![]() When the running balance on the front of the envelope got to zero, she'd have to quit spending in that category or "move" money from another envelope. As she writes checks or makes charges, she'd subtract that money from the balance listed on the front of the envelope. Instead, on the front of the envelope, she'll list how much money is assigned to it. But she wouldn't actually put cash into the envelopes. She would set it up just as if she were going to use an envelope system. Or Lisa could use a "pretend envelope" system. Then when the credit card bill comes, you'll have the money available to pay the bill. If you charge $20 worth of groceries, move $20 from the "grocery" to "checking account" envelope. When you charge something, move cash to the "checking account" envelope. If you don't like debit cards, another way to modify the envelope system is to add an additional envelope for your checking account. Have a debit card for every category that used to be an envelope. When you get paid, instead of putting cash into an envelope, add it to a debit card. ![]() One easy way to duplicate the envelope system is to use rechargeable debit cards. We're much more likely to pull out a credit/debit card or write a check. Unfortunately, very few of us use much cash anymore. Moving money from one envelope to another was a warning sign that you could be getting into trouble. You immediately knew if you could afford a purchase. The envelope system worked well when we used cash for all of our purchases. Of course, that meant that she'd have less to spend in the envelope she stole from until the next payday. If she got to the checkout and had more than $40 worth of groceries in her cart, she could return some groceries or take some cash from another envelope. When she went to the store, she'd take the "grocery" envelope with her and pay for her purchases with the money in the envelope. Cash from her paycheck would be divided into the various envelopes based on how much she felt she needed in that category.įor instance, if she got paid weekly and expected to spend $40 per week on groceries, $40 would go into the "grocery" envelope. She would have a number of envelopes for the different categories of spending, such as rent, food, transportation and so on. There are variations, but in the basic envelope system, Lisa would cash her paycheck. A budget can provide discipline and control overspending. Lisa is attempting to use her budget for its second purpose. If you need to reduce spending by $250 a month, don't look in a category where you only spend $300. It's also a good way to find potential savings. Just knowing that your electric bill is higher could help you identify an air conditioner that needs servicing before it breaks down completely. When compared to previous months, it can tell you what's changing in your spending patterns. A simple monthly budget can tell you at a glance where your money is going. A budget is a wonderful way of collecting information about your finances and presenting it in a way that's useful to you. So merely controlling cash isn't an effective budget tool.īefore we look specifically at Lisa's question, let's spend a moment to talk about how budgets can be used. ![]() Fewer of our purchases are made with cash. ![]() Some of the old budget tools like the envelope system don't work so well today. and still know how much is left in each category as the month goes on? - Lisa How can I track our cashless expenditures for gas, groceries, personal items, etc. My family has been trying to work with a budget for the past several months, but the "envelope" system is just not practical with our primarily cashless lifestyle.
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