- 1 What is the cash envelope system?
- 2 How does the envelope system work?
- 2.1 So here’s the plan:
- 2.2 When it is gone, that’s it – it is gone.
- 2.3 Record your actual spend
- 2.4 Grab my free budget sheet here – yas for FREE! UK
- 2.5 Grab my free budget sheet here – yas for FREE! US
- 2.6 Guess what guys – I have a whole range of these envelopes in my shop – you’ll love them!
- 2.7 Take me to look at the pretty flower range envelopes!
- 2.8 Take me over to see more of the cute animals range!
- 2.9 I want to explore the inspirational quotes series cash envelopes!
- 2.10 Pin me for later!
- 3 Baby Steps
- 4 Rules for the Envelope System
- 5 Remember to treat yourself if you stay within budget.
- 6 Try not to cheat the system
- 7 Related Resources
- 7.1 Read my post on how I developed and use my budget binder.
- 7.2 See my related posts:
What is the cash envelope system?
Dave Ramsey is well documented as promoting this approach. Basically it’s all about taking budgeting back to pure cash. It helps you save money by having the money physically in front of you as you pay for items. The theory is that you will be more likely not to overspend, because you are handing over real cash and not just tapping a card reader.
You have different amounts of cash stored in different envelopes. The budget is determined by what you can afford.
If you’re anything like me, I tend to overspend if money if it’s not in my hand and physical.
My card was becoming overheated with spending recently! Seriously, I am far from perfect and I’m always trying new things to keep me in order and able to explain to myself my spending every month!
So from this month on I am going to try this system for my spending. It doesn’t involve already setup direct debits. I will try it, one envelope at a time.
How does the envelope system work?
The envelope system, in my humble opinion, is best used for ongoing expenses such as groceries, children’s activities, coffee, going out, eating out and fuel.
So here’s the plan:
I am going to build up every month and control each of these areas of my budget with the envelopes. I figure I spend too much on coffee, so this will be my first envelope to control.
It works on the principle that you have to watch the money and plan throughout the month to make it last.
When it is gone, that’s it – it is gone.
At the end of the month I will check my spending and if there is any money in the envelope, I will put this towards another kind of treat for myself. Woop!
Record your actual spend
Also, I will record on my monthly budget sheet what I actually spent, and record this to inform my next payday’s budget.
Grab my free budget sheet here – yas for FREE! UK
Grab my free budget sheet here – yas for FREE! US
Guess what guys – I have a whole range of these envelopes in my shop – you’ll love them!
They are fully:
- downloadable – this will not expire!
- printable – in every series there is a white envelope, so you can customise your envelopes with funky or coloured paper.
Pin me for later!
By taking baby steps, I will be more successful first time and I can assess whether the cash method works alongside my other strategies. (I pay for most things via my Virgin card, as it earns airmiles. If we already enough for a return trip to America via Virgin’s sale, I will revert to spending in cash, using more envelopes quicker).
Rules for the Envelope System
Don’t withdraw your whole budget for the month for the larger spends. For example, if your grocery budget is £300, withdraw £150 for the first 2 weeks. Then 2 weeks later, withdraw the final £150 and put that into the envelope. This is your budget for the month. By withdrawing the second £150 at this point, you are forcing yourself to live on exactly half of your shopping budget, for two weeks. It prevents an early overspend.
Money from one envelope must never be transferred to another. If you are in the grocery store and as you are shopping, you figure you are about to overspend by £10, put that amount back and keep the essentials. It is strictly about keeping within the budget in each budget area. Challenge yourself to use food from the cupboard, or bulk freeze meals, to cut costs of grocery shopping further.
Remember to treat yourself if you stay within budget.
I mentioned before that I plan to treat myself, if I stay within budget. This is crucial to me and has always been an important feature of my budgeting. This way I stay motivated to achieve my goals. I always think of ways to look after and value myself, so I suggest you do this also, and you will become more excited and positive as time goes on, as you reach your end goals! It might be that you have £15 left over in your beauty budget and you decide to roll it over to the next month. Maybe you love a glass of wine in a great wine bar in town, or meeting up with a friend for a fancy coffee. It’s all up to you!
Try not to cheat the system
This is the most important point to remember: you cannot swap money from one envelope to another. This method is purely designed so you keep within a strict budget and control your spending.
If you run out of money for eating out, cook at home cheaply, using your grocery budget. If you run out of kids’ activity money, take them and the dog out to the local park for free, or go for a walk on the beach. Get to know your pet’s quirks, to save money within your vet budget envelope. There are many ways to save further money, by being creative!
Guys, also you might love this – my 2019 Budget Binder. It goes sooo well with the cash envelopes. I love having everything in a cute folder too!
As always leave your comments and replies – we are all together in this and you could have an inspirational idea for other people to try out!
If you have any questions about how I am using the cash envelopes, please feel free to ask.