To ask if anyone does the ‘Cash envelope system’ to budget?

[StickThatInYourPipe]

Hi All

My partner and I finally went through our finances at the weekend and quite frankly they are shocking. We are always needing to use CC by end of month and now I can see why this is! We live completely beyond our means!

Has anyone tried the cash envelope system to budget? I have been seeing online some videos etc but was just wondering how people actually got on with them.

Thanks!

Yes I do this. I have envelopes x6. 5 are labelled week 1, week 2, week 3 etc and 1 labelled hobbies for the dc hobbies that need to be paid on the day.

I worked out the cost of food with a menu for the entire month that includes all meals and snacks I need to purchase for each week. I also work out the cost of cleaning and other household products and add that to the food etc. I put the cash for the entire month split equally between the envelopes. I only spend whats in the envelope for that week. Any left over is put into savings or towards replacing clothing.

I never spend the money in any other envelope other than the 1 for that week. You need to be honest with yourself are you going to not dip into the other envelopes? If you think you might then it wont work for you.

I'm another one who watched DM get the cash in and split it all up - sometimes it was held together with a peg or written on the corner. I am sure there are loads of notes out there with "gas" "phone" etc and when it was a birthday or Christmas then you'd get a note with your name in the corner! :o

I don't do that with cash but I've seen on lots of budget programmes where they tell people to work in cash as it seems more real and they are less likely to overspend. So, if you decided your budget for something was £10 and you only took £10 with you then you wont just decide to spend £12 or 13 thinking it's near enough on budget. Stops you frittering cash away.

I just pay everything by DD as near to the beginning of the month as possible and then buy stuff like food/petrol/entertainment/clothes etc from what is left. if I have money left on payday it goes into savings.

I did this when I was on maternity leave and getting used to a new budget.
I set up all my payments to come out electronically and then I used to withdraw how much money I had to spend per week on lunches/sundries,etc and separate it into weekly envelopes. Then I couldn't use my card during the week, just the cash in the envelope.
It was surprising how often I had money left over. Just the act of having to pay with cash and take it from an envelope made me more conscious about spending.
I also completely agree that budgeting should be taught in schools. It's definitely a life skill that people need to learn.

I've not used the envelope system, but when we were very hard up, I would calculate what we had available each week after essential overheads (rent, childcare, utilities etc). After working out what we had available to spend on food, treats, etc, that is what we would take out in cash at the beginning of the week, and not use the card. Doing it all in cash made it easier to keep track of.

My exbf when I was younger did this, as well as his whole family. It did work, none of them ever overspent they were all massive tight arses anyway but it made me feel so uneasy when there are thousands stuffed in envelopes all around the house, if they had been burgled it would have been terrible.

We don’t use actual envelopes, but we withdraw cash weekly to cover all day to day spends-it covers food, petrol, ds lunch money, window cleaner etc. It totally works for us and we actually manage to accumulate a bit of money most months. We then move that to a separate account to save. All bills paid by direct debit

I have a very detailed budget on a spreadsheet, I even budget for my makeup with a small amount each month. I find this works very well. I always draw out the money for food in cash as this stops me overspending. A top up shop in Waitrose with only a card to pay with is always disaster for the budget.

It wouldn't work for saving large amounts and I prefer one system. So I've got virtual envelopes for phone upgrades, holiday savings, house deposit and so on. It would be thousands, which would make me nervous!

I don't mean to be so evangelical but it was such a game changer for me. I don't look at my account balance as money to be spent at all now. I look at my budget app and see what I have in the eating out pot (for example).

We do the envelope system but electronically by having several bank accounts.

I'm with santander and have several accounts set up with them.. All of which are visible via the online app.

We have a bills account. All our bills come out of this account. DHs wage gets paid into this and it covers all bills and Direct Debits.

Then we have an "Everyday account" which we have visa debit cards for. My wages gets paid into this account. It's for anything that is not a bill.

Then we have several little savings accounts (such as Xmas, Holidays, general savings) on payday, I transfer a set amount into each savings accounts from the Everyday account.

As I say, all of the accounts are visible online and they are so easy to transfer from and to.

The hardest part is to not touch the savings accounts once the Everyday account gets low. Otherwise it works well as we never have to worry about paying bills etc as the bills account runs itself. As long as we don't touch it.

