I get a lot of questions about how to use cash envelopes, so I thought I would share my experience with having a cash envelope system wallet. Having a cash envelope walletcan make all the difference when you’re using cash envelopes and learning how to budget. It’s a great way to manage your finances because you get more control over how you spend your money.
When you first start, using plain mailing envelopes is fine. But you’ll be using the envelopes quite a bit, and they can wear out quickly. A wallet designed for the cash envelope system will make your life easier. Plus, there are plenty of designs to pick from, so you’re sure to find one to match your style.
So – maybe you are wondering how to start a cash budget? The cash envelope method of budgeting can help you save more and spend less. But you must have the right tools in place for it to be effective, which makes selecting a wallet for your cash envelope system crucial.
If you’ve used this budget method before, you know that you need several envelopes to separate your spending categories. That means your wallet should have room for three to six groups for it to work for you.
Most people carry their driver’s license or ID with them when they go out, in addition to store loyalty cards and an insurance card. You’ll need space to accommodate those types of things. A coin storage area is also helpful. When you’re spending cash, you’ll be given change, and you need a place to keep it.
Finally, the right cash envelope system wallet should be affordable. There are plenty of options to pick from, and you should be able to get a nice wallet for less than $100. This is the wallet that I use, it is under $20.00! I’ve had it for a year and it is still in like new condition!
Now that you have a great wallet for your cash envelope budget, it’s time to decide what categories need a cash envelope. This can be tricky because if you’re used to budgeting eight categories with cash and your wallet only has room for six, you may need to make an adjustment.
If that’s the case, you can combine two categories, such as “grocery” and “household goods,” into one cash envelope so you have enough room. Some wallets allow you enough space to add your own envelopes, so you might not have to worry about it.
Generally, you’ll want to set up cash envelopes in your new wallet for groceries, dining out, clothing, entertainment, gifts, and any miscellaneous expenses that might come up that month.
The categories that I recommend using are:
If you’ve been budgeting for a while, you already have an idea about how much cash to put into each envelope. Otherwise, take a good look at your spending habits to figure out how much you want to budget for each category.
For instance, if groceries are draining your cash, decide how much you want to spend on them, and commit to not going over that amount.
If you’re married, your spouse should be on the same page with the amount of cash in each envelope. But single people can benefit from an accountability partner, too, so don’t be afraid to run the amounts by a trusted friend or family member to get their input.
In the U.S., 82% of workers use direct deposit to get paid, according to the National Automated Clearinghouse Association. That means you’ll have to take a trip to the bank to get cash to fill your envelopes with.
Before you head to the bank, write down how much money you need to withdraw. There is no one “right” way to manage your cash categories: you can take out just enough for that week or withdraw enough to cover the entire month.
As soon as you can, separate the money into your budget categories in your envelope system wallet.
When you’re ready to go grocery shopping, only take enough money to cover that one trip. If you usually spend $500 a month on groceries, you might only take $125 if you go shopping once a week.
This is the most important part of making your cash envelope system wallet work: don’t spend more than what you’ve put in each cash category. You shouldn’t spend any of the money from the grocery envelope on anything other than groceries.
When your money is gone, you’re done spending until the next payday or the next month, depending on how you set up your cash envelopes.
If you run out of money before the month is over, you may have to get creative with meal planning, gifts, and entertainment activities. You could:
Sticking to a budget can seem daunting, and you might be tempted to overspend. To help you stay on track, you should have a goal in mind. Ask yourself why you want to manage your money better.
Ultimately, knowing you’re working toward something specific can keep you motivated when you want to spend money that isn’t in your budget.
At the end of the month, if you have money leftover in any of your cash categories, you can put it toward your goal. You could also agree to use it as “fun” money and treat your spouse to a date night or take your kids to the zoo.
If you are interested in using cash and starting a budget, check out my money saving budget planner below. Each of my Personal Finance Planners comes with 8 free cash envelopes!
If you want to see a walk through of how I use my cash envelope system wallet – check my video out here!