Saving Money Series: Cash Envelope System

This was the most difficult part of the Dave Ramsey study for us to swallow.  Aaron and I never used cash anywhere.  We both had debit cards, and let's be honest, sometimes swiping a little piece of plastic is much, much, much easier than having to cipher through what bills and change you have in your wallet.  Especially if you are going to store them in different areas.  Bleh.  No. Thank. You.

But when I said I was gung-ho about this new financial change in our lives last year, I meant it.  So, if that meant digging out the ugly Dave Ramsey envelope wallet, then by golly we were going to do it.

Now, seeing the 'excess' we have in our budget each month that can go towards grocery items or miscellaneous items (remember from yesterday?  it's currently about $500, sometimes less) we didn't have an over abundance to be budgeting out into cash envelopes.  I know people who successfully have envelopes for EVERYTHING.  Doctor's visits, groceries, car repairs, gas, clothing, entertainment, etc.  More power to them!  I think that's incredible!  For us (again, you have to do what is best to meet your needs at the time), it's easier for us to have a grocery envelope, a misc envelope (which I sometimes separate the cash in between), and our blow money separate.  Then, everything else goes into our savings account and when we need a car repaired, there's money there.

So here's the idea behind what makes the envelope system work:

• You can physically see what you have available to spend.  With debit cards it is much more difficult to 'keep track' of the spending in that period of time, and by the time you catch yourself, you may be over budget.  Being on top of it enough to keep track, I found, to be a ton more work than just going through my cash in the grocery store. 
• There is an emotional response to watching cash leave your hand.  Ramsey talked about this in his series, and I didn't believe it.  Boy was I wrong!  I now go into the grocery store with an idea in mind of how much I want to spend (it's never the entirety of my budget, you have to keep $$ in there for emergencies!  I mean, what happens if you run out of milk!?) and if I go over that amount I had decided on, even if it's just by a few dollars, I can feel myself cringe.  In fact, I pretty much cringe anyway.  
• It makes you understand the value of a dollar a little bit more.  I've become that woman that really needs milk and will wait until I go to Kroger to get it because it's on sale and is $1.50 cheaper than WalMart.  (More about that in the couponing, grocery blog.)  Why?  Because making that similar decision about multiple products over and over and over again stretches your dollar further and further and further.  The way I see it, $1.50 could buy me an extra 1/2 gallon of milk at Kroger when they are on sale, so for the price of one gallon at Walmart, I could get 1 1/2 gallons at Kroger.  This is where couponing really came in for us.  I began to see my carts coming out of Kroger heaped up like the carts I used to push out of Walmart, this time with food that I knew would make meals and for 1/2 or 1/3 of the cost!  If you don't think $50 can fill your cart to the brim with food to feed your family, you are probably missing some huge money saving strategies!  
• When it's gone, it's gone.  Period.  It makes you reconsider those nights where you just don't feel like cooking.  I mean, what is $10 to grab some fast food, well, it may mean no gas in the car and a walk to work next week.  I think we can warm up leftovers.  May not sound as good, but it's got to be healthier and is much more economical.  

A few things that we've learned in this cash envelope adventure:

• Gas money going into our misc. folder never worked for us.  Why?  Because walking inside was too much of a hassle and not conducive to where we are in life right now.  (My biggest fear is leaving Bryton in the car - even though I can lock it - just to run in to pay for gas.  I will not do it.)  Thus, I ration out some of our misc money, keep it in the bank, and we use our debit card at the pump.  (But we both know exactly how much we have to put in our vehicles, not a penny more.)
• Separating out our misc envelope helps us know what is going where.  For example, if we know that there are two Sunday's before Aaron gets paid again, and we know that we eat out every Sunday for lunch, and we know that we spend about $20 each time, I'll designate $40 of that cash specifically for those eating out experiences.  Doing this when I get the cash in my wallet allows me to see what is really disposable income.  Plan, plan, plan.  
• This one is random and personal to me.  I used Dave Ramsey's cash envelope system (the literal brown, leather, wallet type that came in our Financial Peace materials) and it lasted me a year.  The envelopes were actual paper envelopes (which worked just fine, mind you, if you put your change someplace else), but being that I put my change from each folder back where it went, well, let's just say my poor misc. folder was losing change in the bottom of my purse at an alarming rate.  Way too much ripping!  So I started searching out other options.  (I also hated that I carried around our checkbook, our envelope system, and my wallet in my purse everywhere I went.  3 things!  Around Christmas time I found this:

Talk about a lifesaver!  www.savvy-cents.com has these amazing gadgets that, get this, hold your 'envelope system' (not paper), all of your id's, discount cards, debit cards, etc, has a change holder on the back, and even has a place for your check book and to store a pen!

I'm not going to lie, it took me probably two months to pay the $30 that the wallet cost me.  (First of all, I've never in all my life spent $30 on a wallet.  Second of all, now that I'm trying to be frugal, why would I want to start now???)  But after much frustration with the other guy, I spent $30 of my Christmas money to purchase this!  AND I couldn't be happier!

I love how it's set up.  I love that I can fit each of my items in one place, and I love that each divider in the envelope system has virtually two slots, which means money can go in one area, and coupons can go in the other!  (Not to mention the fact that I know it will last me longer than a year!)

So there you go.  Trust me, it seems like too much work, but it's worth a shot, right?

Next up:  grocery shopping and reducing your grocery budget.

Make sure you check out my friend at Brooke's Bargains to see how they make budgeting work for them!

-A