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!

@StuntNun, that happened to DH a couple of years ago. I was pretty cross. We paid it off but then he needed to close his credit card account so his 'pocket money' is a current account without an overdraft. He can check the balance on his phone to see if he's got enough for whatever purchase. It hasn't happened again.

With the shared account, we both know it's for food and bills so the card doesn't come out of the wallet unless it's groceries to pay for.

If someone is repeatedly unreliable and blows family money of crap, then it's more of a relationship than a budgeting issue.

Actual envelopes is a perfectly valid and quite commonly used budgeting method, it's fine not to do things virtually.

I completely agree that money management should be taught in schools, if your parents are wealthy and never needed to budget why would it occur to you that it was something you needed to look into or research online? And if your parents can't manage their own money how will they be able to teach you to do it?

There will be families in the middle who, of course, teach their children but imo it would do no harm at all for them to learn at school as well

I was going to say similar to UpStartCrow on P3.

I think I'd have 2 problems with envelopes of cash - one being if you were ever broken in to, then that's all - all your cash is gone and you would be in trouble. The other being that if you have the notes there readily available, then it's too easy to 'just' take it as it's handy, for something you want, I'd have thought.

The key is, to also remember to put in your budget all the things you pay annually, as well as the monthly things - be that TV Licence, MOT, various insurances, Christmas, Birthday presents, holidays, and remember things like Water Rates and Council Tax which are paid in some months and not others.
Then add in the inevitable repairs pot (or envelope if you go that way) - cars, boiler, white goods, etc.

You say you've written down what you spend. Have you included all the "little" cash purchase you make now - be that lunch on the way to work, coffees out, magazines, parking fees, or whatever ? It is surprising how they can add up.

Actually, yes. But it was years ago (when the Earth was cooling) and before computers and online banking. It was very hard back then to get a credit card (especially for a young single female) so everything was either cash or check.

My mum was a bookkeeper and when I first moved out on my own she showed me how to keep to a budget by using a combination of the cash envelope system, writing checks only for rent/utilities, and a paper ledger to keep track of spending. Any money left over went right to savings. I was one of the very few of my friends who was never overdrawn at the bank and usually had a bit put by for emergencies or some small 'splurge'. I bless her every day for this. I'm no whiz at financial planning or investing, but by God I can make a budget and stick to it!

I still use the cash envelope system when BFF and I visit Disneyland. It's the one place that my spending urges get the better of me!

OP try the Goodbudget app. We’ve used it for the past 2 years and it has revolutionised our spending.

We have envelopes for daily spending for DH and Me, groceries, entertainment, transport, and bigger annual envelopes for holidays, shopping etc. It really shows you where your money is going, and makes me think twice about whether I really need that Starbucks etc.

Oh, and I was the only one of my friends who actually balanced her checkbook against the bank statement every month. Does anybody still do this, I wonder?

Electronic banking is a wonder to me. But I still check their figures!

I use the cash envelope system. It works really well as long as you're not tempted to use your cards at all.

Try a monzo card. It's really helping us.

I have 2 bank accounts for this reason. 1 which my salary goes into which then gets split into food bills and rent money and then the remaining goes into my “spending account”.

If it’s a true emergency I can transfer money otherwise there’s no need

"Oh, and I was the only one of my friends who actually balanced her checkbook against the bank statement every month. Does anybody still do this, I wonder? "

Almost all banks and card issuers in the UK allow you to download a file of transactions which (if you have a suitable package) are imported and automatched requiring you only to approve (or otherwise) the matching. The file shows date, amount, payee name, cheque no if a cheque, perhaps some other stuff. My package aliases the bank file name "WESTCHESTER WINERY" to my name "Westchester bar," or "S BLOGGS LTD" to "Sam the windowcleaner" after I've done it once.

Most of my bank transactions are direct debits, standing orders and fastpays, I use very few cheques now.

Another vote for YNAB. It’s essentially an electronic envelope budgeting system. They have a website stuffed full of webinars and you can sign up for free online sessions about any aspect of budgeting.
YNAB is awesomesauce.

Yes. I do it (DH is useless with finances) for our family.

It isn't even that we don't get cash out once the money's run out from an envelope but it makes you think twice about it.

We get out £x at the start of a 4 week period and put it into envelopes. 4 x socialising, 2 x fuel, 2 x food, 3 x family fun money and so on. It took about 6 months of balancing amounts and the number of them eg. how much we spend on a meal out and how many times per month we go out. Utilities come out via DD. Annual-type expenses (MOT, tax, insurance, school fees), unexpected costs ahem, new wing for my car after the gatepost hit it and larger treats like a fancy meal out way beyond our typical budget just come out of the current account but the account looks healthy because of our enveloping than it otherwise would.

