About a year ago I changed the way I was spending money. I decided to quit using my debit card for purchases and try only using cash. I’ll be honest, I did not think this change would make much of a difference. I am a little bit prideful and a lot of stubborn and I really felt that I was strong enough to spend smartly with my debit card. It only took one month of paying with cash to realize that I was wrong! I couldn’t believe how quickly my wad of cash depleted. It was a huge wake up call for me to watch that envelope empty so quickly.
Today I am sharing how I use the envelope system and a few of the tricks I have learned a long the way.
There are some things I buy with cash, and other things I buy with my credit card. I rarely use my debit card. To read about why I use a credit card for some purchases read my post The one idea I disagree with Dave Ramsey on.
My husband and I try to have a budget meeting at the end of every month. Monthly is what we have found works for us. I know others that budget weekly or bi-weekly. We use these budget meetings to discuss how we did on our budget throughout the month, make a new budget for the next month and decide things we could do better or different. At this time we decide how much both of us will need over the month for our daily spending. These categories change monthly, the most common categories are: clothing, house expenses, pet food, children’s extra curricular activities, groceries, fun and other. We always have an “other” category for any extra expenses that come up throughout the month. We have NEVER had a month go by without something coming up that we forgot to budget for. Always make sure you have an “other” envelope.
Once we have our budgeted amount I go to the bank, withdraw the amount of money we will need and start stuffing my envelopes. You do not need anything fancy for your envelopes. We use boring cheap white envelopes and just write the names of each category on them. I then put the amount of money I need in each envelope.
This money has to last me all month. Once it’s gone, it’s gone. I leave these envelopes home at all times. My husband doesn’t like the idea of me walking around with so much cash and I have found that I am to tempted to spend it if it’s with me. When I need to buy something I simply take out the correct amount of cash from the envelope, no more and no less and go to the store. I also leave home all debit and credit cards. This is my way to get rid of all temptation and to prevent any impulse shopping. The amount of cash I put in my wallet is ALL I have to spend for that shopping trip so I have to really pay close attention to what I’m putting in my shopping cart.
I am fairly loose with the envelopes and will occasionally switch some of the cash around in the envelopes mid-month. It’s hard to always know exactly how much we will need for each category. I never spend over the amount of monthly budgeted cash. That large sum is non negotiable and we have to spend carefully throughout the month to make sure it lasts us all four weeks.
I recommend everyone at least TRYING doing most of their spending with cash each month and see how much less you spend. It has really opened my eyes to my spending habits and is a great object lesson for everyone to try.