Using the Cash Envelope System


Cash Envelope System


It’s easy to break out the credit card for routine purchases like groceries, gas, clothes, and fast food. The convenience can’t be beat, but using that credit card can cause you to spend more money that you intended and rack up debt. According to a recent study, people spend up to 18% more when they use a credit card rather than cash.

The envelope system is a great way to get a handle on your spending and help you keep to a budget. It’s easy and requires no special tools or software, just some plain envelopes.

To get started with the envelope system, follow these steps:

  1. Make a budget: Review your spending over the past month and your bills. Bucket your expenses into categories, such as rent, groceries, gas, cable, etc. Then create an envelope for each one and label each envelope with a category.
  2. Fill your envelope: Set aside the amount of money for that week for that category in each envelope. For instance, if your grocery budget is $400 a month, you would put $100 in that envelope for the week.
  3. Spend! The fun part! Spend your envelopes on each category as needed. The important part is not to borrow from one for another category—no raiding the grocery budget to pay for shoes! If you run out of money in any category, spending is over.
  4. Adjust: If at the end of the week you have any money left over, deposit the extra amount into savings or pay down debt. Even an extra $5 each month can make a difference over time.
  5. Refill the envelopes: At the start of the next week, refill the envelopes and start again.

If you’re used to carrying a credit card, it may take some time to get used to the envelope system. But give it time. Adjusting to a cash system will make you more aware of your finances and spending, helping you keep on budget and build your savings.

Heart of Florida United Way is focused on addressing the five major building blocks of financial stability in order to provide low-income working families the services and support necessary to succeed. For more information visit www.hfuw.org or if you are in need of assistance, call 2-1-1, our 24-hour information and referral helpline.

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