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April 24, 2020 · Leave a Comment

Your Complete Guide To Using Cash Envelopes

This post may contain affiliate links for your convenience.
Click here to read my disclosure policy.

Budget· Budget Tips· Debt Free· Debt Free Tips· Frugal Living· Saving· Ways We Save

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Whether you want to start using cash envelopes, or someone has suggested using a cash budget is the best way they’ve been able to stick to their budget, you’ve got some questions. I’m going to walk you through some of the most common tips, tricks, and questions regarding using cash envelopes. And because I always find it helpful to see how people are using and adapting something to work for them, I’ll break down how we use cash in our budget as well.

Your Complete Guide To Using A Cash Budget

Why You Should Use Cash?

Some of the biggest names in personal finance will tell you to use a cash budget. The reason? Cash is king!

What that means is that by using a cash budget, you can easily see what you have left in your budgeted categories rather than flying blindly with each swipe of the debit card, and eventually overspending.

Just because someone recommends that you should use cash doesn’t mean that you have to. The truth is that you need to know your level of self-discipline when it comes to your debit and credit cards.

If you are someone that already has a strong discipline and don’t swipe without thinking it through, good for you! Hubs is in good company. But I have to say I am not one of them. I do so much better when I can see what is left in each category rather than a vague number subtracted from a bank account estimate.

So, should I use cash in my budget or not?

Yes!

Your Complete Guide To Using Cash Envelopes

Years ago I was against using cash because I thought it made it too complicated since we didn’t have a physical bank location within a 2-hour drive of our house. I was very limited with what denominations local ATMs had. Combine that stress with always having two young kids in tow, I thought it was best for our budget to not carry cash on me at all, and skip the ease of expense tracking with what cash is left in each envelope.

Ironically, keeping track of coupons and coupon deals was something I was willing to do. To each their own.

As my kids got older and required less of me watching them 24/7, I tried a 30-day cash budget experiment and found that even though there was a little more legwork to fit it into our budget (more on that later), using a cash budget absolutely helped me keep track of our overall spending and how much we had left in each category.

I know that it also helps our kids. They each have an envelope for their allowance that is filled once a month, on Hubs’ paydays, along with any extra chore money they earn. They can easily see how much money they have saved up, or how much they spent because their envelope is empty.

Using a cash budget works. But with that, so must you.

That means sticking to your budgeted amounts only, and not using your debit card “just because”.

How To Get Started Using A Cash Budget

First, you have to make sure that you have a zero based budget set up. It is hard to start implementing a cash budget strategy if you don’t have a budget set up first.

After your budget is set up, you need to look back at your expenses. That means looking at the last 3 to 6 months of purchases, and seeing what amount you spent on food, household items, personal care items, clothing, restaurants, gifting… you get the point.

Track what you spent, and then total up how much you spent during each month.

Were you pretty spot on each month? If you spent $500 on food one month, and then $550 the next, that’s pretty consistent. I would budget on the higher end first, and if you don’t need that much in your budget, you can always reduce it the next month.

Did you spend an exorbitant amount on eating out each month? This would be an excellent place where a cash budget will help you. If you spent $100 on eating out for a month, and then $300 eating out the following month, try starting with $100 in cash each month to spend on restaurants.

This way you are not completely cutting yourself off from eating out {I get that there are numerous situations where eating out is just what needs to happen because it is better than not eating at all}, but at the same time, you’re trying to stick to a budget rather than going overboard.

 

View this post on Instagram

 

Payday! Time to fill those envelopes up until August 14th! . Groceries: $680 Household: $130 Clothing: $90 Hair: $20 Pet: $90 A: $10 O: $10 B: $10 Kate: $40 Hubs: $40 Family Fun: $90 Miscellaneous: $40 Vacation: $120 Back to School: $130 . Fun fact… it doesn’t bother me carrying all that around as long as they’re divided up in their envelopes. When it’s a single stack, it bothers me to no end!

