Budget Using the Cash Envelope System (Without Using Cash)

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Budgeting can be tough for many people. The thought of tracking how much you spend each week can be tiresome. Many people have found the envelope system to be a much easier way to watch what you spend.

If you have never heard of the cash envelope system way of budgeting, it is simply taking a certain amount of cash out of each paycheck and putting it in separate envelopes for different types of expenses. For example, maybe your “groceries” envelope may have $100 in it each week. And your “entertainment” envelope may get $50 each week. Bottom line, you set up which envelopes you need and how much each one gets out of each paycheck. Once you have spent all of the cash in the envelope, you are done with that category until your next paycheck.

But if you don’t like to use cash like many of us today, you can still use this method. Still grab your envelopes and write your categories on the outside of each one, along with the amount you have to spend on that category. You can also use small a notebook, sticky notes, or whatever you want to use. You can even create a simple spreadsheet to keep track. The key is that each time you make a purchase from that category, you deduct that amount from your total. When you get to $0 you are done.

The success of this system is to not try to work around the system. If you run out of money in your “clothing” category, don’t move money from your “gas” category to help pay for that dress you just saw and have to have. Be disciplined and stick to what you set up for each category.

If you don’t spend all of it each month the best practice is to put any leftover into your savings account. That way you are continuing to build your savings as you go along.

Have you ever tried the envelope system? What works or doesn’t work for you?