I’m 100% convinced that cash budgets are THE way to stick to a budget and ultimately save the most money. But that doesn’t mean the first time you try a cash budget, it’s going to work out perfectly.
We slip a note like this to the teller every month. It tells them how many of each type of bill we want for our envelopes. It took us several months to figure out what size bills to put in each category to make it easier at stores like Target or Wal-mart where I spend from more than one category.
One of the mistakes we made in the beginning is not having enough categories. If there’s too much stuff lumped in together there’s not going to be enough money for something. For example, if you have food lumped in with cleaning supplies, kleenex, and shampoo—towards the end of the month, you might not have enough to eat….but your hair will smell good.
Stacks of cash ready to be divided up into envelopes.
My husband and I made a video for you of how we divide up our cash envelopes. It gives details on the different categories we have in our envelopes. There are a few categories in our budget which aren’t currently funded. Items like: haircuts and beauty, furniture replacement, and date night. As our income goes up, we will fund them. We have $0 place holders in the budget so we don’t forget.
A lot of our categories aren’t funded as much as we’d like. Every time there’s a change in one bill, other categories are affected. For example, this month our gas bill went way up with the colder temperatures, so we reduced our grocery, vitamin, and clothing categories to make up for it.
Some of our budget categories go into the safe instead of my purse. This allows us to save up during the year until a big bill annual comes. This includes things like soccer fees, summer camp registration, and appliance replacement. If I had this cash in my purse, it’s likely I would spend it on a cute lamp….just keeping real.
I like the cash system. It is really making me think before making purchases. I have only been to the grocery store and to Target to return a gift. I went right in the door at Target, returned the gift and put the cash in my purse. It was thrilling to be able to add that money to my savings envelope. Savings up $65. Thank you for this challenge!!!!
You are doing so great, Deborah! It’s making a difference for our family too.
I’m 100% convinced with you!
My vice is convenient “snacks” at Quicktrip or even fast food. I took your advise and every day I bring my lunch to work or pass a place I’m tempted to stop, I write that amount in my book and am watching the saving pile up. Watching the total climb is much better than consuming the calories!!
Monica, this is so awesome! It’s amazing how much the little things add up. I’m a nickel and dime spender for sure. This month is really challenging.
Just watched your video. I use to do this routinely and have gotten out of the habit. Thanks for the refresher course.
Thank you for the great tips so far. I’ve been using cash envelopes for a while but I never really stopped to think that maybe I don’t have enough budget categories and that’s why it’s been difficult to track some items.
Interesting! Thanks for the video and for being so open. I have been using a cash system for about 2 years now (since taking Dave Ramsey’s FPU), but have gotten “lazy” about it in the last year or so. I pay our credit card off weekly, but I do need to renew my focus with the cash system. Your point about having enough small bills to “make change for yourself” is key – and that’s part of my problem… I end up with too many $20s and then just put a “mixed” purchase on the card because I can’t deal with it in the store. It was interesting for me to hear your categories, too. In some ways, I feel fewer categories is easier as it allow for more flexibility (your hygiene and miscellaneous are 1 category for me, and vitamins/protein bars/food are all the same for me), but on the other hand, I will be reevaluating my categories because, as you mentioned, it’s easy to spend most of the food budget on a case of protein bars at Costco, and then struggle to feed everyone for the month!! New year might be a good time to tweak some things! Thanks again for being open with us 🙂
Justine, thank you for taking the time to comment. You touched on something that’s key. The categories that work for us won’t work for everyone, but it definitely gives a jumping point to think about it. If I were single, I would have misc and houshold in the same category, but it’s important to Darren that they are separate. (I think it has implications in quicken where he tracks our receipts.) And really, it doesn’t matter to me that much. It was an easy area for me to give in and make him happy.
Hi Angela,
I just watched your video. I was wondering if you would be willing to share how much is allocated to your hygiene envelope? Thanks!