A post shared by @ makingcentsmatter on Jul 15, 2019 at 4:32pm PDT

What Categories Do I Need For Cash Budgets?

As I mentioned, using cash is best for parts of your budget that you tend to spend blindly on. I would not use a cash-based budget for monthly bills and most non-monthly expenses.

That said, these are the categories that work best for our family:

• Groceries
• Household/Personal Care
• Family Fun {our eating out / movie money}
• Pet Care
• A Allowance
• O Allowance
• B Allowance
• K Fun Money
• D Fun Money
• Hair
• Clothing
• Vacation
• Back to School
• Miscellaneous

Some other cash categories used by others are:
• Fuel
• Baby
• Lunches
• Auto Maintenance

All of these categories don’t get used every month, but these are categories I have envelopes made for and will fill when we need them. For example, when I’m writing this, it is April. I have started our Back to School category, so this envelope just started filling up.

And to be clear – I didn’t start a cash budget with all of these envelopes. I did start with Groceries and Household/Personal Care because those were the two categories I had the hardest time getting the spending under control, even after we slashed our grocery budget by half.

 

View this post on Instagram

 

As I explained in my YouTube video, this paycheck we’re doing our envelopes a little different. It’s super busy this month, and rather than taking out cash, we’re doing debit. Past experiences tell me this is best when it comes to busy months in our house. Since then, our quarantine has made it a smidge less busy… but we’re still going cashless for the month.⁣ .⁣ But that doesn’t mean we’re going totally blind into this budget. I will still be dividing my transactions as if they were paid for in cash, I will be putting the receipts from the purchases in these envelopes, and tracking how much we spent from each category with the spending trackers on the back.⁣ .⁣ By the way, you could have these totally cute envelopes too! They are part of a set of 6 floral envelopes I just made available in my shop: https://www.makingcentsmatter.com/shop – or link in profile. Use the code MAKECENTSMATTER for 10% off anything in my shop.⁣ .⁣ Stay tuned… I have a lot more to upload, and will try to get to them soon. This of course depends on how the kids and doggo are doing with their mandated staycation. ⁣ .⁣ .

A post shared by @ makingcentsmatter on Mar 16, 2020 at 11:36am PDT

The other categories I added in over time. Our Hair category, for example, is because the barbershop Hubs and my boys frequent only works in cash, so I prefer to just have some cash on hand for that specific purpose rather than pulling from a different envelope and then trying to remember to refill it.

How Much Cash Do I Need To Take Out?

The simple answer is as much as you need to cover your categories, but not more than your budgeted amount. And that is going to take some effort on your part. Check to see how much you spent in each category for the last few months.

Now to the calculating part.

Let’s say that you are paid $1000 weekly, and you know that you spend $150 on groceries and $20 each week on household and personal care items. That totals to $600 each month for groceries and $80 per month for household and personal care items. You know that you also spend roughly $60 on pet food and supplies for the month or about $15 per week.

So with your weekly paycheck over 4 weeks, you would take out $185 in cash divided up like this:

Your Complete Guide To Using Cash Envelopes

Which denominations you use are completely up to you.

Like I mentioned before, I don’t have a bank location near me. So I rely on ATMs in their network and the denominations they offer. For me, knowing that the ATM I need to use only does denominations of $20, I would take out cash denominations like this:

Your Complete Guide To Using Cash Envelopes

That way I still have the monthly amount for each category, but it’s divided out each week a little differently based on only having an ATM with $20 denominations available.

 

View this post on Instagram

 

Time to fill those envelopes! . We dont have a physical location of our credit union near us, so I rely on an ATM in their network. . Multiples of $20s are what most of my categories are, and the ones that aren’t, I wind up making change from other envelopes. . $10s are the bane of my existence! I was so excited I had some $5s I could swap out this week too. 😂😶 It really is the little things.

A post shared by @ makingcentsmatter on Dec 6, 2018 at 10:32am PST

The first week I would take out $200, putting $160 in groceries, and $20 in household and pet. The second week I would only take out $180, putting $20 into household and pet each, and then leaving the remaining $140 for groceries. I do it this way because the first week I took out $10 more than the $150 per week that I normally spend, so this week I am taking out $10 less than that average amount.

