The Envelope system
The first time Casey and I ever budgeted was shortly after we got engaged and started planning our wedding. We had been discussing everything that we would need to do and buy to pull off what we had in mind, like the flowers, food, photographer, decor, my dress, and all of the million little things that go into a wedding! I still remember the night he showed up at my door with his laptop in hand and a Google Doc with all of these things written out, ready to start planning and setting our budget!
I was seriously impressed that he had even thought that much into all of this, was appreciative that he involved me in all of it and that it was a joint effort! This is all such a testament to his character because he’s just so considerate and kind like that. He’s the best and I just got so lucky, but really this was so very helpful in the whole planning process and made things run so much more smoothly!
I love that we started talking about money so early in our relationship and made budgeting together a habit right from the start! One of our budgeting tools that I think has helped us be most successful over the years is using an envelope system.
We are not the first people to utilize this method and it is nothing that crazy or new, but I think there is definitely a reason it is so wildly popular! Envelope systems are meant to help you visualize and stick to your budget by using designated, physical envelopes with cash set aside for each category.
How we use the envelope system
We have an envelope for each of our budget categories, but we do not pull out cash for every single one of them. For example, our insurance is on auto-pay directly from our bank account, so it wouldn’t make sense for us to pull out that physical money. For categories like this we simply write out and account for the amount that was spent, that way we have a record and can keep track.
Categories like gas, groceries, and eating out make good sense to use cash! At the beginning of the month we pull out our allocated amount and put it in the designated envelope. When I go buy groceries, I use the money in the envelope and nothing else. This requires planning and discipline because once that money is gone I obviously can’t spend what I don’t have. I write down the date and how much I spent so that I can better track my spending and know how much is left. This has really helped us have control over our money, avoid overspending, and be more intentional about purchases.
One of the great things about the envelope system is that you can customize it to work best for you. For example, when you want to fill your envelopes with cash. We get paid monthly on the last day of the month, so it works well for us to get cash on the last day in preparation for the new month, but you could do it weekly, bi-monthly or whatever is most efficient for you. You can also use plain white envelopes, colorful ones, or whatever you prefer that will help you to organize them.
As we said earlier, you have to be disciplined. You are the only one who can make yourself stick to a budget and create success. Budgeting can be a challenge, but the more you utilize it and let it become habit the easier it becomes! This isn’t to say that you will be perfect, especially when you are just starting out. We have gone through periods where we were really diligent and good about planning our budget and using the cash from our envelopes, and there have been times where we’ve gotten lazy and turned to swiping our debit cards.
There is a surprisingly big difference in our spending and we have learned through experience that we do so much better when we use our envelopes! It has helped us recognize our spending habits and address issues and weaknesses, which in turn saves us even more money!
We know that this method works and would love to hear from you if it is something that you already use or if you decide to go try it out if you aren’t already!
The envelope system works very well. Just as you do for your auto-pay items, this is how I manage most of my normal monthly bills with the envelope system. The physical cash and envelopes are best used for me for the discretionary purchases in life. It helps keep me on track with my spending and most importantly, keeps me on budget.
Yes, we completely agree and love that you utilize this as well! We’ve also used this method in the past to save up for big purchases, such as a car or vacation and it’s worked really well!
This is my first month and I’m discouraged because I keep having big expenses I didn’t count on, like getting my sewing machine repaired. I’m trying to figure it all out and then really keep track on April 1. Do you also enter your expenses on your phone?