Cash Envelope Method Budgeting
You want to stay on budget and out get out of debt, but you just can’t seem to stick with it. You may have been diligently budgeting, using Excel or other apps to supposedly count every cent you spend. Yet, even after putting in all your income and expenses, the fact does not change that you still overspend. You create and strive to maintain a budget and that is certainly commendable, but just writing it on paper isn’t working! You need the cash envelope method of budgeting!
You’re doing what you can to stay on a budget but the result is the same and you are wondering why. It is probably because there is nothing to actually hold you accountable to that budget. That is, if ever you do not follow your budget, there are no consequences. There is no reward, no repercussions, whether you succeed or not.
The Cash Envelope Method
The cash envelope method budgeting system is one of the best and most effective budgeting systems you can use. If you commit yourself to this type of budget control, you will succeed. This tangible method allows you full control over your hard cash but also limits the amount of cash you can spend. You control your spending in such a way that if you run out of cash, then you stop. Here’s how the cash envelope method actually works.
The cash envelope budgeting system is extremely easy and requires just a bit of your time. To start, you need to know your available budget first. You have to find out how much money you have with you after you paid your bills and put some aside for investments and savings. This will be your discretionary budget, the money you can spend until your next paycheck.
Dividing Your Spending into Categories
List all your expenses into categories on a piece of paper. List your income and subtract all the expenses. Don’t forget to have a miscellaneous one for incidentals. Once you figure out how much money you have left for spending, the next step is to divide it into those categories. Some of the spending areas you can use to categorize your budget include rent, food, gas, clothing, gifts, fun money, etc. To allocate the right amount of money, you can look at your bank statements and past spending to see where you need to cut back and what needs to stay the same.
Create Envelopes and Stuff With Cash
Once you divide your spending money according to the categories for the entire month it’s time to get the envelopes. Depending on when you get your paychecks you may have to put some of the budget money for each category in each time you get a paycheck. Get an envelope for every spending category and write the amount of money you allocated for each on the front of the envelope. Write the name of the category on the front of each envelope as well. If you can afford to put the entire month’s allotment inside at one time, that is the easiest way.
Use the money inside the envelopes for your spending the whole month. Once you run out of cash, that’s the end of your budget for that period. You will not be able to have any more spending money until the next month. In other words, if you spend all your food budget and there is still a week left in the month, you’d better figure out how to eat on what you have in the house and in the freezer because you aren’t allowed to spend anything more. When this happens, you will feel compelled to be thrifty in the future and make sure that your cash lasts until the next paycheck, thus preventing you from overspending.
The fact that you have not been accountable to anything for your budget is the biggest flaw of your former budgeting system. Without reward or repercussion for your actions, you will not feel motivated to cut back on your expenses. In addition, those budgeting methods probably just do not work for you. In that case, the cash envelope system might just be the perfect budgeting technique for you.
The reward is having more money and getting out of debt quicker! You can do this! Try the cash envelope method as soon as possible. You will be glad you did!