![]() Advantages of Using the Cash Envelope Method Pros and Cons of Using Cash EnvelopesĪs with any budget, the cash envelope process has pros and cons. That way you don’t accidentally spend it. If you have bill payment cash mixed in with variable spending cash, try segmenting your bill money by paper-clipping it together with a note stating its purpose. Some of your expenses may be future ones you’ve budgeted for, but if you’re not updating your envelope balance, you may make the mistake of spending that money on something else. It’s important to track your spending if you want to have control over it. Many cash envelope templates incorporate some sort of spending tracker, but you could just keep a slip of paper inside the envelope to write down your spending and update your balance. Tracking Your Spending With Cash EnvelopesĪs you spend from your cash envelopes, it’s a good idea to track that spending. ![]() Make sure you’ve cut up or hidden your credit cards to avoid the temptation and ensure you’re only spending from your newly created budget envelopes. Step 5: Spend from your envelopesįinally, start spending from your envelopes. Having a good mix of $5s, $10s, and $20s will help you be more prepared for all sorts of expenses and keep you from having to move money around between envelopes. ![]() While it’s probably easiest to just swing by an ATM, going to an actual teller so you can request a variety of bill denominations may be a better option depending on your budgeted amounts. Moving money between envelopes will confuse an otherwise simple system.Īvoid dipping into another spending category if you want to maintain control of your money and awareness of your spending. You’ll want to make sure you’re only spending from the envelope that matches the expense category so you avoid accidentally (or intentionally) spending from other envelopes. It doesn’t matter what envelopes you’re using to get started, but at a minimum, each one needs to be labeled with the appropriate category. Take a look at your upcoming expenses, both fixed expenses and variable expenses, to determine how much you need. When you budget per paycheck, you focus on only budgeting the money you need until you get paid again instead of worrying about the entire month. I’m a huge fan of paycheck budgeting versus a monthly budget. Once you’ve got your categories determined, it’s time to figure out how much you want to budget for each one. Step 2: Determine your budget envelope amounts Make a list of all the categories you think you may need, but be aware that the more categories you have, the more envelopes you’ll have to keep track of. Each spending category of your budget will be a separate envelope. The first step to creating your cash envelope system is determining your categories. While you can get fancy with your envelope designs and expense tracking, all you really need to get started are some plain envelopes and a pen. In fact, cash envelope budgeting is probably the easiest budgeting method there is. Using the envelope system to pay cash instead of credit or debit cards will help you save money and stick with your budget. How to Get Started With a Cash Envelope System Taking on a cash diet and making the switch for just those problem categories can be a great way to reset your budget or even ease your way into going 100% cash-only in the future. You’ll be forced to make more deliberate decisions and curb any mindless spending.Įven if you’ve largely got your finances under control, all of us have problematic areas of our budget where we’ve overspent before. ![]() By moving to cash-only, you’ll no longer have the ability to spend beyond your means. If you’ve been looking for an easy way to control your spending, switching to cash may be your answer.Ī cash envelope system is great for beginners. Why You Should Consider Using the Cash Envelope Method ![]() This envelope budgeting is perfect for anyone who has difficulty sticking to a budget or tends to overspend when using debit or credit cards. You determine your spending goals per budget category and fill the respective envelopes with enough cash to reach those goals. The cash envelope system is a budgeting method that uses envelopes to represent your spending categories. DOWNLOAD THE FREE GUIDE! What is the Cash Envelope System ![]()
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