And having worked in debt management, and insolvency, and seeing the total mess people easily get themselves in, I completely agree that learning to budget would be a great idea taught in schools.

I’m not sure if it’s the same but I put money away each month for certain things. Rent, phone, bus, holiday, Christmas, lottery, Netflix, DisneyLife. If I have any birthdays for the upcoming month i put the money for that away, I have a pot where I put £20 each month just in case (for new school shoes or uniform or sudden growth spurts) then you are left with money for the month which can be spent on whatever.

I do it and it really works for me

On payday, I withdraw monthly cash for petrol, food, weekly spending and a separate monthly 'social fund'. I have a special purse - you can get them on etsy or do what my sis does and she just uses a number of little coin purses in her handbag.
I find it works really well- I keep half of it on me and half in my purse (roughly)
any money left at the end of the month gets carried over, so I have to withdraw less the next month and my savings build up. I love it, it is such an easy system.

I did this when I was younger and a single mum. It wasn't ever something I was taught to do, it just seemed like a sensible way to split costs for food, bills, etc. It helped me mentally think of budgeting needs and in practical terms meant that I always had enough for essential costs, despite being on a very low income. Have never needed loans or food banks etc. I'm not the type of person who would just spend cash I've taken out the bank without thinking of the other things I need to pay for - I've never needed to be taught that by my school or parents, it's just basic maths really.

It wouldn't work for us now as we're on a bigger income and it doesn't make sense to keep that much cash around, and I prefer paying by direct debit/debit cards than dealing with cash. But I have lots of different bank accounts for different saving purposes (no reason not to, as banking is free), so mentally I still split up my money for different purposes, and track spending on a free app.

I use 3 accounts - our salaries come into the current account, then I work out how much we need and add about £150 for unexpected expenses. The remainder is split between an emergency fund account (useful for replacing the boiler a couple of years back) and the 'holiday' account which doubles up as an extra emergency account if needed.

I found if I kept it all in 1 account it got frittered away. The key is to change your mental thinking so that you do not really 'see' the other accounts so the savings adds up, rather than seeing them as a bonus.

Generally we can afford to replace the cash if we get burgled (not that we sit in thousands) and we have a safe.
Equally when there's mass chaos due to the banks not working (rbs), we can still pay for our shopping

I agree about the fact it’s shouod be taught in schools.
If parents don’t know how to budget (and lost of them don’t, just look at the amount of credit people have!) then how on earth are they going to teach that to their dcs??

OP I haven’t used the envelop system but have a similar online system. I think the most important is to know exactly how much you can spend in each area - so having a clear budget is really the very first step.
For me the second step is to look at all the recurring bills (electricity and gas, telephone/internet, TV etc...) and find the best deal possible as well as getting rid of things that aren’t essential (eg sky tv) or the stuff you keep paying for that you don’t actually use (additional cover for some appliances, magazines etc...)
Then the third step is to know how your u allocate for food, petrol, fun activities and so on. At that step the envelops can work well (or following your spending with an app, using different CC etc....).

But I really think you need to do the first two steps before.

But what happens if you’ve spent your ‘fun’ and ‘going out’ and non-essentials money then run out of the money in the ‘food’ envelope?
I have always just had a weekly budget and I just spend as frugally as possible in the week then if there is money left over at the weekend I do something like a meal out or some kind of outing/treat If not I don’t. If there’s money left over I either carry over into the next week or put it in savings if it’s a lot.

There's a really good onlline OU course on FutureLearn (look up Future Learn.org) called Managing your money. Will take you through budgeting and other aspects of financial planning really thoroughly and clearly. And if you want to think more about your attitude to money and spending, and becoming more 'intentional' about it, Jason Butler (again, lots online) is really good.

I"ve been doing a lot of analysis of my own expenditure and setting short, medium and long-term financial goals since the new year. I don't physically do cash envelopes, but I have set up 3 different easy access savings accounts to squirrel money away for different purposes within a short time frame (over the next 6 -12 months in my case) and I stash the set amounts I've determined for each purpose into those accounts on the day I'm paid. Medium and longer term goals have different financial products and I put money away in them on the day I'm paid. My contribution to the joint account for food, utilities, insurances, etc, go in on the day I'm paid. Any credit card payments owed go on the day I'm paid. This leaves money in my current account for my own expenses, which I've estimated based on past months - haircuts, daily travel expenses, socialising, birthday presents, etc - and a bit left over for unforeseen things. I sweep any extra from the current account into one of the short or medium term accounts each month.

