Budgeting can be hard. When we’re not used to being disciplined with money, suddenly creating a budget and placing limits on spending can feel pretty restrictive. But by personal experience, I can tell you that when we first started using Dave Ramsey‘s envelope system in our family, we couldn’t believe how liberating it was. Instead of getting to the end of the month (even closer to mid-month) wondering where our money went, we knew exactly what happened to it. And best of all, because we were budgeting, we actually had a little left over. Here are the main benefits of using an envelope cash system for your own budget.
With just a little bit of will-power to stay away from the ATM, budgeting your cash at the beginning of the month (or after each bi-weekly paycheck) can eliminate overspending. When you budget, you’ll withdraw the appropriate amount of cash and divide it among envelopes (we use the sections of a coupon organizer). Create categories for things you can use cash for: groceries, clothing, entertainment, pet supplies, home repairs, birthday gifts, kids’ allowance, etc. Decide every month how much you’ll spend on each category. When the cash from that envelope is gone, you are done spending. End of story. Leave your debit card at home. 🙂 When you use cash, it’s much easier to control your spending.
Control AND flexibility? You betcha. Your budget will not be the same every month. Some months you might have two birthdays to buy for. Others there will be none. Perhaps you have some expenses that only pop up quarterly. Maybe you only need to buy dog food every other month. Perhaps you’re hosting a dinner and need a bigger grocery budget this month. When you plan, think carefully. Check your calendar. Make sure you’re budgeting a reasonable amount for each category that you can stick to. Your cash budget is 100% custom-made for you, month-by-month.
3. Eliminate “Unexpected” Credit Card Use
Imagine you go grocery shopping. You’ve looked at your list and figure $75 is enough for this week. Knowing you only have a certain amount of money should be enough to keep you from impulse purchases (especially if you leave your debit or charge cards at home). If you keep from buying that ice cream or bag of chips, your waistline could thank you, too. After all, your debit card makes it easy to buy “whatever,” but nobody wants to get to the register and be short on cash.
Handing over cash has a way of making us feel more accountable for that spending. You’re likely to question those purchases a little more thoroughly. Do you really need that item? Could you accomplish the same thing while spending less? How much is this really worth? Using cash forces us to analyze or spending, rather than just swiping a card. When you take that $50 bill out of your wallet, it feels much more “real” than swiping a card.
5. How Cash Envelopes Work
If you’re not sure how the cash envelope budgeting system works, take a little time to learn more. It’s surprisingly simple, and it can make all the difference in the world when it comes to sticking to a budget and getting out of debt. Your bank account will thank you later!