Who doesn’t love spending or giving away a wad full of cash? I have the freedom to spend cash guilt-free when I use our envelope system to manage our spending habits.
With an envelope system the amount of money budgeted for a category is put into an envelope labeled with the name of that category. Managing your money this way is not as easy as using a debit card, but it makes sticking to a budget a lot easier.
Here are seven reasons why I love using the envelope system.
1. I know exactly how much I have left to spend at all times.
Daniel is the one who manages the bills, updates the budget spreadsheet and puts data into Quicken. When I don’t use the envelope system I have to ask Daniel how much is left in a category before spending any money. With the envelope system I can just look inside the envelope. I always know how much money I have to spend.
2. I like controlling how the money flows.
Daniel fills the envelopes and I handle the distribution and spending for these 5 categories:
Using cash for these items allows me to control the flow of our money. For example, I know when the kids will need a new pair of shoes so I use some of the clothing envelope money for that purchase. The envelope system helps to keep me on track.
Also, if I am consistently needing more money in one area then I know I need to add more money to that envelope in our next budget meeting.
3. I am free to spend the money how I want.
I don’t need to explain to my spouse why or where I purchased clothes for the kids. All he cares about is if I stayed under budget in the clothing category.
4. I never have to worry about a purchase after I have paid with cash.
I don’t have a lot of extra brain space to keep track of purchases after they happen or worrying about Daniel reconciling a checkbook later. Once the money is spent, it is gone, and I don’t worry about it ever again.
5. We get to decide what we’ll do with the extra money at the end of the month.
When the month is over and we have leftover dining money, then Daniel and I decide if we want to save it or spend it. One month we agreed I could use the extra dining money and I got to treat a friend.
6. It is easy to save money.
I like throwing cash in the back of the envelope system and forgetting that it is there. Often, clothing money will sit there for a while before it gets spent.
7. I love paying in exact change.
I take a certain amount of pride in paying in exact change. The cashier will look at me with a confused expression and the people behind me get impatient. I don’t care because it is fun to be weird!
Just like a gym membership, the envelope system only works if you use it consistently. On Friday I will be talking about how to setup and effectively use an envelope system.
*Photo Courtesy of mandaloo (Creative Commons)