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| My current envelope/walletPurchased from the Dave Ramsey Store |
Figuring out your cash envelope system doesn’t have to be a difficult task. You can use regular plain mail envelopes or if you take FPU you will get an envelope system in your kit. After you figure out your budget for your major expenses (tithing, mortgage, utilities, etc), you need to work on the things that you can pay for with cash. Here are some examples:
- Groceries
- Eating Out
- Gas
- Haircuts
- Entertainment
- Gifts
- Clothes
- Household items
List out the items that are important to your family and then you can work on building your envelope system.
The question I usually get from most people is “How do you figure out how much you put in each envelope?” This is where it took some trial and error for us. Because I do not know what is important to your family, I cannot tell you what you should or should not spend or what envelopes you should have. We started by taking out $900 cash every 2 weeks ($450/week). Here is how we split it up:
- Groceries- $300
- Dining Out-$120
- Household-$100
- Clothing-$50
- Entertainment-$50
- Personal Care (Haircuts)-$40
- Misc-$40
- Gifts-$100
- Babysitting-$60
- Blow Money-$40 ($20 for each of us)
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| Those are debit cards NOT credit cards |
Again, what you put in your envelopes is what is comfortable for your family.
Our Grocery envelope is tricky because there will be times where we run out of the cash quickly or there are times that we have excess. The times we fall short is when we do bulk purchases at Sam’s Club. The Misc envelope tends to be our slush fund envelope. It is our “emergency fund” envelope in case we run short before the next pay period.
We have a Dining Out envelope that we use to eat out as a family. We like to find the deals where kids eat free to make it last longer. Many people combine their Grocery and Dining out envelopes into a Food category, but we needed to set a limit on going out because we discovered that was where much of our money was going prior to having a budget.
Our Household envelope is for things we need for the house. If my husband is changing the oil in my van or we decide to repaint the family room we use cash from that envelope.
Our Clothing envelope is for clothes for all FIVE of us {Yes that is the truth}. In fact, we hardly use that money because I do not shop every month. I also do not buy retail and I buy off season. I also buy used clothing from friends or kid’s consignment sales. And we are fortunate to live near a family who has 3 older daughters and they pass on their outgrown items to my daughter. We usually have plenty of money in that envelope when it’s time for back to school shopping. {And thank the good Lord that I only have ONE daughter-my boys could care less what they wear.}
We discovered that we hardly use the Entertainment envelope. When my husband and I go out on dates {hence the Babysitting envelope}, we mostly use the dining out envelope. Recently we needed a few things for our house so we used the entertainment money to pay for those items.
Personal Care is for all the men in my family to get haircuts. I know you can save money by cutting hair at home, but I can hardly cut a straight line on paper. I can’t even imagine what I would do to hair {I don’t have to imagine. I tried it when my hubby was in the military, but he banned from the clippers.} So it’s to the barber shop for my boys.
Our Gift envelope is for ALL the gifts we purchase throughout the year INCLUDING Christmas. Weddings, baby showers, birthday gifts all come from this envelope. Because my two older kids get invited to a LOT of birthday parties I set a limit to the amount they can spend.
Our Blow Money doesn’t get an envelope. It goes directly into our wallets. This is the cash that my husband and I each have to spend on what we want. If I want Dunkin’ Donuts iced lattes, I can have them if I spend that money. If my hubby goes out to lunch while working, that is his prerogative. Whatever the case we cannot complain what the other spends his/her money on. If he takes me out to lunch and then buys me an Iced Latte I won’t complain…ever!
When we first went to this system, I almost had panic attacks because our checking account was so low. It was low because bills were paid and we had the cash in our hands. I had to keep reminding myself that we had enough money because we planned for everything.
Recently we have been trying to get our last few debts paid off so in the last few pay periods, we have only taken out $500 every two weeks ($250/week) and just filled the Groceries, Dining Out, Personal care envelopes. The money we didn’t use was available for debt reduction.
Many people resist using the envelope cash system because they feel their freedom is limited. I found that I had more freedom because I was not worrying about what the checking account looked like all.the.time. At the beginning of each pay period, I pay the bills, take out our cash balance the checking account and don’t have to look at it again until the next pay period. It is very liberating! {Let’s face it, I’m a nerd and I like numbers so I look at it maaaaybe one or two times, but at least I don’t check it every day!}
UPDATE!! The Bank of America debit card peeking out in the photo above is G.O.N.E.!!
