t work for you, actually use cash envelopes for 2-3 months. Pick one or two categories in your budget where you tend to overspend (for us that’s food!) and stick to using cash in those categories only. If you hate it after 3 months, there are no hard feelings. But you may be surprised to learn that cash envelopes actually help you spend less!