The Non-Intimidating Approach to Cash Envelope Budgeting
Cash envelope budgeting isn’t scary, I promise. You don’t have to use cash for all of your monthly spending, in fact I don’t recommend it. Here are some easy steps to get you started:
- Start by figuring out how much you spent in the previous month on each of the following categories: restaurants, grocery, entertainment/recreation, fun money (shopping, random spending, etc.)
- Take that amount and decrease it by about 20% (if you aren’t already spending within the guidelines below).
- Once that amount has become comfortable for you (may take a month, might take longer), try to decrease it again in 10% increments until the amount you’re spending out of your total monthly income in each category is as follows: *these are the guidelines I feel comfortable with, by all means adjust them to fit your family
Restaurants: 5-7%
Grocery: 10-13%
Entertainment/Recreation: 5-7%
Fun Money: 5%
*These are the areas that our family uses cash for in our monthly spending. If some categories don’t work for your family or if I haven’t listed categories that WOULD work for your family, budget cash for them!
After you have followed my easy-peasy steps to tackling cash envelope budgeting, here are some guidelines to help you keep with it:
Make them work for you.
For us, it’s just not realistic to use cash for gas (despite what my personal money guru Dave Ramsey says). We also save money on our groceries by using our Target debit card (despite all of the controversy surrounding that). So in our case, I don’t have a cash envelope for gas, and I use both the envelope and debit card for groceries.
Keep a limit that is modest yet realistic for your current spending habits.
If you’re currently spending $600 a month on going out to eat, goodness sake I hope you’re not, don’t budget $150 for the first month. Rome wasn’t built in a day, people. Take it in baby steps.
Use a fun template to make your own.
Plain ol’ envelopes are so BORING. Print out this template and make your own. It makes envelope budgeting that much more fun 😉 P.S. we use resume paper to make ours. It’s a little bit thicker.
Write the starting amount for the month on the envelope.
The template we use is meant to keep track of the spending throughout the month, but we use them by writing out the amount we started with each month. That way when we get to the next month we can see what we did for the month prior and improve or stick with it.
If you can’t take the cash out at the beginning of the month, save the receipts and do it ASAP.
We use my paycheck for our cash spending (it just works that way with our budget). I typically don’t get paid right away on the 1st of the month. So, we save all of our receipts and try to limit our spending up until I am able to budget and put the remaining cash into our envelopes.
I really hope you give cash envelope budgeting a chance. You don’t have to be crazy disciplined to be successful with it, trust me. Check back next week for my post about tackling debt.
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I take cash out every 2 weeks (every paycheck) for fun and gas. In NJ gas is cheaper if you pay cash so that works for me. Taking cash out helps me budget so much more because I physically see it disappearing.
We just started going “cash” for all our non-repeat bills (things like mortgage and power are still hooked up to autopay). It is interesting the weird looks you get at the grocery store when you whip out a hundred dollar bill to pay with. Cashiers really aren't used to people paying cash.
I love Dave Ramsey, but you're right, his steps aren't the be all to end all for every single family. Personally for us we've been able to apply 90% of his steps as-is, but have needed to tweak a few so they better fit our family dynamic. Good for you though!
I really, really need to try this!