How to Create a Cash Envelope System That Works for You

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A few years ago, I began using a cash envelope system to pay down a high credit card balance. To do this, I placed a budgeted amount of cash into separate envelopes marked with expenses like groceries, restaurants and other daily costs. Then I paid cash for any items in those categories.

Handing over cash made me a more careful spender. I no longer blew through hundreds of dollars with a series of painless swipes and little thought. As a result, I paid off an $8,000 debt in 18 months.

I’m a big believer in the cash envelope system. However, I had to experiment with different methods before I found one that worked for me. I’ll tell you about that in a bit. But first, let’s look at how to use a cash envelope system and why it makes you a better money manager.

Choose your cash envelope system

The first thing you need to do is create a budget or refer to the budget already in place. Then figure out how much cash to place in each category’s envelope for each pay period.

Here’s an assortment of envelope systems to get you started…

Don’t delay the process by getting caught up in color-coded systems or shopping for the prettiest envelopes. If you have a mailbox and a recycling bin, you have plenty of envelopes.

Designate cash-only expenses

I use a credit or debit card to pay recurring expenses such as utilities, insurance and property taxes online. I also use plastic at the gas pump. (If you use a credit card, pay it off monthly to avoid more debt.) Designate envelopes for groceries, restaurants, prescriptions, clothing, health and beauty, medical bills, child care, pet food and other expenses.

Don’t cheat

If you run out of money from the restaurant’s envelope, dipping into the groceries stash defeats the purpose. You’ll probably need to adjust your amounts over the first couple of months.

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Originally published at on August 28, 2018. helps people with credit card debt, tax debt, student loans debt, credit report errors, ID theft issues, bankruptcy & more!

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