Are you ready to take charge of your money in a FUN and organized way? Do you want to try the Cash Envelope System but aren’t sure where to start? Try out our Printable Cash Envelopes For Easy Money Management!
What Is A Cash Envelope System?
A Cash Envelope System is one way to take charge of your money and stay on budget. With the Cash Envelope System, you place cash in envelopes that are labeled with the categories you spend in on a regular basis.
Once you place the money in the envelope, you must be disciplined to work within the confines of the amount in the envelope, for that category.
For example: if you choose to place $50 in your Clothes Envelope and you find a pair of boots you have to have for $110, you will know you have to wait until your Clothes Envelope has more cash or choose a pair of boots that meet your cash amount.
Most people place money in their envelopes each paycheck. Some may do this weekly, while others divvy up the money on a monthly basis.
Cash Envelopes help to guide you in your spending so you don’t spend every last dime at the grocery store and have nothing left to get a haircut!
How Do You Start A Cash Envelope System?
Cash Envelope Supplies
With a little looking, you will find there are gobs of resources to help you with your Cash Envelope System. There are special wallets, envelopes, zippered pouches … anything you can dream up … you can probably find.
At one point, in our young married lives, we purchased a special wallet with compartments for all of our envelope categories. We quickly realized we didn’t like this option because we didn’t want to carry ALL OF THE MONEY with us everywhere we went.
Instead, I made duct tape zippered pouches for the different categories. That way, we could take just the category pouch we needed.
Fast forward … many years later … we have now streamlined our categories and taken out just what we need when we need it.
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Best of all? You can make your own Cash Envelopes, right at home, with just a few supplies!
- Cash Envelope Printables – found below
Cash Envelope Categories
You can use as many or as few Cash Envelopes as you’d like. Just remember … the more envelopes you have … the more tracking you have to do and the messier it can get at checkout.
For example: if you choose to separate Groceries from Paper Products and have yet another envelope for Personal Care Products … checkout could be a nightmare. Of course, you could separate everything out by going through your receipt, once you got home, but who wants to do that? Don’t make life more difficult than it has to be.
You may also be at a point where Eating Out is laughable and Fun and Clothes have no room in your budget. I know Dave Ramsey says to include them but we’ve been at that point where it just wasn’t possible. That’s okay! You can find FREE Fun and wear second hand clothes. Choose the categories that work for you, right now.
Here are a few categories you may choose to use a Cash Envelope for:
- EAT OUT
- HAIR CUTS
- PET CARE – CATS
- PET CARE – DOGS
- GARAGE SALES
What Is Not Included In A Cash Envelope System?
Bills you would normally pay online … like the mortgage or the power bill.
Sure, you could go to the bank, take out cash, and head to the power company to pay your bill.
That’s a waste of time.
We recently switched our cell phones to Xfinity. I was surprised to see multiple Pay Stations inside the Xfinity store. I was told that many people will go to the bank, get a money order (which you pay extra for), and then drive to the Xfinity store to pay their bill.
Is that a version of the Envelope System gone mad?
The Envelope System is here to help you be smart with your money … NOT make your life hard!
We also choose to use credit (that we pay off each month) at the pump. For us, gas is cheaper at Costco and this option is convenient.
How To Use Cash Envelopes
Determine How Much To Put In Each Envelope
Start slow! You probably have a general idea of how much you spend on groceries and haircuts, right? Pull cash out on payday and put that money in the envelopes!
If you normally use credit cards for your purchases, look back at what you’ve spent in the past to determine your envelope amounts.
Start with the categories that you already spend in.
For example: if you normally spend money on groceries, haircuts, clothes, and gifts every month … start with those.
- If you are paid every two weeks, you will put enough in the envelope to buy groceries for two weeks.
- If you have a pet that goes to the groomer every other month, you will put half the amount in the envelope each month.
