Cash envelope system for beginners 2021, low income, teenager, setup weekly pay and smart way to use money especially debit card.
Have you heard of the cash envelope system? If you’ve heard of Dave Ramsey, you’ve undoubtedly heard him tell you that cash is the only way to go to stay on budget.
My wife and I started using a cash envelope system when we first started our debt-free journey and, from experience, I can tell you it was a huge pain – but it worked!
If you’re on board and ready to start using cash for your purchases – congratulations! You are well on your way to finally get out of debt and start making some serious progress toward your money goals.
A cash envelope wallet system is the perfect way to control your spending and to take control of your finances.
In today’s article, we going to talk about you guess it cash envelope system for beginners by the end of this video, you will know how does it work? How much you can save? And important of all is it really worth your time or not we about to find out so sit back relax and drink some coffee.
What is a cash envelope system?
The cash envelope system is exactly what it sounds like. You put your cash into different envelopes based on the budget categories.
You’ll decide exactly what amounts go into each cash envelope based on your spending goals.
For example, you might put $500 in the grocery budget and $200 in the fun budget. The key is that you’ll only be able to spend the cash out of these envelopes for the specific budget category until the next cycle of your budget.
What is the benefit of using this system?
If you have ever tried to stay on budget while using credit cards, you probably understand how difficult this task can actually be! Using credit cards takes the pain and emotion out of spending. If you go to the store with a credit card in hand, it’s relatively easy to swipe that card and buy whatever you want.
There really is no pain associated with the purchase until the end of the month when the bill arrives. If you go to the store with $40 dollars in cash for food that needs to last until the end of the month, spending each and every dollar can be painful.
This will make you pay much more attention to your purchases if you know you only have a finite amount of money to spend.
When the cash runs out – it’s out. Plain and simple.
Using cash is somewhat of a budget hack if you think about it. No more overspending – no more high credit card bills at the end of the month.
Add a little spending pain to the mix and suddenly you can be much better at sticking to your budget!
What is the downfall of using this system?
You have no credit card reward. But you going to be like mike I want to have point so I can fly for free. Hear me out on this If using the cash envelope system stops your overspending and helps you save even 10% more per month, do you even need the 1-3% cashback credit card rewards?
Another downfall is an inconvenience. If you’re going to buy groceries and halfway to the store you realize you forgot your envelope, you have to turn all the way around.
A solution to this problem would be to keep some backup cash in your wallet, but it might be cheating but I will leave it up to you.
How does it work?
When you start using the cash envelope system, you’ll want to first pick some categories from your budget that you find yourself frequently overspending on.
Here are some commonly used cash envelope categories:
- Groceries
- Haircuts
- Clothing
- Gift buying
- Dining out
- Fun money
- Online Purchases
With your properly labeled envelope categories, you can start putting your hard-earned cash in your wallet.
You have two options to fund your system.
Option1: If you have the available cash, you can fully fund your wallet at the beginning of the month.
Take the money out of your checking account and fill up the categories with the amount you have budgeted.
Option2: If you are short on available cash, you can wait until you get paid throughout the month. Slowly fund your cash wallet as you receive income.
With either option, you need to remain disciplined and only use what is in the wallet. For example, if you want to go out to eat but can’t fund that category until your next paycheck – learn the value of patience.
Don’t fall back into the habit of using a credit card or borrowing from another category. This cash system will take some time to get used to it but it will pay off in the long run.
What do you do with the extra money?
It’s the end of the month and you have $100 left in your grocery fund? I have a major virtual high five coming your way!
Coming in under budget is definitely something to celebrate. This is where personal finance is personal. You are a grown adult and can use that extra money however you see fit.
If you want to celebrate by going out for a celebratory dinner – be my guest! If you want to use that extra money to put towards your emergency fund, pay down debt, or investing, that is awesome too!
It all depends on what money goals you have and how quickly you want to achieve them.
How to use a cash system when shopping online?
Using cash is great, but what if you love taking advantage of Rakuten to save money while shopping online? It’s true, you can often save a large amount of money by finding the best deals on the internet.
Don’t be afraid – there is an easy way to navigate the cash envelope system when shopping online.
If you find a great deal online, make the purchase with your debit card and take that amount out of your cash wallet.
You can either deposit your cashback into your checking account (time-consuming) or you can save the cash and use that amount to fund your wallet next month. All up to you.
Where to find your cash envelopes?
The cash envelope budgeting system is a very popular approach to getting a handle on your budget. Due to this popularity, you have many choices when it comes to carrying your cash in these envelopes. Here are a few options to take a look at:
Plain white envelopes: Of course, you can go with the standard white envelopes. After all, if your ultimate goal is to save money then this is an affordable option. You can get 500 plain envelopes for $15 on Amazon.
Savvycents Wallet: With this wallet, you can organize your cash, coupons, receipts, and store cards in a fashionable way. They have a variety of colors and styles for you to choose from. What I like about this wallet is the slim design with a zipper for increased security.
Bella Taylor Wallet: I am a big fan of the way this wallet looks – it definitely is a beautiful way to budget! This cash wallet comes with 8 envelope slots and label inserts that you can customize on your own to match your cash categories. The wallet also has space and slots available for your cards, your ID, and your checkbook.
Should you use the cash envelope system?
That’s a good question. This system isn’t going to work for everybody, and if you do decide to use it it will definitely take some getting used to.
That being said, if you find yourself frequently overspending on certain things, the cash envelope system can be a huge help. Give the cash envelope system a try!