How To Use A Cash Budget

When you are out at the store and it is time to pay, you will take money from the cash envelopes for that category. Leave your cards where you cannot get to them easily, and don’t use them for categories that you have in cash.

This takes a lot of self-discipline. Don’t get discouraged if you aren’t sticking to it right away.

What If I Have Money Leftover?

This goes off personal preference. I know some people in the debt-free community love to head to the bank, deposit that unused cash in their checking accounts, and either stick it in savings or make an extra debt payment! And that’s awesome!

But that doesn’t work for us.

Like I mentioned before, we don’t have a physical location of our credit union near us. So when we have extra cash leftover in our envelopes, I save it for the next time I fill the envelope.

For example, if I have $20 left in my grocery envelope, I will reduce how much I take out for groceries next time by $20, and pay an extra $20 towards debt.

In the end, you need to use a method that works for you.

 

View this post on Instagram

 

Envelopes filled! . Do you use cash or debit? . For us, it’s a mix. Cash for certain categories (food, household/personal care, allowance, family fun money and so on). Debit for other categories (fuel, Chewy purchases, copays, etc). . The envelopes we have vary based on our budgeting needs. They are not the same month to month (although they are close).

A post shared by @ makingcentsmatter on Jan 16, 2020 at 12:00pm PST

What If I Do Spend All The Money?

In this case, to stick to your budget and reach your overall financial goals, you need to go back to the drawing board.

You need to reassess your categories to where you can spend less in during that paycheck, and then stick to it.

With the next paycheck, you need to go back and reassess. Did you underestimate the amount you would need, or did you overspend? Either adjust your budget categories as necessary or tighten in the spending reins.

How Do I Share Cash Envelopes With Others?

I am the one that usually does all the shopping. All. But in the rare instance that I need Hubs to pick up something, most often I will tell him to use his spending cash, and I will reimburse him when he gets home from the proper envelope.

For example, he usually carries a $20 on him. If I needed him to stop for some milk and coffee on the way home, he will use his $20, hand me all the change (bills and coins) when he gets home, I will put the bills in the grocery envelope and hand him a $20 from the grocery envelope. This is what works best for us.

Find a system that works best for you. If you split the shopping equally, then split the cash envelope equally.

Your Complete Guide To Using Cash Envelopes

Using Cash Envelopes:

You can use any envelopes you have! Use envelopes from junk mail, use mailing envelopes, make your own, use printable envelopes… use whatever works!

I go back and forth between using laminated envelopes and printable envelopes that fit inside my wallet. You can check out how to make your own laminated cash envelopes, or purchase your own printable cash envelopes. You can also get a free set of printable cash envelopes in my Resource Library.

Recently I have been keeping the categories I use the most often in my wallet, and the categories I don’t use as much at home in the planner. This isn’t always the case, and what I use at the time depends on how busy that particular season of our life is.

During our COVID-19 self-isolation, we used our debit card and ^^cashless trackers^^. Again, it depends on the season of life we are in; use what works best for your current season of life.

Online Shopping On A Cash Budget

Is it even possible to incorporate online shopping with a cash-based budget? The short answer is YES!

There are a few ways you could approach this. First is you could take out that money in cash, and use it to buy a gift card or a prepaid Visa, and then use that online. If you’re someone who tends to add a lot of stuff to your orders just because, this may be the better option for you you’re limiting the amount on that card.

We do it a little differently. In my Budget With Me videos, I break down cash envelopes to include a Pet/Chewy category. Our household has a puppy, a geriatric cat, and two male rabbits. It is infinitely easier for me to have the majority of our pet supplies delivered to our house rather than hunt it all down between four different stores. I keep what we need on an 8-week autoship, and budget for it each month.

While I could keep our debit card on file with Chewy, and pay for it outright, I don’t. That means, yes, we do still use our credit cards even in debt repayment. For a detailed explanation of why you can check out this post.