When you first start out with the Envelope System, I would suggest you be generous with the amounts you put in the envelopes. You can tighten the reins and adjust the amounts in future months. For now, you don’t want to set yourself up for failure.
Track Your Spending
It’s super easy to spend all the cash in your grocery envelope and wonder where it all went. Like, yesterday you had $500, right?
An easy, no hassle, way to track your spending is to simply put your receipt in the envelope.
You may also choose to use a register for each envelope (included in the Cash Envelope System below).
Keep Your Envelopes At Home
You really don’t want to carry all your cash envelopes around with you. That just gets confusing and dangerous.
Dangerous because you could lose your envelopes and all the money in them.
Confusing because you’ll probably end up borrowing from other categories, leaving yourself in a pickle.
When you head to the grocery store or the movies, simply take out enough cash for your trip and leave the rest in a safe place at home.
Know When The Money Is Gone, It’s Gone!
Don’t try to borrow from other envelopes! The goal here is to work within the confines of your budget. If you borrow from other envelopes, you’ll leave yourself in trouble in the category you borrowed from.
If the Envelope System isn’t working quite right for you, you probably need to make some adjustments.
On paper, it may make sense to put $20 in your Eat Out Envelope but, in reality, your family of five can’t eat out for less than $40. That’s when it’s time to adjust your expectation to eat out every month or make room in your budget to adjust the amount you put in the Eat Out Envelope.
After a few months, you will have a better idea of what amounts work for you.
Who Should Use The Cash Envelope System?
I’ve heard it said that the Cash Envelope System is best for those with a low income. I disagree.
I feel the Cash Envelope System works for everyone, no matter what their income.
Six figure families can benefit from the Cash Envelope System as well as those who live paycheck to paycheck.
Our family is a prime example. We used the Cash Envelope System when I was working three part-time jobs to get my husband through college and we, still, use the Envelope System today … 25 years later, as we work our kids through college.
Our categories may have increased but we still work within the confines of the amounts we’ve budgeted, in order to meet our monetary goals.
You should consider using the Cash Envelope System if:
- You live paycheck to paycheck and run out of money by the end of the month.
- You make the big bucks but don’t know where your money goes each month.
- You want to SAVE money but never seem to have enough left to save.
- You have a big expense you would like to make but aren’t sure how to get there.
- A small emergency expense often means you go without groceries.
- Your vehicles need maintenance but there isn’t money for that.
- You anticipate a fun outing and want to budget for it (like garage sales).
- You have a hard time saying NO … let the envelope say it for you!
- You are a living, breathing, human being …
You can retrofit the Envelope System to work for YOU, in whatever stage of life you are in!
What If My Spouse Does Some Of The Grocery Shopping?
Your Cash Envelope System doesn’t live in any one person’s wallet or purse. If your spouse plans to stop by the store after work, he/she can take the money out of the appropriate envelope.
If you often find yourselves stopping by the store, when you hadn’t planned to, you may want to come up with a specified amount that you keep in your wallet. The trick is to keep that money separate from your personal money.
My husband and I both have separate spots in our wallets for family money and personal money.
What If I Buy Everything Online?
You can still use the Cash Envelope System!
Use an envelope and register for each category. Record the amount you budget for each category and the amounts you spend. Pretend like it’s cash so you don’t overspend.
What If I Run Out Of Money In My Cash Envelope?
Do you really need the thing?
Can you eat at home instead of eating out?
Can you eat from your pantry?
Can you put off that haircut for another week?
You may choose to create a Miscellaneous Envelope to help cover you when your envelopes are empty. That would totally work.
In our house, we choose to make a game out of it. Of course, we could always run to the bank and increase our envelope fund but that defeats the purpose. Instead, we choose to practice delayed gratification or make do with what we have.
For instance, we get paid once a month and divvy up cash in our envelopes once a month. That means, depending on the month, we may not have a lot of cash in our food envelope by the end of the month. We could run to the bank to add money or we can get creative and make it work! That’s what we choose to do in those months when our food budget has been high.
