Doing it this way, we were not running back to the bank to put cash in our checking account to pay for every fixed expense. This is just the way we decided to do it because it made things a little easier for us. You will need pull cash out for everything else. I leave money in my checking account for my bills since all of them are on auto-pay. Most likely, you have things that are due the same day every month for the same amount. These are things like your cell phone, mortgage, and car payment. If you get paid weekly, then you need to list your expenses for every single week. Using the cash envelope method was no exception.įor us, I budget for getting paid twice a month. If you have read my blog, you know I budget according to our paychecks. Do you want to fill your envelopes with cash every week or every payday? Do you have your list of expenses?įor this example, I will give you step by step instructions on how we used the cash envelope method. How to Create the Cash Envelope System: Step by Step InstructionsĪt first, there are some things you need to decide. This might take a couple of months to get exactly right, but in the end, it worked for us. You will have $200/mo for groceries in your cash envelope and your husband will have $50/mo. If that is the case, out of the $250/mo that you have in cash from your first paycheck, take out $50 and make envelopes for your husband. Maybe you go to the grocery store most of the time, but there is a chance that your husband might go too. If you run into this problem as well, you need to figure out how much cash to give to your husband. My husband would go to the grocery store after work to get groceries for dinner and I had the cash envelope. This was a problem that I ran into when I first started. What happens if your spouse goes to the grocery store once in a while also? Related: How to Create a Budget (When You Really Don't Want to).Repeat this process for all major categories in your budget such as gas, dining out, clothing, beauty, misc… That will total $500/month for your grocery budget. You repeat this process for your second paycheck of the month. This is your chance to really get a handle on your money. If you want to seriously tackle your budget you have to believe you can do it! Click To Tweet There is no cheating by using your debit card or telling yourself you will do better next month. If you spend $251 in one grocery trip, you have to put something back because you don't have that much cash in your envelope. If you go to the store after work and realize that you don't have your envelope, go to your house and get it. This is where you need to have discipline. The ONLY thing that you can spend that cash on is grocery items. When you get paid with your first paycheck of the month, you go to the bank and withdrawal $250, and put that cash in an envelope and label it “groceries”. You budget $500/month for your groceries. Let's assume you get paid 2 times a month for a total take home income of $1,000. In fact, I used my son's construction paper to make my envelopes and everything was color coded. You don't need to save up cash to start or go out and buy fancy envelopes. The great thing about the envelope system is that you can literally start today. These are just some of the questions I have received from readers, so I finally decided it was time to write the Ultimate Guide to the Cash Envelope System. How do bills get paid on the envelope system? Can you still do the envelope system if you do everything online? What happens when the cash runs out? How do you do it when you have a spouse and he needs cash also? This method is not new and has been around for a very long time.Įven though it's been around awhile, many people still don't know how it works or the benefits. Similarly, it's worth reaching out to your current bank or other financial institution to find out about the different account options they offer based on your financial needs.If you have researched how to budget, then you probably have heard of the cash envelope method. By not seeing this money in your checking account, it can make you less tempted to spend it - with an 'out of sight, out of mind' mentality - but still earn interest," Kendall explained.Įven apps like Mint automatically categorize spending and let you set budgets by category, which can be used to mimic the cash-stuffing system if you're doing most of your spending online or electronically. "With a SoFi Vault, you can even automate a dollar amount or percentage of any direct deposit each individual. To give one specific bank example, Kendall explained SoFi's version. That can be a way to digitally emulate the cash-envelope strategy, Kendall notes. Many banks or financial institutions will allow you to set up a separate savings account for a specific goal - one that's separate from your main checking or savings account.
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