![]() I use a budget envelope for my Christmas money, for things I’m saving up for. Some people also use cash envelopes as a mini savings account, to hold their sinking fund money. No matter what payment method you prefer, I think it’s beneficial for people to try the cash envelope method for at least a few rounds of monthly expenses and spending. Once they get a feel for how much they should be spending, they transfer over to a budgeting app, or go back to using a credit card so they can earn reward points. Sometimes people only do the cash budget system for a few months to help get their spending habits in line. (We talk more on which spending categories this works best for below). ![]() For example, you wouldn’t use cash budgeting for debt repayment or your car insurance payment, as it’s online, and it’s a fixed expense, so there’s no need to budget it out because you know how much it will cost. Using an all cash budget is typically done with your spending money. The cash envelope system is great for someone who may be tempted to spend more money than they should, but with cash budget envelopes, they can’t spend more than the amount they determined doing their monthly budget planning. So it’s a safety catch for your monthly budget. ![]() Basically, at the beginning of every month, you decide how much money you want to spend in specific categories and stuff your envelope with that amount.ĭuring the month, you spend from your category envelopes, and once that envelope is empty you stop spending money. Cash envelopes are used as a way to budget your money it’s the “cash envelope system”.
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