Learn about this old-fashioned method for modern money success!
The cash envelope system came into being long before financial guru Dave Ramsey brought back into the limelight as a way to stick to your budget. We’ve gone in depth about how cash envelope budgeting works, but it can be a hard sell for budgeters who are strongly tied to their plastic. So, let’s dive deeper into the benefits of cash envelope budgeting and explore how it can help you get your spending under control.
First of all, be honest: does any of this sound familiar?
- You’ve made a budget, but you find yourself blowing it every month.
- You feel like you make enough money, but you just don’t know where it all goes.
- You try to keep track of your spending, but life gets in the way and you end up just swiping your credit card and thinking “I’ll sort it out later.”
- You find it difficult or impossible to keep track of money spent on each purchase.
- You’re never really sure how much money you have left in your budget.
- You try to moderate your spending, but mostly you’re hoping to get lucky and somehow magically stay within budget every pay period.
- You have no budget at all and find yourself holding your breath and sending a prayer to the gods of finance when you swipe your card a few days before payday.
If this list makes you feel attacked, cash envelope budgeting is most likely the answer to your money misery. Yes, we realize that withdrawing cash and physically going into stores is inconvenient, but that’s the point. Spending money shouldn’t be so easy that you can do it without thinking and blow through your budget in mere days. Cash envelope budgeting works because it makes money tangible and grounds your spending in the reality of how much money you actually possess. Take a look at the proven benefits of this old-fashioned budgeting system:
Benefits of cash envelope budgeting:
- It makes money tangible - As discussed above, this is the key mechanism of cash envelope budgeting. When you’re swiping a card, it’s difficult to visualize how much of your budget you’re using up. The money doesn’t feel real, so your brain doesn’t even realize how much you’re spending over multiple card swipes. Actually holding cash in your hands and watching it go away when you spend it helps your brain treat it like what it is - a finite resource to be conserved and used carefully.
- It teaches you to pay attention to where your money goes - When you live on plastic, it’s easy to lose track of how much you’re spend on each category. You may set an initial budget and decide that $150 every two weeks for entertainment sounds perfect, then be shocked to learn that you blow through that in one weekend. Cash envelope budgeting makes you pay attention to how every cent of your budget is spent.
- It’s been proven to make you spend less money - This has to do with the difference between using cash and using credit cards. A 2001 study by Drazen Prelec and Duncan Simester of MIT found that shoppers spend up to 100% more when using their credit card to pay instead of cash. Using cash upfront helps you feel and see the monetary consequence of each purchase, resulting in lower spending.
- It prevents you from overspending in that one problem area - If you find yourself blowing through your clothing budget month after month, the cash envelope system could be the answer. When the money is gone from an envelope, it’s gone! You can’t possibly overspend. Obviously, this only works if you stay honest and don’t borrow from other envelopes. But if you’re not going to be honest with yourself about your money, no budgeting system will work.
- It will curb your online shopping - Slickdeals.net conducted a survey of 2,000 American adults about their budgeting habits and weekly spending. Online spending topped the list as the #1 budget buster, with 40% of respondents reporting that they overspend online weekly. In 2021, obviously you will occasionally buy something online, but committing to cash envelope budgeting will drastically reduce your online spending.
- It prevents overdraft charges - Retiring your debit card and withdrawing only the cash you need for each budgeting period will make overdrafts a thing of the past. The cash envelope system acts as a buffer between your bank account and your weekly spending, so you know the money will always be there for automatic drafts of your rent/mortgage, bills, and loan payments.
The takeaway: Cash envelope budgeting works
With our brains, seeing is believing. Just like how we can overeat if we’re eating snacks straight from the container versus portioning them out into a bowl - it’s easy to go over if you can’t see the limits. If you’re a busy mom, you most likely lose track of the money spent when you’re swiping cards at every stop. You may know that your weekly food budget is $150, but then you swipe at Target and spend $100. Ok, so you know you’ve got $50 left. But then you run to the grocery store, then the speciality food store, then back at the grocery store because you forgot something, and before you know it you’ve spent that $50 a few different times without even realizing it. That’s the problem with plastic - the money doesn’t feel real. The cash envelope system lets you see and touch the money, so you know how much is left.
Our advice: Make cash envelope budgeting as easy as possible with the Cash System Wallet
One of the reasons cash envelope budgeting works is because it makes overspending difficult. However, it’s important to take steps in order to make using the cash envelope system as easy as possible. The more inconvenient and messy it is, the less enthusiastic you’ll be about it, and the less likely you’ll be to stick to it.
To prevent defeat, invest in the Cash System Wallet to streamline your cash envelope budgeting. This clutch-style wallet features 8 interior, labeled slots that work like envelopes to organize your cash into budget categories, all in a securely zippered section. It’s also got an easily accessible space for your cards, IDs, checkbook, and pen, secured with a turnkey latch. A zippered pouch on the outside gives you easy access to your change, and the optional wristlet attachment frees up your hands. It’s the cash envelope budgeting system - without the envelopes!
If you’re ready to reap the proven benefits of cash envelope budgeting, take the first step by exploring our Cash System Wallet styles!