The cash is drawn directly out of DH's salary which is paid into our joint current account. My salary is paid into our savings account and every few months we move the surplus from the current to savings or an investment etc.

Enveloping works brilliantly simply because you see the money going and you have an idea of where it's going. We even have 4 envelopes (2 for each adult) for 'frittering'.

In case it makes a difference, DH and I each have low six figure incomes. We own our house outright and have nice holidays several times a year. We do this to set an example to our children and to retire early and comfortably; it isn't only for people who worry about having enough money at the end of each month.

why is your husband's credit card expenditure a joint responsibility?
PearTree because my credit rating takes a hit when he gets the debt collectors after him. Annie I'm not sure that him being a bit crap with money is sufficient cause to LTB!

Thank you everyone! I will also check out YNAB

I don't use envelopes but I do budget by mainly using cash. I don't have a credit card or an overdraught facility so I have to keep track of my spending. Lots of different ways of doing it, OP, but the principle is that you work out what your disposable income is after paying your bills (and a little bit of savings is recommended as well) and stick to it.
A lot of people do find that using cash is easier, hence using envelopes. Jars work well, as well. I used to have different purses, and put money into them for different uses.

If you pay for things with a card (contactless or with a PIN, debit or credit) you can then see where all the money goes each month, as every transaction is listed. With cash, I find it is very easy to lose track and forget this or that small purchase.

apologies for my dumb naivete, Nun, but is that simply because you share the same address? or is it a joint card? If the latter, could you uncouple your credit rating from his by having separate cards? As I said, we have only very slowly brought our finances together so this is a bit forrin to me. And I've never lived with someone who isn't on top of money, so the situation hasn't ever arisen.

I teach families budgeting as part of my job and many use the envelope system.
I use 3 bank accounts. One for joint bills,one is DHs, other is mine. Wages go into joint account and after all bills, we syphon rest into our own accounts and savings. I draw weekly cash and work from there.
Client group I mainly work with struggle to have one account let alone 3, so works best for them.

I remember seeing how my mum budgeted when I was a child. Dad got paid weekly in cash. Mum had a list of how much she had to put away every week for all the bills that might come in. Even ones that only needed paying once a year she had a weekly amount worked out. Each bill had its own jar or tin and she would sit down every week and put the cash for bills away. Then there was a sum she used to shop with every week. After that she had money left that she put in a savings account for things like holidays

My mum did this too, although it was literally envelopes she used, not jars etc. She's never had a credit card or been in debt other than the mortgage (paid off years ago). I think she has a debit card nowadays, but is primarily used to withdraw cash from the ATM more than anything else. Cars, holidays, furniture, repairs, etc have always been paid in cash. She might have some direct debits set up to come out of her bank account these days, but I couldn't say for sure. Either way, I'm sure she could tell you down to the last decimal point how much is owed and when.

DH and I used to do this too in the days when we were paid in cash and internet banking hadn't been invented. Nowadays I pay almost everything online, but I have certain things that are budgeted for regardless.

I have different bank accounts. One where all payments go out of, a savings account what all pay in funneled into first and then divid out and a savings account for actual saving.

But I do use a credit card. Because I'm self employed I have the credit card for spending and ever month it's cleared off. The card just helps with cash flow. I have a separate credit card for emergencies but it's not been used in a year. Just there because I worry a lot about what could happen and possibly needing it because we used to be in a bad position financially. We now have the savings so I should really get rid of it!

With a good budget and sticking to it, it's possible to sort your financial situation out. We've managed it in a year and are now debt free and finally saving for a mortgage.

We have everything dd. Or pay online on a certain day of the month.
As for weekly spends, food etc I used to use my debit card and not think about it until I was shocked at all the couple of quid here and there silly transactions. My friend said to do in cash as more strict
So now on a Monday I draw enough for food shop and maybe £10 for odds( the odd sch dinner or whatever is small change stuff) . I refuse to go to cash points until at Least Thursday.. And again will only draw what's needed for a top o up shop to cover weekend and maybe a take away...
I save soo much this way.
Obviously if one week is more expensive then I draw a little more but It honestly works.
Go for it

Love the term 'walking around money'

Peartree your credit rating can be affected by someone else if you have the same address.

OK, I see, thanks. Well, another reason for that family summit about budgeting, Nun. Personally, if he can't control his spending (£1000??? I can take the family to Madrid at Easter for that, and indeed will be - I really hope whatever he bought was worth it) I'd be suggesting a period in which the cards are cut up and the first standing order of the month goes to pay down the outstanding balance. Good luck.

It is a common misconception that you are financially connected to someone you have lived with or who has lived at the same address as you. This is not automatically the case – you are only financially connected if you share things such as a joint account or have applied for joint credit.

From the Experian website.