Using cash envelopes can be a huge financial blessing for singles and couples. Many people steer clear because they’re unsure how to make them work in their relationship.
Here are 4 great tips to help you get started. My goal is to get you to use them because they have saved us money, time, and financial stress for years.
How do they save money?
You can argue cash envelopes won’t work for you but until you try it your point is moot. Keep an open mind, listen to our experience, and consider the benefits to your financial health.
To show how cash envelopes save money I considered pointing to some Ivy League study, but I’ll keep it existential since it’s what I know.
Using cash sets limits in each category. When the money in each category is gone, it’s gone. You preconceive how much you’ll spend rather than just spending whatever you have. I call this “telling your money where to go instead of wondering where it went.” Define what categories work with cash and create those envelopes. We have five: groceries, miscellaneous, clothing, dining out, and entertainment. We each get $300/month total; when it’s gone, we stop spending. If we don’t spend it all, we carry it over and withdraw less for next months envelope.
Using cash hurts more. Try it and you’ll see. I still remember the first time we took our grocery envelope to the store. Each item placed in the cart went through a rigorous screening rather than tossing in whatever we wanted. Things we needed went in regardless; things we wanted were added according to how much was already spent. Turns out we didn’t want many of them bad enough to spend the cash.
It made a big difference in the way we shopped; and it still does.
Cash envelope tips for couples
Perhaps you know cash envelopes would save your family money . . . if only you could figure out how to make it work with your spouse.
This is how me and Betsy have made it work for us:
1. Direct deposit paychecks – do this so you don’t have to go to the bank to deposit your checks every time you’re paid. It saves time, gas money, and hassle. If your employer doesn’t offer direct deposit, ask them to; I did this once and the employer obliged.
2. Define cash categories – what categories work best for cash in your situation? As mentioned above, we use cash for groceries, miscellaneous, dining out, entertainment, and clothing so we have 5 separate envelopes. We each get half the total money allotted for all envelopes each month.
3. Withdrawal once per month – now that you know how much cash is needed for a months worth of cash purchases, withdrawal that amount once per month. This saves gas money, trips to the ATM, and ATM fees (you’re not stuck using a machine that doesn’t belong to your bank).
4. Divide the money – does one spouse do the majority of the shopping and purchasing or is it divided equally? Figure this out and distribute accordingly so you each have enough for all categories.
We used to give Betsy most of the cash for everything but miscellaneous (we both get $100/month for misc. regardless) because she did most of the shopping. Now we’re together most of the time so we split it down the middle. It works incredibly well for us; do what works for you and don’t stop until you find what works. If your situation changes, change your system accordingly.
Give it a shot
Use our experience and tips to test this out for your situation; what do you have to lose? Most folks I know save a lot of time, money, and hassle by using cash envelopes together.
I dare you to prove me otherwise.
How do you handle change? You put that in the envelope as well? My wife and I use our iPhone and use Mint to handle the budget. I maintain the categories every few days. That works for us because we found the envelope system to be cumbersome… The main thing we ran into was dividing up our funds for the various categories. 50/50 seems to work for you, or 80/20, but it didn’t work too well for us. Maybe we didn’t give it enough time…
Matt Jabs says
If change is an issue, just exclude it from envelopes, put it into a jar and at the end of the month put it into your vacation fund or somewhere else – bonus. Yep, sounds like you could use more time to find what works best for you.
For me using cash saves me a lot of change. Got my wife doing it as well and we save about five bucks a day in change. We are planning on using it for vacation with the kids this summer.
Matt Jabs says
Awesome to hear Chuck. We save all our change into our vacation fund too; it adds up fast!
jack foley says
yea we are the same – change into a jar..
cash into envelopes – if you are consistent – it adds up fast..
New here, but enjoying what I have read.
Cash envelopes work amazingly well for us. The first few months we swapped a few dollars from one envelope to another (which financial gurus often speak against) until we figured out fair amounts for each envelope. Our categories are: Food, Misc., Bathroom/cleaning/toiletries, medicine. Our personal money goes straight into our wallets.
Just a note on build an EF first or pay-off debt? (Enjoyed your post on that.) We tried doing the 1,000 Dave Ramsey recommendation, but we never were able to keep it stocked. We are now working on a three month fund and that seems to be more realistic. We are putting a wee bit on debt at the same time!
Matt Jabs says
Glad you made the transition to cash and are enjoying the benefits. Yeah, the $1,000 was never enough for us to feel comfortable either… it varies for everyone. God bless Sue.