Thursday, June 23, 2011

Cash Envelopes and Financial Peace

We've been faithfully using our cash envelope system for about six months now, and I love it. At first I wished our budget allowed for a larger amount to go into the various envelopes, but after adjusting to that, I really like the discipline it forces. If we don't have the money in the envelope, we simply don't buy whatever it may be that we'd otherwise be interested in. Sure, this means we aren't doing a lot recreationally, for example. But what we do choose to do or purchase, we enjoy more, because we're making a very conscious choice to use money in that way (and most likely we had to save up for it).

This higher degree of discipline with our money has enabled us to pay off all but $400-some dollars on my OB bill of $4,114 plus a $440 ultrasound, plus about $100-worth of labs. I also see God's supernatural hand of provision in there, because I can't believe we've been able to do that. We'll still have a hospital bill, but this experience encourages me that we'll find a way to get that paid off too. (Prayers for a healthy, non-complicated birth and baby are much appreciated!).

We found that the restriction of using the cash envelope system brings about financial peace. Once we learn to live within the budget, we have greater control over our money. There are no longer the $10-here, $20-there "small" purchases with the debit card (or uncategorized cash) that can add up to $50 or more a month. If I look in our food envelope, for example, and see that we're dipping below a certain point, and I still have groceries to buy, there will not be any running through the Wendy's drive-thru on a night I may not feel like cooking. We're telling our money where it's going, and we're making thoughtful decisions about it. This discipline allows the money to grow. It feels good.

The other benefit of the cash envelope system is that we're faithfully putting money into categories, such as our home, that previously never got funded. We'd always look at our checking balance and feel like we couldn't afford to spend money on this or that, so we wouldn't, unless it was an emergency. This way, we're designating some money each check to those previously unfunded categories. If we don't need to spend it, it grows. We'll be able to paint the house or purchase new carpet at some point, because we can see that the money's there.

So this Coffee Talk Thursday, let's talk budgets. Do you use one? Do you love it, or do you find a budget too restrictive? If so, I would encourage you to give it another try. I know some of you have said in the past that you use an electronic budget instead of a cash-envelope system. That's great, too. The envelopes just work better for me, since the cash is more tangible. I'd love to hear what's working for you.

(Linked to Frugal Friday)


  1. I first learned of the Dave Ramsey envelope system some two plus years ago. I have yet to emply the idea to our house, but would like to try it. I need a Costco envelope! LOL That's a place where I can easily spend too much!

  2. I keep telling myself that even though it sounds hard, it will be so worth it. I would love to try this system. I just have to buckle down and do it. I always feel like I don't have enough money for this or that, but I usually end up make one or two impulse purchases a week. I love reading that it is working for you. It makes me even closer to being ready.

  3. Hi Shannon! I'm with you. We don't have Costco, but just Sam's. I find I blow through my grocery money when I'm there, so I'm trying to limit my trips to just once a month.

    Hi FSS! Yes! Try it :) When you're putting money in an envelope for "this or that," it removes the feeling of feeling like you don't have any money you can spend on that. It's kind of freeing, in a disciplined way!
    If you have any of the Dave Ramsey books (or I'm sure you could get them from the library), he talks you through how to set up the budget, and he has percentages for each category. Here is a quick link I found with some recommended percentages:
    We kinda follow the percentages, but it's more on what amount of cash we can afford to put into each particular envelope, and what's reasonable in that category (for example, we were putting $20 in clothing twice a month, but found that with soon-to-be four kids, and me, and my husband, that wasn't too realistic, so we bumped it too $40 two times/month, and that works better--if anyone needs shoes, my husband's work clothes, etc). Keep me posted on what you decide! Good luck :)

  4. AnonymousJune 24, 2011

    One question .. when you talk about if you didn't spend the cash (like in the house repair envelope, for example) -- is there a security risk having too much cash on hand?? My nephew was saving up for something, didn't bank the money and it mysteriously disappeared. They think a friend who was visiting stole it. If you don't need it immediately (as in painting the house or carpet) -- do you put the extra cash in a savings account so as not to tempt fate in that way?? Maybe you're not talking heaps of cash, but I was just curious how that works. I can see it working for groceries etc. where the money is sure to be spent....and too quickly too!

    Denise in Canada

  5. Hey Denise, good question. I think as more cash accumulates, we probably will transfer that amount over to our savings account and just keep a record of what's in there (or use a fire-safe lock-box at home). If an envelope (such as auto) gets too much cash in it, I stop carrying it with me in my purse--just keeping what I might need for gas or something. Sorry to hear that happened to your nephew.