- What is the cash envelope system
- How to use a cash envelope system
- Free cash envelope templates
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- What is a cash envelope system?
- Why should I use cash envelopes for budgeting?
- How do you use the cash envelope system
- Free cash envelope templates
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What is a cash envelope system?
The cash envelope system is an old-school way of handling your money that’s stood the test of time because it works.
Why should I use cash envelopes for budgeting?
Budgeting is a great tool for managing your finances, but one of the biggest drawbacks is that you usually don’t know you’ve gone over-budget until it’s already too late.
Cash envelope systems are great because they’re super cheap to implement, easy to understand, and so simple to follow that you can even use it as a tool to teach kids how to budget.
How do you use the cash envelope system
Step 1. Decide what budget categories you’ll need envelopes for
Some of the most common categories that people use include:
- Housing (rent, mortgage, utilities, etc.)
- Medical (insurance, doctor’s visits, medications, etc.)
- Childcare/pet care
- Transportation (car payment, gas, maintenance, etc.)
Whether or not you have more expenses beyond that varies from person to person. For this system to work, you’ll need to make sure you account for all expenses that you reasonably expect to spend on, so it helps to look at a more extensive list of budget categories to make sure you’ve got everything.
Step 2. Figure out your budget amount for each category
Some expenses are set each month and easy to figure out, like your rent or car payment amount.
Step 3. Fill your cash envelopes as you get paid
If you get paid bi-weekly, put 50% of what you budgeted into the envelope every time you get a paycheck.
For example, if you budgeted $100 for transportation, put $50 in that envelope each time you get paid.
If you get paid weekly, put 25% of what you budgeted into the envelope instead.
If you want to avoid the hassle of using real cash, pretend money makes for a great alternative.
That way, you can still divide out your money between the envelopes and move it around, without having to actually hit up the bank to replenish your money every time you get paid.
Step 4. Spend only what you have in the appropriate envelope
When it comes time to pay for a bill or expense, pay for it out of the appropriate envelope. That does mean you should have the cash envelope with you, so it may help to get a cash envelope system wallet.
If you don’t have enough money in that cash envelope, you can either choose not to make the spend at all (preferred), or you can take the money from another envelope.
Understand, though, that doing the latter means you will have less to spend on that category, so it’s best to use this option only if the spend is truly necessary.
If you pay for a bill or expense online or digitally, take the money out of the corresponding envelope anyway as if you were paying with cash. This will ensure that you don’t spend more than you intended for that category.
Step 5. Adjust as necessary
If you’ve never budgeted before, you aren’t going to get your cash envelope system perfect on the first try, and that’s totally okay.
It is always good to take a moment at the end of each month to reflect and see if you need to make adjustments. Here are some common reasons why you might change what you allot:
- You anticipate having an expense that you didn’t have the prior month (ex: birthday gift for someone)
- You are consistently not meeting budget for one of your categories (after adjusting, make sure your total for all envelopes is still under your monthly income)
- You want to reduce your budget in one or more areas to challenge yourself to spend less (good for you!)
Free cash envelope templates
Need something simple yet pretty to hold your cash that you can easily DIY? Grab any of our gorgeous, chic cash envelope printables to show off that you’re budgeting in style.
Cut along the outline of the envelope. To assemble, fold in flaps (each side and top of envelope) and tape or glue the sides to create the envelope pocket.
Grab all 5 templates in a single pdf by clicking the download button below. Please help us share this free printable to your favorite Pinterest board or on Facebook so others may use this free resource as well. Thank you!
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Push the envelope on your finances with the cash envelope system! Download our free cash envelope printables or get yourself a cash envelope system wallet and start taking control of your spending. By budgeting with cash envelopes, you can seal the deal on saving money!
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Sylvia, aka Mama Chang, is a personal finance blogger out to prove the possibility of navigating high-cost living on a low-cost budget. Paid off college and condo in her 20's on under $55k salary. She wants to teach others how optimize money to maximize quality of life. Dual income with kids, based in Hawaii.
Hangs out on Keeping Up with the Changs: Pinterest