But whatever the amount was that I have on our autoship that month, I budget for it that month and then pay it off on the credit card that month. I don’t give it time to accumulate interest and carry the balance.

Make Sure You Succeed

To succeed at using and sticking to your cash budget, make sure you have clear financial goals. Understand why you are going through this process of making the budget and sticking to it.

Don’t forget to reassess your budget categories periodically. Spending habits change as you go through life. While our family of 5 hasn’t grown larger, my kids certainly have grown bigger than when we first started budgeting. Feeding two teenage boys is a real struggle. I have had to adjust our budget to meet not only our grocery spending needs but also our fuel spending. School activities for three is also a struggle.

As with all things personal finance, it is very unique to your situation. Find a balance that works for you. And don’t forget to give yourself some grace as you’re starting your cash budget.

Do you have any tips on using cash in your budget? Leave them below!

Your Complete Guide To Using Cash Envelopes

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makingcentsmatter

makingcentsmatter
Payday is today! Actually, payday was Friday the 1 Payday is today! Actually, payday was Friday the 12th because we completely forgot today is a bank holiday in the US. The feeling of being paid and not needing it is a nice one.⁠
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Here's what our paycheck needs to get us through for bills until March 14th. For a full look at our budget over the next month, head over to my budget with me on YouTube: https://youtu.be/rb8uyi1-rNc⁠
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#monthlyincome #monthlybudget #monthlybudget #zerobasedbudget #payday #budgetwithme #budgeting #budgettips #budgetcalendar #frugalliving #savingmoney #paycheck #makingcentsmatter #debtfreejourney #debtfreeprogress
This weekend was focused on a pantry shop and meal This weekend was focused on a pantry shop and meal plan creation! This meal plan to get us to our February payday. We also picked fast meals, because it's a busy two weeks between doctor's appointments,. Academic Decathalon, dance, and drama. I'm unsure we'll be able to shop on payday, hence the extras.⁠
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Total spent: $112.39 for items to get us through this and lunches.⁠
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Keep in mind, just over $112 for 12 meals isn't sustainable for our family, just in times when we need to stretch the last bits of our monthly income. I really wish $112 was enough to feed two teenaged boys in our household.⁠
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The point being... do what works for you, and your situation based on your location. Don't try to fit yourself into someone else's situation!⁠
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#mealplan #mealplanning #frugalliving #frugalmom #makingcentsmatter #savingmoney #monthlyincome #budgeting #budgetmom #groceryshop
January's real numbers:⁠ .⁠ House: $511.13⁠ January's real numbers:⁠
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House: $511.13⁠
Citi: $720⁠
D NelNet: $100⁠
K NelNet: $100⁠
K Chase: $150⁠
Explorer: $343⁠
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Extra Payment to Citi: $500⁠
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Noteworthy... our car payment had a late fee assessed because the mail was SLOWED down over Christmas. Three headaches later, and we potentially have online banking finally set up with them. It is still a headache. And we are never taking another car loan out with this bank!⁠
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How was January?⁠
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Sometimes in order to see progress, you need to ta Sometimes in order to see progress, you need to take a step back.
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I'll be honest, I didn't think that we got this far in 2020. With everything going on - and more importantly, everything NOT going on - we didn't keep up with this every month. We just threw what we could at our goal. I'm simply amazed at how far we came.
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Things are still hectic, and I'm simply mentally exhausted between remote learning, extended remote learning, offset quarantining children... it goes on and on.
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But I also cannot wait to see what strides we will make in 2021.
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#makingcentsmatter #debtfreejouney #debtfreeprogress #savingmoney #savings #frugalliving #frugalblogging #budgeting #monthlyincome #zerobasedbudget #financialgoals #personalfinance
This is what school looks like when it's a hybrid This is what school looks like when it's a hybrid model, and your house does not have unlimited space. I was standing in our kitchen when I took this picture, the kids behind me making lunch.
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Our district is carefully monitoring our local infection rates, and we are currently in a hybrid form. That means they divided the district into two groups; half are in school on Monday and Tuesday, the other half on Thursday and Friday. They are offering an all remote option, but Verizon for some reason supplies our house with speeds so slow that it would shock a tortoise. Remote was a no-go.
