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Have you ever gotten to the end of the month and realized you spent WAY too much money on food? Or maybe you can’t seem to find where your paycheck went? I’ve been there more times than I would like to admit, and really, until I started budgeting every month, that was the norm. I would drop a good $600 a month on fast food. I would look at my bank account and make sure I had just enough money to cover the bills. And I was always broke (well, except for the short period of time when I was ballin’ with my $100,000).
Enter: Dave Ramsey
Now, I know that there are people who hate Dave Ramsey more than sleeping in a bed full of spiders (I know, I shivered just typing that), and there are those who love Dave Ramsey more than their grandmother. Whatever your stance on him, no one can deny that he is one of the world’s biggest evangelists of the “cash envelope method”. As Michelle and I started on our budgeting journey before marriage, after listening to Dave Ramsey’s “Total Money Makeover”, one of the things we discussed was using credit cards vs. using cash. We decided to start out using the cash envelope method. We now put everything on our rewards credit cards, but back then cash worked for us.
Here’s a step-by-step process on using cash envelopes:
- Get Cash
- Put in Envelopes
All kidding aside, using cash envelopes takes all of the guess work out of managing your day-to-day discretionary spending. Michelle and I would first sit down and write out all the categories that weren’t monthly bills. We would then make an envelope for each category (our categories were; Food, Gas, Date, Spending Cash, Giving, House) and fill each envelope with the budgeted amount. We did this at the beginning of each month, but you can also just fill them whenever you get paid if you are not currently a month ahead.
How To Save Money Using Cash Envelopes
Throughout the month, we would spend from these envelopes until the money was gone. And here’s the kicker…Once the money is gone, WE WOULD JUST STOP SPENDING! Isn’t that magical? Now, you might say, “but what’s to stop you from raiding your bank account to spend more cash money on 60 boxes of Tic Tacs?” I’m glad you asked.
At the beginning of each month, we would create our budget plan, projecting our upcoming spending. Then, the first thing we would do is transfer any amount that looked like “extra money” to our savings account. That way, only the money that we were going to use sat in our checking account. Think of it like making an entire batch of cookies for your entire neighborhood, but you won’t be giving it to them until Christmas. You wouldn’t just leave them on your kitchen counter (would you?), otherwise, when Christmas rolls around, you won’t have any cookies to give and you’ll be fat.
Sometimes, our money would run out, and we would end up digging through the kitchen to find something to eat for dinner at the end of the month, but we stuck to our budget! After a few months, we got really good at managing our food budget, specifically, and could stick to our $240 a month budget with ease. We managed to get by and NOT MAKE EXCUSES for why we needed to spend money at the mall, or eat out, or buy some new décor for the apartment. This allowed us to not only survive making $14 an hour, but to also save $300-$500 a month and aggressively start paying down our student loans.
Why Don’t You Use Cash Envelopes?
I only know a very few people that use cash envelopes, so statistically most people reading this don’t. My question is, why not? It’s a great way to help you stick to your budget EVERY MONTH and really gives you clarity on exactly where all those pesky dollars are ending up. Now, I will say that we moved to rewards credit cards, but only after a few years of cash envelopes to help develop good budgeting habits. I recommend everyone who is starting a budget start with this method and build some awesome money skills that will pay dividends for years to come.
Comments: Have you used cash envelopes? How well did they work? If not, see above 🙂