How to Shop Online with Cash Envelopes

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Last week Ann asked a question that deserves it’s own post: “The envelope system wasn’t realistic for us. We do a lot of our household purchasing online, not at a ‘brick and mortar’ store. Also, paying utilities and rent with cash would be extremely inconvenient as opposed to writing a check or paying online. I actually tried a system like your sister’s once (it was on a whim and just an idea I had) but it got to complicated and tedious to stick with and became so it wasn’t worth it to me. Would you share your thoughts on online and utility transactions with the envelope system? Thanks!”

I do a majority of my shopping online too, especially when things are really busy.  We still use the cash system to keep ourselves accountable with the budget.  When I purchase with a debit card or online, I immediately take the cash out of the corresponding budge envelope and put it in an envelope to take back to the bank.  If we are low on funds, I take the money back right away.  If not, we save the cash to fund part of our envelopes with the next month.

There are several things we budget for only virtually and don’t carry an envelope for.  This includes our utilities which are auto drafted from our checking account and gas which we use our debit card for.  These are things that budgeting a different amount for won’t change the reality.  Unlike food or clothing that we could make different choices to drastically reduce spending.

I use the same cash back to the bank method for my Target Red Card.  It’s a debit card and using it saves me an extra 5% plus offers perks like free shipping online.  Since I have to move the cash right away that keeps me from overspending just because there are perks to the card.  I wrote more about Target Red Cards here.

How to Use Your Debit Card Like a Cash Envelope System

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I am personally convinced that cash envelopes are the best way to stay on budget, but I also know that this method doesn’t appeal to everyone.

I’ve talked to people who won’t shop with cash. It makes them nervous to carry it around.  They don’t like making change between budget categories or the fact that cash leaves no trail. Then there’s that nervous feeling they get that they might not have enough to pay for their stuff (which is kind of a bonus, because it is what ultimately curbs overspending.)

There are several apps that allow you to track debit card spending as if it were in an envelope. Dave Ramsey has one called Every Dollar. The basic version is free with a paid version available if you want it to automatically sink with your bank account.  You enter your budget into the app, then record your purchases as you make them.  The app subtracts and lets you know what you have left in the categories.  Below are similar apps that are also initially free.

  1. Good Budget
  2. Mvelopes
  3. Expense Keep
  4. Simple Track
  5. Budget Ease
  6. Envelope+ Kid–for kids to track their spending

I like that debit cards come out of the bank account right away, so there’s no accumulation of debt.  The danger is the card will scan as long as there is money in the account even if that money was budgeted for something else.  If you are spending cash and spend another category’s money—you KNOW it right away, because you had to take it out of the envelope for that other category.  It’s a conscious decision.  Going over budget with a debit card is less clear cut until you write it down.

When you are scanning a debit card, the only way to keep on budget is to record the purchase BEFORE it’s made. Then you can see ahead of time if there is enough money in that category.  I intend to record my purchases, but I DON’T, this is why I can’t see myself giving up cash any time soon.  Using a debt card requires more organization and discipline—character qualities that aren’t yet well developed in my repertoire.

If you aren’t a smart phone fan, my sister-in-law showed me a paper and pencil method to using your debit card like envelopes.  Get a small notebook that will fit in your purse.

Give each budget category it’s own page and write the amount you’ve budgeted for that category at the top next to the title. Then as you shop, write down what you spent in each category on the appropriate page and SUBTRACT so you can see what’s left.

If you need to move money from one category to another record it in the book.  For example if you need to move $50 from clothing to food, simply, subtract it from the clothing page and add it to the food page, with a note of where it came from.

At the end of the month, create new pages for each of your categories.  Clip the front pages together so you can access your new pages easily.  Add post-it tabs with labels to help you find your categories easily.  You can reuse the tabs by moving them to the new sets of pages each month.

Do you think any of these methods would work better for you than cash?

Spending Freeze Day 5: Do You Have Enough Categories?

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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.

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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.

Cash envelopes

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.