There’s a school of thought that when it comes to spending, cash is harder to hand over than credit. Some financial experts believe that you’ll actually spend less if you’re paying with cash using the envelope system because it’s easier to see the value in a $100 bill than just paying with a credit card. One budgeting method for using cash is called The Envelope System. Here’s how it works.
Create a Budget
It’s not the most fun activity in the world, but getting on track with your finances requires a budget. Write down your income. Then make a list of bills including your mortgage, car payments, insurance, groceries and anything else you can think of. Be sure to include debt payments and savings. Make sure every dollar you have coming in is included in a category.
Name the Envelopes
On the outside of each envelope, write a category name like groceries, entertainment, or clothing. Put the amount of cash allotted to each category inside the envelope. That’s what you are allowed to spend on that category each month. When the money is gone- it’s gone.
Avoid Temptation
Leave the credit cards and even debit cards at home. Avoid the temptation to spend more even when an envelope is empty.
Give It Time
The envelope system is a great way to visually keep tabs on your money. That way you are not needlessly and unknowingly blowing your budget. For a video tutorial on the envelope system check out this site.
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