Save that Cash

There was a time after I had been divorced with twin daughters, that I was really struggling financially and thought I would never get out of debt let alone be able to save money! Saving money to purchase a new home can sometimes feel like an uphill battle you will never win. 

As an educator, I am a natural researcher, I stumbled upon using Cash Envelopes. I read everything I could about this topic.  I loved how structured this system sounded,  assigning my money to each category, and giving myself a budget felt like something I could do, and you can too!

You may be thinking, I have to carry cash to use this system? Why not just use my debit card? Using a debit card may give the illusion of more money than there actually is.  

WHAT IS THE CASH ENVELOPE SYSTEM?

The cash envelope system is used to help you become more intentional with spending your money, and no more, in each categories.  Using cash envelopes really helps if you overspend money in certain categories.  

It is a very easy system to start.  Decide what categories you need (more on this coming up) and create an envelope for each category.  You don’t need anything fancy to start, just envelopes (although they do have cute envelope systems on Amazon such as mine you see in the photo).

HOW DO YOU BEGIN?

I have a few recommendations before jumping into the envelope system.  Hopefully you have a budget in place that will guide you with roughly how much money you will need in each category.  This can be tricky, but be patient!! 

1. Track your spending for a month.  Every.Single.Purchase.  This will really help you  when you are trying to figure out how much money to put into each envelope.  I like to put a notecard in each envelope for tracking.  It’s quick and easy.  Plus, you will always have it with you.

2.  You must be patient.  It might take you a few months to dial in how much money you need in each category.  Give yourself some grace with this.  I know I was pretty frustrated with myself at the beginning if I went over budget in a certain category.  

This will teach you one of two things.  One, maybe you are spending too much in this category and you can try to cut back in that particular area.  Two, you didn’t budget enough for the category.  Take a look at your spending and decide which one is accurate.  

3.  If you have a spouse, make sure you are both on board. Have open communication, and review regularly.

USING THE CASH ENVELOPE SYSTEM

Begin paycheck to paycheck.  Decide the day before you get paid how much money will go in each envelope category. Once you decide that, write down which bills you need to get at the ATM.  Be very specific: 1’s, 5’s, 10’s, and 20’s. This way when you go to the bank to get your cash, you are ready and will be able to fill your envelopes quickly and accurately.  

Once you have figured out how much money you will put in each envelope, you will need to be aware of what you plan on spending money on when you go out.  If you know you are going to be getting gas, bring your gas envelope.  You should not use money for other envelopes to cover costs!  If you forget your envelope, go home and get it.  No, seriously go home and get it.

The magic of this system when you have it running smoothly, is the amount of money you will save.  When you have cash to spend it helps you to be very intentional about how you spend your money.  There is something about having physical cash vs a debit card to pay for purchases.  It makes you think a little more before buying something.

When you know you will be getting gas, only take the amount you will need.  If you are getting a few things from the grocery store, take what you think you will need.  It is not necessary to take the entire envelope.

PROS AND CONS 

Pros

*You will start to be very intentional with your money.  

*Savings will probably start happening for you.

*No more overdraft charges if you use cash for everything.

*Using cash means you will be much more aware of how much money you have, therefore budgeting is easier.    

*Any extra money left over can be used to help payoff debt.

Cons

*You need to have the correct envelope with you when you spend money on that category.

*It can be frustrating at first getting to where you are comfortable with the amount of cash you need for each category.

*Some people may not like having that much cash.    You should definitely have a hidden safe to keep your cash when it is not with you.

*Borrowing money from another category will be tempting.  Don’t.  This is the time to get creative.  If you are out of money for food, look in your freezer, look in your pantry.  You will be incredibly surprised at how much further you can get your food budget to go. 

THAT’S A WRAP

Using the cash envelope system works!  If you struggle to keep yourself in check with money, or feel you spend too much money on things you don’t need,  I suggest trying this system.  Becoming more intentional with my spending has been my favorite part of this system.

If you try this, I would love to hear how it is working for you!  Happy envelope stuffing!