Financials and budgeting are so hard!
I’ve used different programs and software to try to get our finances in control but so far none have worked out as well as I hoped. So it is time for a change.
I shared with you in my last post how I’m switching up my goals setting process. This is one of those things that I’m so zoned in to working on so we can make some progress but actually see that we are.
The truth is, I’m not trained or certified in anything financial. I’m a mom who’s trying to find the best way to help her family financially and set our family down the right path so we can get out of this mess!
This post is for you if you’re just starting out with cash envelopes and you’re wondering what is a simple way to hold all your envelopes.
How do you start with cash envelopes?
There are a few things you might want to consider when you decide to use cash envelopes:
1| Determine your cash envelope categories
One of the main reasons I’m trying my hand at cash envelopes once again is that I’m not budgeting our money properly. I have been using a computer software budgeting system and I would write down one number in my planner, the same number in the software, and when we overspent in that category, just shift money around to cover the overspending.
It was so easy to change if it didn’t match. No wonder we weren’t making progress as quickly as we wanted to!
I created some main categories that I wanted to make sure that I wouldn’t overspend on (which we easily were before) so I could keep a handle on the spending.
- Groceries
- Household
- Fun (Entertainment and Dining Out)
- Clothing
- Misc (where I keep my spending money)
- Girls
- Max (our dog)
On the front of each cash envelope, I have the category, so it’s easy to see. On the back of each envelope, I have a transaction ledger, to keep track of what I’m spending the money on. The balance that’s remaining is also on the envelope, so I know how much is left in there!
When it hits $0, it’s time to stop spending in that category! That’s been the biggest eye-opener for me. I could never see what our balances were before. Now I have no excuse!
2| How much are you setting aside in your envelopes?
Do you want to start small? Or do you want to jump all in? I wanted to jump all in, if you’re going to start something might as well go all out right?
There is one category, our fun category, where I only pull out half. I keep the other half of our budgeted amount in the checking account just in case we decide to swipe the card for any reason.
Based on some research, the best way to decide how much you want to set aside for your variable spending is to see how much you spent the last few months and take an average. Then you can decide if you want to keep it the same or reduce it a little bit or add some more into that category. It’s up to you and your goals.
3| Are you going to have cash sinking funds?
I also have a folder that has some sinking fund envelopes that I want to save for this year. Do you have any big holidays or celebrations that you want to save for? Sometimes saving a little bit at a time is a lot easier than paying the big chunk that one month.
I created some envelopes for some categories that I know we tend to spend a lot on so it’s easier to save throughout the year. These categories have a visual tracker on them (I got the idea from The Budget Mom, gotta keep it real around here!) so you can see how much progress you’re making.
My favorites are our birthdays! I created envelopes with our ages that we’re saving towards and they turned out so cute!
The process of the sinking fund is to determine how much money you want when that holiday/celebration/goal comes and divide that number by the number of months you have to save.
| Goal | $300 |
| Deadline | July 2020 |
From March to July 2020 is 5 months.
$300 / 5 = $60 a month
You will need to set aside $60 from March to July to have $300 saved by then.
If you want to make sure you have all the funds before the month of July, then it would be 4 months.
$300 / 4 = $75 a month
You will need to set aside $75 from March to June to have $300 saved by the beginning of July.
4| Cash Envelope Wallets
There are so many different kinds of wallets out there. I’ve used the SavvyCents wallet before which has dividers within the wallet so you don’t need envelopes. It’s like a coupon sorter wallet.
This time I got a wallet that has binder clips inside to hold my own envelopes that I’ve made. The wallet did come with envelopes but I wanted to customize my own (of course!).
So far the system is working really well! I’m able to easily see how much I have left and easily access the cash when I need to. Writing down the transactions on the cash envelope is pretty simple too. Just having to flip it over and write down all the information!
I hope that this has helped you if you are trying to decide on using cash envelopes. It’s taken a while to get used to the transition, but it’s been worth it!
How do you organize your cash envelopes? Was it an eye opening experience for you too when you switched over?
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