My husband and I have started a new journey. He is starting a new job and with any new life-altering decision, we needed to configure our money. We really want to stick to our budget and make some good financial gains this next year. All this being said, each month I will give you different money-saving tips that we have adapted (or attempting) to make our lives a bit less stressful and more financially savvy.
This month’s tip is one my husband and I have started and stopped many times, but are committed to doing long-term: paying with cash. The studies are out there: you spend less money when you are spending with cash.
Basically, the system is you have an envelope for each spending category: gas, food, housing, etc. You budget the money and divide the cash into the appropriate envleopes. Once that money is gone, no more spending money on that caterogy for that month. My husband and I decided that the bills that come out electronically each month (so we don’t forget) are going to stay electronically. We are living off cash on gas, food, entertainement extras. We are even going to be specific on our food budget having a Costco envelope and a separate Target and grocery store envelope as well. I even have a monthly coffee budget.
Here is are more step-by-step directions:
- In order for the envelope system to work, you need to know how much money you have coming in and how much money you have going out. Start by creating a budget that reflects your current financial situation.
- Divide your spending into categories.
Look over your budget, and divide it into areas of spending: food, gas, clothing, entertainment, etc. Then create an envelope for each category. No need to be fancy; a plain, white envelope with the category written on the front will do.
- Fill your envelopes
Fill each envelope with the money that you’ve allotted to that particular category.
- Spend until the money is gone.
Pay for your purchases out of the appropriate envelopes – using the food envelope for food purchases and the clothing envelope for clothing purchases – but only until the money is gone. At that point, all spending in the drained category must cease until the next month.
- Put any leftover money into savings.
If you have any money left in your envelopes at the end of the month, add it to your savings or use it to pay down a debt.
- Refill again the next month.
Refill the envelopes, and start again. Each month is a new shot at making your budget
I will keep all of you readers out there updated on how the envelope process is going! From our past attempts, we were proud to see where our money was going and knowing it was okay to go to a restaurant without the guilt of “we shouldn’t spend that money.”
If anyone else wants to try this system, let me know! Or if you have been successfull, tell your story!
Go out there and save some money for your family and use cash!