The cash envelope system is a great way to keep yourself from going over budget. Your spending is restricted to the amount of money you fill in envelopes to represent different budget categories.
The pandemic, however, has made it less convenient to stick to this budgeting method. Many of us are doing more shopping online, and many are avoiding the germs that handling cash may expose us to.
But you can still follow the basic principles of the envelope budgeting method without using cash. Here are four ways to transition to a cashless version.
1. Use Gift Cards
Instead of stuffing your spending envelopes with cash, use gift cards. At the beginning of the month, purchase gift cards that correspond with your various spending categories.
For example, you might get one card for groceries, another for gas and another to use for entertainment purchases. You’ll save money on activation fees if you purchase a gift card for a particular retailer — like a Target or Walmart gift card — rather than a Visa or Mastercard gift card.
Before buying gift cards, read the fine print so you’ll know if there are any expiration dates or fees. You may have to adjust your spending limits to match up with the gift card denominations.
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2. Use a Budgeting App Based On the Envelope System
Envelope system budgeting apps existed way before COVID-19 changed our worlds. Goodbudget and Mvelopes are two apps built around this budgeting method.
The free version of Goodbudget gives you 20 envelopes to manage your spending. Its paid version — which costs $7 monthly or $60 annually — offers unlimited envelopes. Goodbudget doesn’t sync to your bank account, so you have to manually update your transactions to keep your envelope balances current.
Mvelopes, on the other hand, does link to your bank account, so your spending is accounted for in real time. This app lets you choose from three paid plans — a basic version costing $6 monthly, an intermediate level at $19 monthly and a complete plan for $59 a month. While there is no free version, you can take advantage of a free trial for one month.
3. Use Multiple Accounts for Different Types of Spending
Another way to create digital “envelopes” is by using separate bank accounts for different areas of spending. You may want to stick to just a few broad budget categories so you don’t end up having to open a bunch of bank accounts.
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For instance, you might want to have one account that covers food and home essentials rather than four separate accounts for groceries, take-out, beauty products and home supplies.
When working with multiple bank accounts, you’ll want to maintain a master account where your paycheck comes in and then distribute money into each spending account. You can set up bank alerts to let you know when your balance reaches a certain level so you’re careful not to overdraft.
4. Track Your Spending After Every Transaction
Keeping yourself acutely aware of your spending as it happens is another way to stay within your budget limits. Use a makeshift ledger that you carry around with your debit card — it could be an empty envelope, an index card or a small notebook — to record your spending.
Before you make a purchase, take a minute to check your budget to see how much you’re able to spend in that category. After you make the transaction, quickly do the math to update your remaining balance.
It’ll take a little more self discipline to stick to your spending limits, but it can be done without resorting to using cash.
Feeling overwhelmed? Create a budget that works for you with our budgeting bootcamp!
Nicole Dow is a senior writer at The Penny Hoarder.
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When you log into your bank account, how do your savings look? Probably not as good as you’d like. It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
The 100-envelope challenge is pretty straightforward: You take 100 envelopes, number each of them and then save the corresponding dollar amount in each envelope. For instance, you put $1 in “Envelope 1,” $2 in “Envelope 2,” and so on. By the end of 100 days, you'll have saved $5,050.
It works like this: Gather 100 envelopes and number them from 1 to 100.Each day, fill up one envelope with the amount of cash corresponding to the number on the envelope. You can fill up the envelopes in order or pick them at random. After you've filled up all the envelopes, you'll have a total savings of $5,050.
To begin, a good rule to follow is the 50/30/20 method: 50% of funds go to needs, 30% wants and 20% to financial goals. Make an envelope for each category that applies: rent, utilities, phone bill, gas, groceries, emergency, savings and leisure. Put aside cash in each envelope corresponding to the amount used.
When you get your first paycheck of the month, take out $350 from your bank account and put the cash in an envelope. On that envelope, write out “Groceries.” When you get your second paycheck, do the same thing again and put that $350 in the envelope. That's your $700 food budget for the month.
The cash envelope system, or cash stuffing, is an approach to budgeting designed to help you spend more intentionally. Envelopes used for cash stuffing contain all the money available for specific expenses each month. Cash stuffing could help you avoid credit card debt but requires a lot of physical cash on hand.
Bottom line. Cash stuffing might appeal to consumers who prefer simplicity or have problems with impulse control. But the risk of having all that cash around — not to mention missing out on interest and card rewards — should make you think twice before labeling all those envelopes.
How to set it up: To save $5,000 in three months with this challenge, you'll need 90 envelopes (one for each day of the challenge). Divide out your $5,000 goal into various amounts for each envelope, making sure the total of all envelopes equals the total savings goal. Then put them in a jar and draw one each day.
The child genius had realised that if you group the numbers from 1 to 100 in pairs, the sum is equal to (1 + 100) + (2 + 99) + (3 + 98) + … In other words, 101 + 101 + 101 + … Since there are 50 pairs of numbers, the sum is 101 x 50 = 5050. The 100 envelope challenge is a way of saving £5050 in 25 weeks.
Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.
You may also feel unsafe carrying cash, as it's harder to track it when it's lost or stolen. It can be cumbersome to get started: Getting all the envelopes ready and allocating money into categories can take some time to set it all up, especially if you haven't created a budget before.
Okay, this system is as easy as it gets. Choose your paper and cut slightly larger than your cash. Label the top of each slip of paper with the allocation name (i.e. “groceries”, “gas”, etc.) At this point, you can place your dividers and money into the zippered pouch.
Now the challenge can really begin. Each day, put money into an envelope equal to the number on the envelope. So on day 1, you put $1 into the envelope.
One of the contestants is getting an envelope with twice as much money as the other. After each of them sees how much money he got (in private), he can ask the other person to exchange envelopes (without knowing how much money the other person got). If both contestants agree, the exchange occurs.
Introduction: My name is Rev. Leonie Wyman, I am a colorful, tasty, splendid, fair, witty, gorgeous, splendid person who loves writing and wants to share my knowledge and understanding with you.
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