Is the cash envelope system for you? When you think of people who live their lives with the cash envelope system, what words come to mind? Irresponsible? Old-Fashioned? Poor?
That’s what I always too. I turned up my nose at those people with their little envelopes labeled “Food” and “Gas”. “Hmmph! They must have such bad credit they can’t even get a bank account!” is exactly what I thought as I swiped my credit card through the machine.
And then one day as my husband and I were having our monthly “where did all our money go?” discussions, we got the crazy idea of actually creating a budget and sticking to it. In my search online for “the perfect budget", I kept hearing about those little envelopes again.
“Ok – let’s give it a try. But I’m sure it won’t work!” Not only did it work, but I haven’t spent this little money since I was 16 and working for $3.35 per hour!
There is something very powerful about handing over cash at the store, rather than just mindlessly swiping your card. If you only have $30 that week for eating out you start to think: “Do I really want the Extra-Tall No-Foam Double-Shot Soymilk $5 Espresso? Or will I be happy with a $1.29 House Blend?”
So how does one get on a cash system?
1) Create a budget .
2) Once you have your budget, you simply figure out what parts of your life you want to handle as “cash-only”. For most, this will mean everything except housing, utilities and loan/credit card payments.
We use envelopes for:
- Grocery
- Gas
- Clothing
- Entertainment
- Babysitter
- Gifts
- Church
- Dining Out
- Mad Money
The envelopes get refilled every two weeks and once the money from one envelope is gone, that’s it for that category until the next payday. In the midst of all of this, the credit and the debit cards are out of your wallet. You are paying cash now!
For some people, this will become a whole new way of life. Even those who aren’t ready to make the full transition can benefit from just a few weeks or months of this system. It is a great way to finally figure out who is getting your money each month!
When she isn’t filling her envelopes and looking for the prettiest envelopes available, Mindi can be found at Moms Need To Know.
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What a great article about something that is so foggy to so many people. I too, had my preconceived notions about envelopes and why people used them. Little did I know how powerful a tool they could actually be. Too many people overlook the psychological implications of swiping a card versus opening your cash envelope.
Almost everyone that I mention the envelope system to seems to think they have it all figured out, and the statistics couldn't possibly be referring to them. No way does spending on the debit card cause them to spend more money, they say. I did too. When we decided to actually try it, I was skeptical but just like you said, when you are in line and you know you only have a certain amount of cash that you can spend, it most certainly curbs your appetite to spend thoughtlessly.
We have found that we put more items back on the shelf after asking ourselves a series of questions that never came to mind when swiping the debit card. I will definitely tell the FPU class that I am coordinating about this article. It is excellent!
Its funny when you use the envelope system your money stretches farther! Plus you have to ♥ the fact that when you purchase things this way you own it right away. Thanks to Dave Ramsey life has been so much easier!
This is the same system my mom used when I was growing up. Worked for her! I just use checks, and when I buy things on line, I use the PayPal plug in — it looks like a credit card to the sellers, but the money actually comes from my checking account. It keeps me from charging anything.
Check these out. It makes it really nice to use the cash envelope system. Plus they're way cute!
http://laceyandtyler.blogspot.com/2009/02/fashion-cash-clutches.html