Popularized by personal finance guru Dave Ramsey, the cash envelope system encourages you to toss aside your cards and rely solely on pre-labeled envelopes full of real, physical money.
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Here’s how it works: ? Take out a set amount of cash at the beginning of each week. Set your budget, and divide the cash up accordingly. Put the cash into labeled envelopes for each of your weekly spending categories. (This shouldn’t include fixed expenses like your rent or monthly car payment — it’s OK to continue paying those your usual way.) Use only the allotted amount of cash in each envelope for that category of spending
Once each envelope is empty, that’s it — no cheating by whipping out a card to buy that new shirt.
The envelope method will help you better visualize your spending habits, and having tangible limits will help you reign in your swipe-happy tendencies.
Would you try this method? If you have, has it been successful?
I just started using YNAB, youneedabudget.com which uses the envelope method and I love it. I feel like I was doing my budgeting all wrong in the past now based on my personality! At the beginning of the month I now know where everything is supposed to go, how to pay down my debt, and how to save. (pay yourself first!)
For unforseen expenses, I first build a rainy day fund, if there isn’t enough to cover it, I have to float it on a card or build a negative balance envelope that has to fill back up. I also have an envelope for “Checking account padding” which will help me begin to get 1 or 2 months ahead with my cash. It may take a while but I have already seen the benefits of this method over budgeting based on income!
I like the idea and I will probably give it a try sometime. Right now I am focusing on writing everything I spend down just so I can track it and budget it properly.
I would say that one of the reasons a lot of people don’t do this is because at first glance it seems like it might be complicated but I can also see how it could be very helpful and I am sure it would get easier over time.
We’ve tried this method before we ever heard of Dave Ramsey. My grandfather used to use it back in the 1930’s and 40’s, and even up until he couldn’t care for himself any more. My wife and I used it for several years after we were married, and it worked quite well. We made our list of grocery needs for the week according to what we had in the envelope and what our state charged for taxes. One week it was $5.00 over, and we had the cashier take those items out. Those things were necessities, or so we thought at the time, but we lived without them for a week or two. I’d recommend that method to anyone who wants to get out of debt quickly and STAY ON A BUDGET! And you’re right…NO CHEATING!
Our emergency fund had to be raided two weekends ago to make a necessary family trip to see my sister in GA who is dying from breast cancer. Thankfully her daughter and son in law had an apt in their home across the river in SC for us to stay in while we were there. Emergency funds are exactly what people need for these kinds of family emergencies, auto breakdowns, etc. Thank God for the instruction given by my elders growing up and for others who have lived a little longer than I have. Wisdom is the principle thing. Get WISDOM, and with all of they getting, get understanding, (The Bible)
Thank you, Bonnie. She had just started a school for “at risk” children four years ago and gone from just a few children to having over 100 children when the cancer revealed itself. She had to have someone come in as an administrator, and eventually they had to take over completely. My sister finally resigned, but she had STARTED something that was being used by the Lord, and was employing people who wanted to work in a Christian environment. Many of these children came to know the Lord, We’re praying that it will continue to serve in not only education, but in God’s work.
I like the idea and I will probably give it a try sometime. Right now I am focusing on writing everything I spend down just so I can track it and budget it properly.
I would say that one of the reasons a lot of people don’t do this is because at first glance it seems like it might be complicated but I can also see how it could be very helpful and I am sure it would get easier over time.
I am in the same position right now. I sit down and write my expenses down and balance my accounts twice a week. I have been contemplating envelope system but may scale it down to “controllable” expenses as I feel I have a tight rein on reoccurring bills. I could also use it to account for impulse purchases and limit those.
I never though that this was a particularly good budgeting method (what are you supposed to do with a million nickels and dimes?) until I tried it. During the process of moving last month, I decided to sell some of my extra furniture on Facebook Marketplace. I was too lazy to drive across town to deposit the cash I had earned, so I chose to keep it in my wallet as my “spending” money. I felt like I was keeping a secret from responsible, boring Emily who would normally keep watch over her checking account day and night (and would never buy a muffin AND a croissant for breakfast)! But since I knew how much I had for the week, I didn’t mind spending on things that I really wanted in the moment because I knew there was only so much for me to spend! While this method was short lived, and I probably won’t request cash back on my next purchase, it DID help me get in touch with my true wants and needs and maybe will encourage responsible, boring Emily to lighten up the next time she wants two baked goods for breakfast.
Take out a set amount of cash at the beginning of each week.
