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Envelope System


Forum: Financial Planning and Budgeting

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  #1  
July 21st, 2011, 10:42 AM
nateandjenny's Avatar Mega Super Mommy
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Can someone give me the best way to use the envelope system?

Thanks!
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  #2  
July 21st, 2011, 11:28 AM
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Use cash; when it's gone, it's gone!

Seriously though.....first figure out which areas of your budget you would like to use cash for. Then create a max amount for each of these areas. I found that the easiest way to stick with envelope budgeting was if I replenished the money weekly. That way, it was never too long before geting more + constantly looking at it made me really question each and every purchase.

I used one of the little expander things and labeled my categories. That way I had the money with me at all times (also, a plus of putting the money in weekly was that usually there was never a ton of money in it at once). I also didn't have to keep replacing envelopes as they wore out.

I actually would take any coin change left over and toss it in our chane jar. It's amazing how fast it can add up. We'd usually have about $20/month in change.
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  #3  
July 21st, 2011, 04:02 PM
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Quote:
Originally Posted by ~Kris~ View Post
Use cash; when it's gone, it's gone!

Seriously though.....first figure out which areas of your budget you would like to use cash for. Then create a max amount for each of these areas. I found that the easiest way to stick with envelope budgeting was if I replenished the money weekly. That way, it was never too long before geting more + constantly looking at it made me really question each and every purchase.

I used one of the little expander things and labeled my categories. That way I had the money with me at all times (also, a plus of putting the money in weekly was that usually there was never a ton of money in it at once). I also didn't have to keep replacing envelopes as they wore out.

I actually would take any coin change left over and toss it in our chane jar. It's amazing how fast it can add up. We'd usually have about $20/month in change.
I was going to say the exact same thing right down to the change jar. I just changed my change in and made $47 to apply to step 3
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  #4  
July 21st, 2011, 07:19 PM
JessP's Avatar Lovin life and family
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We only use the cash for gas and groceries. I have two envelopes, I put the money in after each paycheck. I have it broke down in our budget so it works out to about once a week. At first it takes time to remember to grab the cash. Once you get used to it, its a great system. Makes you pay more attention to where the money goes and how much you spend. We just restarted the system July 1st in fact. It helped a ton with saving for our house.
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  #5  
July 21st, 2011, 09:37 PM
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Personally we don't use the envelope system, just not something we have needed to do as we're okay with doing lists for groceries and only buying what's on the list and budgeting and not going over that on our bill, etc.

I agree with the other ladies on how to do it and I also agree that weekly is probably a good idea.

Since I work as a transcriptionist for an insurance adjusting company, my recommendation would be not to keep anymore than $200 in cash in your home at one time. If someone were to break in or you had a fire or something along those lines, most insurance companies (whether it be renter's insurance or homeowner's insurance) will only cover $200 worth of physical cash, so if you have more than that in your home and something happens you're out of luck for anything over that amount that you lost. I unfortunately transcribe a lot of interviews where the people had $1,000 in their home in cash (supposedly) and only get $200 from the insurance company and if they were telling the truth, that's rough to lose $800 because someone broke in and stole it or you had a fire.

Good luck!
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  #6  
July 23rd, 2011, 07:17 AM
jhmomofmany's Avatar Look! A Dancing Banana!
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thanks for asking about this! I've told hubby we need to do this for some of our more "spendy" categories. When you're setting your budgeted amounts.. How did you decide what amount for each category? What if you run out?
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  #7  
July 23rd, 2011, 08:09 PM
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I had been writing down what we were spending before I set up budgeted amounts. I looked over several months of spending and then reduced each area to an amount that I thought was appropriate. We still had some adjustments, but they were minor.
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  #8  
July 25th, 2011, 12:06 PM
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I went back through months of budgets/ledgers to see what we were spending in each category. Then we planned how often we grocery shopped or needed gas and planned to take the cash that paycheck. We get paid 4 times a month so we don't take much at one time. Once the money is one that's it. No more spending. It's hard at first but it helped us to control our spending. A lot of people don't realize what the spend when they swipe a card.
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  #9  
August 3rd, 2011, 12:08 PM
nateandjenny's Avatar Mega Super Mommy
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thanks ladies I am planning to get something started this weekend now that s finals are over!
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  #10  
August 4th, 2011, 10:00 AM
JessP's Avatar Lovin life and family
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Let us know how it goes and how it is working out for you when you have been using it for a bit. The first couple months are hard especially if you aren't used to it and your spending is kind of erratic.
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