You want to have fun AND save for retirement, but your money seems to run out before the next paycheck comes in!
You have a friend unexpectedly visit from out of town one weekend. You go out to dinner on Friday evening and spend some time shopping together on Saturday. Your friend leaves and you feel all warm and fuzzy because it was so nice to catch up. However, on Sunday afternoon, you receive a notification from your banking app that your power bill is due Tuesday and there is not enough money in your account to cover the bill. The warm and fuzzy feeling just vanished.
You can get control of situations like this if you implement a cash envelope system.
Because you will be more aware of your spending habits
When you hand over cash, you think a lot more about how much you are handing over than when you swipe a debit card. Having to count out the money and seeing what is actually left for that category makes you think harder about how much you are spending and if you actually need it.
In the beginning you may find you spend the money from a category faster than you thought, but over time you begin to become more selective about what you are purchasing. You also plan out for bigger purchases instead of splurging on items digging you further into debt.
Because the money you need for your power bill will not be mixed in with your money you want to spend on eating out and having fun.
The envelope system is a strategy for keeping you more accountable in sticking to your budget. Whether you take out your money for the month all at once or every week, you know once your envelope is empty, that you are not able to make any further purchases in that category. Thus, the money set aside for your power bill will still be safely sitting in your checking account.
When you budget make sure you are accounting for what you are actually spending because if you don’t budget enough for that envelope and you start pulling from other envelopes, it will quickly snowball (and not in a good way)!
Because it will clear your mind and increase your confidence about achieving your financial goals
It helps keep you “gazelle” focused by having the money in the envelopes. I know for myself it was a competition I had with myself to try to still have money left over in envelope at the end of the month. In the past using my debit card, even when I was on a budget, I wasn’t thinking about what was there, but just about my purchase. When I pay cash out of an envelope, I go into the store saying I have $30 and intentionally try to spend less.
Do you use envelopes? Tell us how they have helped you on the debt journey!