Most experts also recommend not “sharing” money between categories. Then, throughout the month, you will use the cash envelopes for their corresponding expenses. You would add $50 at your first paycheck of the month and $50 with your send paycheck (if you get paid bi-weekly).Īlternatively, if you have enough money in savings, you can put the entire $100 in at the beginning of the month. For example, let’s say you plan to budget $100 for gas. First, add the budgeted amount of cash to the envelope at the beginning of the month or after each paycheck. For me, the grocery budget is the killer!įor the cash envelope system, here’s what you do. Most people who struggle with budgeting will have the hardest time with these categories.
These categories include things such as food, clothing, dining out, entertainment, and so on.
It is especially important for tricky line items where it is easy to overspend. Plus, since you pay a fixed rate each month there isn’t a possibility of overspending in these areas.įor all other categories, you pay cash from your envelopes. Paying your utilities, your car payment, rent, or other similar expenses with cash isn’t necessary. It is important to note it doesn’t make sense for all categories. The basic premise behind the cash envelope system is using a separate envelope filled with cash for each budget category. For those of you who aren’t as familiar with this budget method or who need a refresher, let’s do a quick review. If you have ever heard of Dave Ramsey, you’ve probably heard of the cash envelope system. Conclusion What is The Cash Envelope System
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