How to use the cash envelope system without cash
The cash envelope budget system is one of the simplest forms of budgeting you can do, but if you don’t use cash, you might think you’re not able to use it. That isn’t necessarily true, but it does take a little bit of moving things around and some self-control to use the envelope system budget without cash, but once you get the hang of it, you’ll find it’s actually quite easy to do.
I talked about how much I LOVE the Cash envelope system a couple of years ago. However, you know what? Times change! At the time cash was the best way for us… however, I have upgraded just a little 🙂
The basic premise behind this budgeting system is that you create an envelope for each of your budgeted expenses. You then write the amount you are budgeted onto the envelope and spend only from that envelope for that budget category. Take your grocery budget, for instance, if you are normally spending $100 each month on groceries, your grocery envelope would only be funded with $100.00. As you are spending on groceries throughout the month, you’ll only spend from that envelope. Once the budgeted money is gone, you’re done buying food for the month.
Pretty simple to do monthly budgeting, huh?
The issue with this system is that it pretty much leaves anyone paying with a debit card for a lot of things out of the loop unless we get creative.
To use the envelope system when you pay primarily with your debit card or with checks, sit down and create your envelopes as you normally would. Make sure to account for every expense that you spend money on, both personal and any business expenses. On each envelope, leave room on the front (and possibly the back too depending on how often you spend money in that area) for you to write down expenses. Now, “fund” your envelope categories with the respective amounts of money. In other words, write the amount that you have budgeted for that budget category on the envelope somewhere. That amount just became the only money you can pay on that budget category.
As you spend money throughout the month, write what you spent and why you spent it on the front of your envelope. Since you’re not dealing with physical cash, you’ll also need to subtract the cost of the expense from the amount you started with to create a running budget. Once you exhaust budgeting for that category, stop spending money on it.
Just like when you budget this way using cash, make sure you don’t fall into the trap of moving money from one budget to another to accommodate overspending when using this system. That only leads to finding yourself in a budget hole that can be very hard to dig out of.
If you don’t want to use an actual envelope system without cash, set up a mock system with a spreadsheet. Give each budgeted category a separate sheet and have one column be the total amount budgeted and keep a general running tally of when you spend money for that category. Formulate the cell categories to auto subtract money from your total and it will automatically update your remaining budget left. (If you aren’t sure how to formulate a cell, a quick Google search will provide plenty of very easy to follow walkthroughs.)
No matter how you choose to make a payment, you absolutely can use the cash envelope system without cash. If you’ve been wanting to try it, but haven’t yet, go on and give it a try using one of the methods in this post. You really have nothing to lose by doing so!
I’d love to hear if you already do this! How does the envelope system work for you?