Guest Post: The Envelope System

Using a budget is something that I have previously had a really hard time with. It was too much work to enter every receipt and categorize it. It was just too abstract for me. Then I decided to give the cash envelope system a try.

I have been using the cash envelope system for about five months now and it has absolutely transformed my family’s ability to save more money each month. My husband and I do not have the same spending habits. I am very frugal and always have been, he is much more comfortable spending money and likes to have things. This has been a struggle for us throughout our marriage, but using a cash budget has greatly helped this situation.

We decided on a very simple system. We use #10 envelopes that are all be kept in one large Manila envelope. We keep the majority of the money at home (in a safe place), and just grab what we need when we are out and about, so that we are not walking around with large amounts of cash all of the time. We use a very simple system with only 4 envelopes:

Grocery

Household (this is for all money spent at stores such as Target and Walgreens, and it does include some grocery items. I didn’t want to have to separate every transaction, so I left a little extra room in the household budget to include some grocery items.)

Entertainment (this is for all family entertainment, including eating out)

My hubbies fund (this will be money for his lunches and snacks)

To decide on the amounts, for 3 months I made all purchases using my debit card, so that I could track our expenses and see how much we were spending. Then I took those amounts and averaged them out and my husband and I came up with a number that we could both live with. I was a little too optimistic though and after not being able to make it to the end of the month the first two months, I added a little more money where we needed it.At the beginning of each month, I withdraw the amount of cash that we need for the month and separate it into the 4 different envelopes. If there is anything left over at the end of the month, I roll into the next month. This has worked out so wonderfully for us. I have to be selective of what “deals” I decide to buy. Even if things are at rock bottom prices, if I don’t have the money in it for my budget, then I will be out of luck. There are simply no more arguments about going out and doing and buying things. When the money is gone, it is gone. I wish that I had started doing this years ago. It is simple and easy and isn’t too restrictive.