This works for me because I enjoy having a lot of control and I'm very goal-oriented! So I don't mind paring my clothes budget to zero or going out budget right down if I'm doing so in order to save for a really great holiday (short term), a course I want to do (short term), to build a fund to help our kids with big expenses later on (medium term) or to build up a better pension (long term). I find it helps me say no to temptations to splurge.

What do you do when your OH is rubbish at sticking to a budget? I have tried to budget before but then it all goes wrong when my DH gets a 'surprise' credit card bill for over £1000.

I'm usually pretty good with money and rarely overspend. However, I'm planning for a holiday in New York so I've restricted myself to £100.00 per week, this includes food, going out, treats, cosmetics and my weekly dance/exercise class. I always put the £10 for the class in a separate compartment straight away, so I don't accidentally spend it.
I usually have some money left over, which then goes into a drawer for the notes and my piggy bank for the coins.
All the money saved that way will be spending money in NYC.

no, because I am a bank and card person. I only keep enough cash for incidentals over the next week or two.

I use a computer package to track my accounts (most of them will download transactions and statements) and it holds a sort of budget planner where I have recorded my regular monthly/quarterly/yearly transactions. This enables it to draw a forecast of what the accounts will do over the next month (or year, or whatever). So I can see if an account will be overdrawn or holding too much.

Of course it's less stressful if you are able to live on the "happiness" end of Mr Micawber's theory of financial management.

I don't think budgeting works if you or a partner have the idea that credit card spending isn't real money.

That would drive me mad, StuntNun, and I would have to LTB if it wasn't agreed, shared expenditure! We have separate accounts (current, savings short and long term) as well as shared accounts. If I rack up expenditure on my credit card, it's my responsibility to pay it off, ditto my husband on his card. We started out with very separate finances and have gradually brought more together, but we still maintain a lot of distinction between even our day-to-day finances. Can't you separate finances in your household? why is your husband's credit card expenditure a joint responsibility?

Yes I do, although I think it's used more in the US as they have dollar bill notes so can get a bit annoying with the £1 coins. It's my 1st month of trying the cash envelope system. Am a week in and so far so good! I have envelopes for food shopping, personal (budgeted myself £40 per week) entertainment, birthday/gifts, travel i.e. train ticket, petrol. I find that having cash rather than just using my debit card makes me think more carefully about what I'm spending my money on. Good luck to you!!

Have a look in to the Monzo card which is basically a cash envelope in card form. It's a debit card that you top up from your account. It's not linked to an account itself so once you've spent what you transferred to it, it's gone. I've found it useful for budgeting

stuntnun you need to talk to him, do the budgeting together and expect him to act like an adult.

When, inevitably, he doesn’t, you ask him why he thought that it was ok to do what he did. Scream like a banshee & threaten separation.

Rinse & repeat.

Eventually you realise he just doesn’t give a shit how his actions impact you, you get fed up & you leave. You get to control your own destiny & eventually meet an adult to have a relationship with.

...or so I’ve heard 😉

Frankly, the cash envelope system sounds a bit infantile.

A budgeting tool could be a good option, or we just do excel spreadsheets.

First, we worked out what we need for essentials like food or bills paid on a weekly or monthly basis. Then one-off items in the year (e.g. insurance, car service). You need to make sure you're getting the best deals for mortgages, utilities and not overspending on things like children's activities etc.

We pay groceries and bills out of the shared account and have a linked savings account where we transfer money towards the 'once-a-year' stuff.

Otherwise, we have 'pocket money' - same amount goes into our own accounts every month and covers clothes, haircuts, Christmas presents etc. As it's a smaller amount spent on nice things so it's easier to manage.

Everything else gets saved/invested. About every 3 months, DH and I will allocate a couple of hours to review and plan our finances: see if the spending is on track, if any budgets needs adjusting, if it's time to shop around for a new deal or anything + make decisions about allocating money to big-ticket items like holidays, cars, furniture, investments etc.

So basically, a case of watching your pennies day to day and looking after your pounds. If you have a budget, you're disciplined and wait to sit down to agree to any bigger expenses, you'll be a lot less likely to spend money on random shiz.