Cash Envelopes
So a few years back I discovered Dave Ramsey. I read about cash envelopes & dived in only to fail very fast. I had so many envelopes, ones for mortgage payments, food, this that and anther, and my budget wasn’t even covering the filling of these envelopes! Only recently have I mastered my use of cash envelopes and I honestly think I’ll never go back!
How to start:
First thing to say is I started by saving a months cash in advance. There is no need to do this. You can just decide on how much you need for each one and start with one pay-check. Filling your envelopes up every time your paid. The reason I do a month in advance is as I get paid bi weekly, one pay-check covers the envelopes and the next covering bills and savings etc.
What do I need:
Nothing much, I started with white envelopes where I tracked my spending on the back. I made my categories, filled envelopes and off I went. At first I found it hard juggling the envelopes but I’ve now upgraded to having laminated ones in my purse. I also made little trackers from card which I place in each envelope.
Deciding the categories:
This is where I went wrong first time around. I had loads of them from my electricity to my gym. I now just have the areas where I’ll be using only cash. My mortgage and my other bills come out of my current account. This means on pay day I withdraw the amount I’ve set aside for cash envelopes and then stuff into the correct envelopes. The categories I use are food, household, baby, fun, fuel, clothes, beauty and misc.
Deciding the budget:
This is a tricky one for some people. For me my envelopes are all variable expenses. That means they change every month. Depending on how many days I’m working, fuel could be €20 or it could be €150! Sometimes we use the fun envelope and something we don’t. So the budget is something I decide the month before when I’ve a good idea of what’s coming up. This is one thing I love about them because I can save money in the cash envelopes. If there is money leftover I will often carry it forward to next months budget or maybe pay extra of my loans. Either way I’ve a bigger budget the next month and more cash flow. One thing that’s really important is over budget rather than under budget. That way you won’t run short and reach for the card.
Why I love them:
I never run out of money using this system. It’s that simple. Something unexpected pops up and I’ve got the money there (Everyday expenses). Kids need a copy for school by tomorrow, the money is in the misc envelope. I live rural so no more panicking to get to bank machine. Also I reduced my bank charges simply by not using my card as much only once a month. It’s also been a huge help with overspending, I just don’t because I see the money. It’s visual and I have to hand it over! No more going into town and swiping and then checking bank balance when I get home. I know exactly where every penny is. My current account is now just for bills and my once a month withdrawal. You know what they say, look after the penny’s and the pounds will look after themselves 😉