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This set-up has taken some trial and error to get to where we currently are. Because no matter how prepared you are and how much you've planned, once you're in the weeds, actually doing it, there is no telling how your best-laid plans will work.
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Our home is a 1800sqft one-story, open living area, 4 bedroom, 1 bathroom, ranch-style house in a very rural area. It has no home offices. No guest bedrooms. Yes, that is a desk in the corner of our dining room. 🤣
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Each kid gets their own color bin for their school work. This includes school-issued Chromebooks and other standard items they need to get work done - headphones, pencils, and so on. When we are done for the day, we clean up everything, place them neatly in these bins, and place them in cubbies (on my current left) at night while the Chromebooks charge.
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I do NOT bother to clean up at lunchtime. It would take us more time to clean up and reset everything than it takes us to eat lunch. So we only pack it all up for the day and call it done.
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During the day, I sit between my younger two and field any questions they may have, troubleshoot technical issues we all have, and be the overall bouncer when things get off-topic. My high schooler will occasionally emerge from his bedroom, which opens to the kitchen. So he is close by when he has questions.
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Please remember that with all things in life, you need to work with what's available to you. And there is no shame in that. Don't ever feel like you're not doing good enough because it's not picture perfect. Work with what you have available to you, and you'll do amazing things.
School is in session, the garden is slowing, and I School is in session, the garden is slowing, and I’ve finally realized I haven’t shared our payoff numbers for July or August. Yeah……
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Please keep in mind, we are paid monthly on the 15th, but we don’t go by a “monthly” budget. So I have to go back and look at these numbers based off their due dates in the calendar. Because our pay falls in the middle of the month, I can’t tell you what portion of our income went to debt. It’s going to vary paycheck to paycheck anyways because our priorities vary with each check. Nothing is ever the same month to month, and pay to pay.
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That said, inJuly we paid off $2,694.43.
In August we paid off $1,673.40.
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The difference here is that our priorities shifted between the two months.
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During August, we were doing more prep for whatever school would look like this year, and we had some savings goals make their way to the top of the list as well.
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Of those goals, in August we made progress!
EF Reimbursement: $146 / $1,200
Checking Buffer Reimbursement: $227 / $500
Vet Sinking Fund: $40 / $200
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Remember this is a journey, not a race. There is no point wearing yourself ragged and still making no progress. Make progress where you can, and celebrate it. Even if it’s $5.
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It’s progress, and that’s what matters!
While I wait for the canner to finish the last rou While I wait for the canner to finish the last round... I rearranged our recipe binder. It's only taken me 8 or so years. 🤣😶😭
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I miss the days when zucchini was my problem. Now it's tomatoes. I can only find so many ways to use up spaghetti sauce! So the next 50lbs or so will be chili base and unseasoned sauce.
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On top of this school is starting with a hybrid in building & online system. And I'm seriously slacking on some things I need to do. I'm not good at juggling multiple things and the balls are falling. But I keep reminding myself... be patient. This too shall pass. This is only a phase. So I pick and choose what's the most important, focus on that and go from there.
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So if you feel overwhelmed with your current phase, remember, this too shall pass. It's okay to rearrange priorities. It's okay to take a breather.
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This too shall pass.
If you didn't start finding interesting ways to ge If you didn't start finding interesting ways to get rid of the squash, can you say you even planted any?
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Good news, I'm almost caught up! Bad news, the garden has more.
Super busy here... but I wanted to share that wins Super busy here... but I wanted to share that wins can come in super small packages. I thought I'd spend $380 to clean the band instruments in this house. I ended up spending $234. So the remaining $146 can go to reimbursing what I pulled from our EF.
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No matter the win, celebrate it!
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What are some wins you have had lately?
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