The Cash Budget Envelope System: Do You Use it?

I'm curious: if you are on a cash-only budgeting system, do you use actual cash to pay for expenses, or do you use a debit card?

DH and I are debt-free followers of Dave Ramsey's financial advice. For the last couple of years we've paid cash for everything, but we use our debit card to do it. However, Ramsey advises against this and suggests his "envelope system"....keeping predetermined amounts of actual, physical cash (what's that?) in envelopes, and only spending from those envelopes. So when you're out you're out.

I've been wanting to try this because I think I could get a better grip on our monthly spending, but DH doesn't want to. Because we live in our RV most of the year, he thinks its a bad idea to keep so much cash on board.

I'd love to hear if anyone else uses the envelope system and how it's worked for you.

I'm also a DR devotee. I signed up for the online Total Money Makeover for a year, and as a bonus they sent me a wallet with envelopes to use for cash.

Man, it was no time at all before the envelopes were all ragged and I had "stolen" from the gas envelope to pay for groceries because I didn't have small bills, etc. etc.

A lot of the DR folks really swear by it, but the only way I could manage was to figure out what my cash-only budget was for the month (like food, gas, clothes, misc.) and divide by 4 and then withdraw that amount from my checking account on a weekly basis. I made up my mind that I was living on that money, but I didn't subdivide any expenses.

It works better for me, but only because my DH and I do a DR no-no and keep our finances separate (long story). If we were pooling everything, that might get too difficult to monitor.

Since about 3/4 of my purchases are from local shops I use cash to spare them the transaction fee.
My CSA, which does not take cards, and is a large enough ammount that cash can be a problem for them, gets a check.
Gas stations here often charge $.10 extra per gallon to use a card, so they get cash. On trips I use the card because I have a set gas budget so I put that into my account and I rarely run into the extra charge outside of this areaanyway.
Hotels get debit but all other purchases, which have been planned for, are cash as they are also often made in local shops in the areas I travel in.
Online purchases [ like the doggie socks from your website!] are planned for and get put on the debit card.
Sometimes I will use a credit card when I come upon something at a great price, like my new winter coat, that I have been on the lookout for but was not expecting to find just yet. I then pay the card off with a bank transfer from my stash.
I do not use envelopes per se but work with very carefully budgeted ammounts within a general pool of cash. I have been doing this for so long that I am not longer tempted to fudge funds from one source to another.
I also write EVERYTHING down, even after becoming FI these last 10 years.

I used the envelope system when I waited tables in my 20s and it worked like a charm for me at that time.
When I got home I put tip money in appropriate envelope - I paid my roommate in cash for rent & utilities.
I would take $$ to bank to write a check before I wrote it --- bank was close to my house.

My life was much, much more streamlined then though. It is very easy when you are the Captain of your Own Ship in many ways.

It gave me a GREAT physical sense of allocating $$ though.

I could understand not wanting to have that kind of cash on you though when you are travelling.

This isn't necessarily a 'simple' suggestion, but maybe you could replicate the Physical part of the exercise using funny money (make homemade Monopoly cash or something) and move it from envelope to envelope as you use debit card. ???????

My DH does our books weekly, and we have an allowance we stay within, for the most part. If one of us needs or wants to make an expenditure significantly outside of this, we consult each other. Our weeky budget is the same; $170 for all food & transportation expenses. Often we're under this amount. We have a house account out of which we pay all our bills, and use the debit card.

Recently we've been at or somewhat over, as we're hosting an out-of-work friend. We'll recompense the expense this spring when he assists DH in the remodel of our garage into a finished office for me, and a functional tools area. He's an architect & carpernter, my DH is a builder, so I know we'll make back the grocery $$ we're spending now!

If you're worried about keeping large amounts of cash around, maybe you can put your weekly amount into a savings account and use the debit card for just that account.

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Originally Posted by HumboldtGurl

I'm curious: if you are on a cash-only budgeting system, do you use actual cash to pay for expenses, or do you use a debit card?

DH and I are debt-free followers of Dave Ramsey's financial advice. For the last couple of years we've paid cash for everything, but we use our debit card to do it. However, Ramsey advises against this and suggests his "envelope system"....keeping predetermined amounts of actual, physical cash (what's that?) in envelopes, and only spending from those envelopes. So when you're out you're out.

I've been wanting to try this because I think I could get a better grip on our monthly spending, but DH doesn't want to. Because we live in our RV most of the year, he thinks its a bad idea to keep so much cash on board.

I'd love to hear if anyone else uses the envelope system and how it's worked for you.

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IF you feel like having too much cash onboard then make your cash be travelers checks. Or get a safe. or go to an ATM when you are out. Being an RVer does not mean that you can not have the cash available to you.

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Originally Posted by catherine

I'm also a DR devotee. I signed up for the online Total Money Makeover for a year, and as a bonus they sent me a wallet with envelopes to use for cash.

Man, it was no time at all before the envelopes were all ragged and I had "stolen" from the gas envelope to pay for groceries because I didn't have small bills, etc. etc.

A lot of the DR folks really swear by it, but the only way I could manage was to figure out what my cash-only budget was for the month (like food, gas, clothes, misc.) and divide by 4 and then withdraw that amount from my checking account on a weekly basis. I made up my mind that I was living on that money, but I didn't subdivide any expenses.

It works better for me, but only because my DH and I do a DR no-no and keep our finances separate (long story). If we were pooling everything, that might get too difficult to monitor.

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I haven't done this yet, but if I did, I would do it like you. My life is so busy, how could I deal with cash envelopes for the bills? Take the money out of the bank, then put it back so I can pay off a bill online? We don't even have local gas, or electric companies, or phone companies or cable companies in our town. Everything is online or by check or Credit card.

I think this kind of a system might work/be necessary if you really have difficulty controlling your money. In our case, we don't do envelopes, but here in China we are pretty much all cash. I will use my local debit card for some larger purchases (Ikea has aisles that only take cards, not cash, so I use it there most times we go), but pay cash for most everything else. I enter my cash expenses in my master FI spreadsheet just about daily and have the running totals linked to a sheet with monthly and annual budget targets, so I can see if/when things are getting out of whack.

If your debit card is working for you, I don't see why you need to fix something that isn't broken.

lhamo

We are somewhat like redfox on this. We are emptynesters living on a "common pot" basis (all income pooled, all expenses paid out of one checking account). There is one person who is the book-keeper/manager of the finances. This role has been permanently held by the same person, and probably will remain so, due to the learning involved. But periodically the offer is made to transfer the role to the other spouse.

We don't keep nor want to keep much cash around. Between us, it's rarely greater than $60. So, no envelopes.

But we spend on a pay-as-you-go basis for any discretionary items, using either a debit of credit card. We each have one of each we carry around.

I tried the cash envelope system back when Larry Burkett was with Money Matters. I was an envelope failure. I stole from envelopes to cover other envelopes and then during a big grocery shopping trip I lost an envelope and all the cash in it. I went back to using the credit card (and now the debit card). At least I get a statement every month (or watch on-line) and can track my spending better.