What If I Have Money Left In An Envelope At The End Of The Month?
There are no hard and fast rules here.
The thing is … you get to make the rules!
It’s a beautiful thing!
You may choose to leave the cash in the envelopes and let it accumulate.
This would work well and be the smart choice for many of your envelopes.
- You didn’t have a Birthday Party to go to this month but next month you’ll have three. No worries! You’ve got the cash!
- Clothes shopping didn’t happen this month but school clothes shopping is just around the corner. You’ve got it covered!
- No haircuts were needed this month but next month you want to spring for a new color. Woot!
- Your grocery budget was low this month but your son will be home from college next month and the boy likes to eat.
You may choose to move the money out and start fresh each month.
This method may work well for some of your envelopes, especially if they came in way under budget.
- The grocery budget took a nosedive because you decided eating organic wasn’t for you or you came up with a weekly meal plan and it saved you cash.
- You found a new person to cut your hair for a fraction of the cost.
- You didn’t buy any new clothes and the kids have grown and flown.
If you find you have excess amounts in your envelopes each month, it may be time to adjust how much you put in your envelopes.
If you choose to move excess money out of envelopes, where will you put that money?
What a great problem to have, right?
Here are a few ideas:
- Pay off debt.
- Move to a Miscellaneous Envelope for the times you come up short.
- Move to an Envelope for something special you’ve been saving for (like a vacation or a power tool).
- Place in a Savings Account.
What If You’re Saving For Something Special?
Make an envelope for it!
I’ll use myself as an example. I am saving for a DeWalt Double Bevel Sliding Compound Miter Saw. It’s super fun to make stuff out of wood and I think this new saw will help me do even more!
Because woodworking has become a hobby for me, the savings are not coming out of our regular budget. Instead, I have been setting aside a portion of my monthly allowance and side hustling.
Side hustling, you ask? One way I’ve done this is by making these 4 X 4 Firecrackers with the tools I have.
Friends actually LIKE them and have bought them. I put the money earned from the Firecrackers right into my Tools Cash Envelope!
Is The Envelope System Safe?
When my daughter was young, she saved $100. It was a big deal. She wanted to go to the mall and my husband offered to keep the $100 bill safe in his pocket. You can probably guess the rest of the story … somewhere, somehow … that $100 was lost, my daughter was distraught, and it was a day she will never forget. A day she will never let my husband forget either. Ha!
Whenever you carry cash there is a risk. A risk you might lose it, it gets stolen, or your husband sees it as fair game to buy something he has to have.
There’s also a risk with using credit. One of which is … you don’t pay it off. That’s a big one!
You have to weigh the risks and do what works for you.
If you choose the Cash Envelope System, keep your envelopes in a safe place and only carry what you need.
Pros And Cons Of The Cash Envelope System
The Cash Envelope System ROCKS because:
- It teaches you to be disciplined with money.
- Your money is tangible … like when you were a kid, at the toy store, weighing your options. Choices, somehow, become more important when you are holding cash.
- If you don’t use credit, you don’t have a credit card bill, you don’t pay interest, and you don’t carry a balance.
- You don’t have to worry about creating debt.
The Cash Envelope System STINKS because:
- You may lose the cash or it could be stolen.
- It’s stressful if you get to the checkout and don’t have enough cash in your envelope.
- You have to plan ahead.
- You don’t get credit card rewards.
Why Does The Cash Envelope System Work?
The Cash Envelope System forces you to think about your spending. If you know you have $200 for groceries this week, and no more, you will think a little extra about the case of soda you want to put in the cart.
Your Pet Care Envelope has you covered when your little guy needs a trip to the groomer. There’s no need to shuffle money because you have an envelope for that!
The Cash Envelope System is a great way to keep your spending plan in line!
It doesn’t matter how much you make, how well off you are, or your social status. Cash Envelopes can work for you!