Cash Envelope System
How does the Cash Envelope System Work?
The basic principles of using cash envelopes are to:
- Create a realist budget.
- Establish spending categories that allow you to pay cash.
- Write the names of each spending category on the front of an envelope and the goal on the back.
- Determine how much cash you require to have in each category. Take this from your budget.
- Every payday withdraw cash and put it in your envelopes.
- Keep the envelopes in a secure place.
- Keep receipts in the envelope to show what you spent. They help to determine what was necessary or not and where your money went to. Discard receipts when verified.
- Spend the cash as you need it. If you don’t use it all it will carry over to the next payday.
- When the cash is gone, it’s GONE! If you notice the category is too low and you have spent it all make a note. Rivise the amount if you find it is not enough.
Write Down Your Spending Categories
First make a basic budget! There are many budget-friendly worksheets out there. Choose a free one and fill it out every month. Next, take a few minutes and think of everything you spend money on during the month, and write it down. Then put a check mark next to everything you can pay for in cash. Those my dear are your categories.
You can keep it super minimal or make several categories. I would suggest starting small and add more categories as you need it.
The important thing to learn here is to be consistent in using the cash envelope system in order to create new spending habits and to be more intentional with your money.
Cash envelope categories ideas:
- Groceries
- Gas
- Household (laundry detergent, toilet paper, soap, toiletries, etc)
- Fun Day
- Personal Allowance
- Spouse’s Personal Allowance
- School
- Eating out
- Sam’s club
- Miscellaneous
- Hair cuts
- Pets
- Tithes
- Health
- Coffee shop
- Gym
- Much more and can be personal