Family Finances ~ The Cash Envelope System

As part of our plan to simplify our life, we have begun a new finance system for our family.  We are very lucky to have learnt long ago to not use credit cards for daily spending or bill paying.  We primarily use debit cards for daily spending and a combination of direct debit or Bpay for our bills.  This system was working but we really felt like we could do better!  

I thought about a time when I was really good at budgeting, saving and not impulse buying.  I remembered that when I had my first job I was paid in cash.  Those hard earned dollars were given to me in a little yellow envelope with the payment details on the front.  There was something about handing over cash when paying for something, that really made me double think about what I was buying.  Looking in that little envelope to see how much cash was left was a great way of keeping my spending in check!  Once the money was gone it was gone!

With this in mind I started researching budgeting systems that involved the use of cash.  I found the Dave Ramsey – Cash Envelope System.  On his site he said exactly what I was thinking, well actually what I was experiencing.

“There’s something psychological about spending cash that hurts more than swiping a piece of plastic.”

This was us.  So we started to set up the system.  With the right tools it was SIMPLE!

I ordered this gorgeous Cash Envelope Wallet from etsy.  Inside it is divided by plastic cards into 6 categories or envelopes.  You simply label each “envelope” with a category for spending.
You need to work out the following things.

  1. What will your “payment” cycle be. Weekly, Monthly, Fortnightly?  
  2. What are your regular costs? Put them into categories.  For us we have Groceries, Petrol, TakeAway (coffee, snacks at shops etc) Home (decorating etc)
  3. What will you budget for each category.  Be HARSH.  We have only budgeted the absolute minimum.  I am determined to save.
You can now set the system up!
Later this week I will share with you how the system works, some other Do’s and Dont’s of using the Cash System and check in with how we are going!
Do you use cash?