How We: Cash Envelope System
If you are finding this post, most likely you have heard of Dave Ramsey's cash envelope system. If you haven't, go check it out here. Basically you are committing to spending the majority of your finances in cash in order to prevent overspending. Today I am going to show you how we use the cash envelope system and how it works for us!
First: Figure out which categories you are going to convert to cash. Some categories like Gas and Mortgage are obviously hard to pay in cash, so those are examples of ones we pay with our debit cards. The cash envelope categories we decided on were:
Second: Figure out your budget. Go through and determine what your budget is for each of your cash envelope categories. Make sure you stick to the budget you set! For example, if you decide you want to spend $400 each month on groceries, every week you will take out $100 and put it in your grocery envelope. Then once it is gone, it's gone. You don't use your debit card at all for groceries. If you have any left over, you can either move that into a savings envelope or you can keep it in case you need the extra for next week. I always like to move it to a savings envelope because it's nice to have some cash in an extra envelope if we ever need it!
Third: Create/Buy your envelopes. So there are a TON of great options when it comes to cash envelope organizers! Here are a few examples;
Now, you don't need anything fancy to start budgeting this way! You can use paperclips, regular envelopes, or anything that can keep each category separate! I didn't want to spend the money so I just created my own! What I did was cut a rectangle with a tab that fit in my wallet, wrote the name of the category, and then laminated it! I did this for each category and then put them all in my wallet! This is the wallet I have, from Target! I love it because I have a section for my cards, license, etc... then another section for my cash envelopes!
Lastly, in order for the cash envelope system to work, you have to commit! It is harder than you think, trust me! Nobody likes putting something back on the shelf because you went over budget at the grocery store, but figure out what you really need and what you could go without for the week. Stick to your cash envelope system! If it is too hard and you are finding yourself reaching for your debit card week after week, leave the debit card at home! It will force you to stick to the cash you have in your wallet. We have been using the cash envelope system for a while and it has changed our life! We had NO idea how much we were really spending on food, the kids, etc... and once we converted to cash and left our debit cards at home, we realized how often we went to grab that debit card! I would challenge you, if you are contemplating taking the plunge into the cash envelope budgeting system, do it! Get intentional with your money!
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