As mentioned before, we converted our household to our own little cash-based economy this Summer. While the system may not be for everyone, it is working remakably well for us and I cannot encourage you enough to give it a try! Believe me when I tell you - NOTHING that I have done in the last two years has done more to curb my shopaholic tendencies than switching to the Envelope System!
But how can one transition from relying solely on debit and credit cards to not using them for anything?
Like most things, there are two ways to do it. You can either transition slowly or you can take the "rip the BandAid off" approach and just do it. We ripped off the BandAid, but you may not be ready for that.
The first thing you need to do is create a budget. There are hundreds of programs out there that can help you to do it (some of which may have come pre-installed on your computer), but my all-time favorite free one was created by Kendra at Shopping For Two. (As much as I link to her budget sheet, you might think I'm getting paid to do so....I'm not, just in case you were wondering!)
If you want to take this slowly, take a look at a few expenses over which you most want to gain control: Eating Out? Groceries? Your "Little Things" spending (you know - the $3 toy from Target, the Starbucks run, all small expenses that can quickly add up to over a hundred dollars each month)? Just pick any that you want and set weekly, bi-weekly or monthly limit for spending in that category. (you decide the intervals. Brad gets paid every two weeks, so that is when we fill the envelopes)
After that, it's very simple....Grab a few envelopes and write the category name on it. Go to the bank/ATM and get enough money out to fund that envelope. For the next week/two weeks/month, any spending in that category comes out of that envelope. When the money in that envelope it gone, you are done spending money in that category until the next time you are scheduled to refill the envelopes.
Of course, you are going to find that you need to make adjustments in the beginning and even along the way. For example: when we started this, my grocery budget was $100/week. I quickly realized that I didn't need that much money, so now I only put in $114 every two weeks (which includes money for diapers). On the other hand, we had to increase the amount of money that we put in to Brads gas envelope (Brad & I each have our own) because his driving back & forth to work cannot be reduced as gas prices flucutuate. But we made up for his increase in gas expenses by me staying home more often and giving him money from my gas envelope.
After a few weeks of this, add on another expense and create an envelope. Continue doing so until everything but your mortgage/rent, utilites and debt payments are being managed through the cash envelope system.
Oh - and if you are used to swiping your debit or credit card for everything, prepare to be shocked at how unwilling you suddenly become to spend that money now that you are handing over cash and have to look at the balance in your cash envelopes go down!
Susan Kishner
I've been reading along for a while now. I just wanted to drop you a comment to say keep up the good work.
Ami (Writing: My Life)
I've was using the envelope system for gas, groceries and miscellaneous spending money (i.e. eating out, Wal-Mart trips, etc.) for more than a year. I've gotten out of the habit over the last few months, but this just reminded me why I was doing it and what a help it was. I'm going to make up some more envelopes and get ready for the next pay check.
Julie
Thanks for this series. I'm finding it really helpful.
kendra
Thanks again for the link! You are just the best!
savvysuzie
Great post. It's amazing how much more careful you are with spending when you actually see the cash in front of you! We are on a mostly cash system, and I wouldn't have it any other way!
PS I have an award for you over at my recipe blog!
http://savvysuziefood.blogspot.com/
savvysuzies last blog post..Circus days
savvysuzie
Great post - we are mostly cash only and it totally changes the way you spend when you have to physically handle the money.
PS I have an award for you at my recipe blog!
http://savvysuziefood.blogspot.com/
savvysuzies last blog post..Circus days
Heidi
Hi Mindi: Thank you so much for your service. I am going to start using the envelope system soon and wanted to get Kendra's Budget from "Shopping for Two", but I cannot seem to find her contact information and the page says, "Enter your e-mail address below and we'll send it to you along with a Users Guide immediately.", but there is nothing below...no spot to enter your email address. Can you help? I've been an avid coupon diva and stockpile sistah for years, but my husband's job was recently eliminated and we just need to regroup.
Hadias
We have been using the cash only system for a few months, but when gas prices skyrocketed we began by cutting back an unnecessary trips.
Weekly runs to the bank to make withdrawals was one of them. For some reason when the gas prices dropped in November we didn't return to cash only. Why not? I don't know.
It didn't dawn on me until now how important and beneficial "cash only" is for us. I realize it every time I swipe my card and then have to reconcile my accounts. It's time consuming.
"2009 cash only system" here I come. Thanks for the reminder.
Lacey
If anyone is interested I use this Fashion Cash Clutch as an envelope system. It isn't as embarrasing pulling it our when at lunch with girls or whatever. I love it!
http://laceyandtyler.blogspot.com/2009/02/fashion-cash-clutches.html