It’s January 31st, which means we made it through our first month of using the “cash in envelopes” budgeting system!! We kept talking off and on about trying this and finally just went for it with the start of the new year!!
When I posted about this on Instagram in the beginning of the month, a bunch of people commented or messaged me and said they were curious to hear how it went, so I decided to just write my “review” of the whole process for anyone who’s considering trying this for themselves.
What’s involved in this envelope system?
This system does require a little bit of up-front planning, but once you get that done, it’s really not that tough. We sat down at the beginning of the month and figured out what our categories would be for the envelopes, and then created a simple spreadsheet to plan for how much cash we would be putting in each one. Keep in mind, we didn’t use the envelopes for bills because those are automatically deducted from our account each month. We also still used our debit cards for gas, because that just seemed easier and it’s not like we’re really tempted to spend extra money at the gas station (although I am a sucker for QT’s iced tea…). 😛
How to decide on the amounts for each envelope:
Some categories, such as “gifts for friends and family” will change every month, so it’s important to have your calendar nearby so you can check and see what needs you’ll have for each category in that specific month. We had 3 family members to buy birthday presents for this past month, as well as a gift for a baby shower, but some months that number will be a lot less.
We also went through a simple inventory of our home supplies to see what was getting low (TP, paper towels, light-bulbs, etc.) and budgeted accordingly for those things. This entire “planning meeting” took us about an hour, so it really wasn’t too bad.
The next day, I went and withdrew the cash from the bank and put it in the envelopes.
Once the cash was in the envelopes, we wrote the beginning balance and the date on the back of each one. Then, when we went to withdraw money from an envelope, we would write that amount, (along with the date and the purpose for the withdrawal) and subtract it from the previous balance. This made it easy to track where our money was going!
Is it tough to say no to random shopping trips??
Several people asked me if it was tough not to spend extra money with this cash system, and yessss there were several times I found myself entertaining the idea of running into Target but then realized, “I don’t have cash for that!” 😛 (Target has some sort of magic power that tries to lure me in there even when I know I don’t NEED anything! Please tell me I’m not the only one.)
So, even though it was tough to say no to random shopping trips, it actually felt GOOD because I knew we had budgeted for the things we needed and anything else I would have bought was just going to be extra money that we didn’t actually need to spend.
Do you feel like you saved money with this cash system??
YES, definitely. To be honest, we were already pretty frugal with our money before we tried this system, but when we’d look at our bank statement we’d still notice random purchases at places like Target (guilty as charged…), Home Depot (ahem…haha!), and we also ate out more frequently than we realized, I think.
This cash system definitely helped us feel more aware of where we are spending our money, and there were several times we would talk about buying something and then realize we really didn’t need it.
Did the cash system take all the fun out of life??
Someone asked me this the other day when I told them about our cash-system experiment, and it’s actually a really good question. I did wonder at the beginning of the month, would this cash thing make us into miserly, penny-hoarding people who freaked out every time they spent money on something?
Surprisingly, though, it was quite the opposite! I actually had MORE peace about our financial state and I loved knowing that we were staying within a reasonable budget. We made sure to have envelopes for categories such as entertainment and eating out, so it wasn’t like we didn’t allow ourselves any fun! But by having the cash for those fun times built into the budget, it felt like we could spend that money worry-free because we knew we could afford it and that we weren’t overspending. It’s so easy to just swipe a card at a Starbucks here or a Chick-fil-a there and not realize how much it’s adding up over the course of the month. So knowing that we had a certain amount allotted in the envelope for such occasions was actually really freeing and great!
Will you do it again??
Yes!! We actually just had our “budget meeting” yesterday for February and it went even faster this time, now that we have a handle on what we’re doing. For now, we’re really loving this cash system and the way it’s helping us be more aware of where our money is going.
I listened to an awesome series of messages by Andy Stanley on finances about a year ago, and I remember one of his first points that he emphasizes before you dive into the actual nitty-gritty of budgeting and financial planning was, “You need to know WHERE your money is going.”
We did this about a year ago. We printed off the past 3 months’ statements from our bank account and went through with colored highlighters, categorizing our purchases so we could see exactly where we were spending our money. It was so eye-opening. I think purple was our color for “Miscellaneous Purchases” which basically meant random trips to Target or $20 charges at Walgreens that we couldn’t even remember what they were for, and when we added up all those purple transactions, it was crazy how much we were spending like that!
We’re not sure how long we’ll continue this cash system, but for now it is really helping us be more aware of our finances and better stewards of what we’ve been given. (And it’s definitely helping me say no to the ever-tempting aisles of Target. 😉 )
I’d love to hear your thoughts on this!
Have you ever tried the cash budgeting system? Do you have any budgeting tips to share, that work well for you?