Adventures in returning to the envelope system

I first read about the envelope system back in college. I used it regularly, but after graduating and paying off my debt, I sort of abandoned it. I'd gotten a hold of my finances, and I figured I could budget safely without having to use this tactic. I could afford to give myself a break.

Then, last month, I realized just how much of a break I've given myself over the years, especially when it comes to food. Upon examining my expenses for the year, I complained to Brian:

“Hey, why am I always paying when we go out? I know it's the 21st century, but come on!”

“What are you talking about?” he argued. “I always pay!”

“Then why did I spend upwards of $400 this month?” I asked.

“I don't know, but so did I.”

“No,” I argued. “There's no way we spent a grand on food in just four weeks.”

Turns out, we did. We've been spending a ridiculous amount on food and groceries. And while it hasn't put us in the poor house, it's still a waste. It's a waste because there are things we want to save up for — a house, maybe. Who knows if that's what we'll want in a few years? But when we get there, it would be nice to know we have the option and didn't squander it on burgers and beer.

“We've got to start using the envelope system,” I declared.

“What's the envelope system?” Brian asked.

“We take a set amount of cash from our paychecks and stuff it an envelope,” I explained. “And that's the only money we can use on groceries and dining out.”

“I don't like it.”

Brian doesn't enjoy frugality as much as I do. For him, it's more of a means to an end. Still, he knew it was the right thing to do if we wanted to stop spending like maniacs.

It's been almost a month since I've returned to the envelope system. Here's what I've learned (and re-learned).

I Overestimated My Frugality

I forgot how much power tangibility has. I stopped using the envelope system years ago because, as I mentioned, I was earning more and was financially independent. My debts are paid, I have an emergency fund and, each month, I auto-deposit into my retirement and savings accounts. All of this convinced me that I was on top of my finances; I didn't really question my thrift. And maybe I had a good hold on my finances, but I also spent $400+ on food in one month. In fact, in one week, I'd spent $90 on groceries and another $80 on restaurants.

And hey, sometimes in life, things happen and maybe you do spend crazy money like that. Or maybe you really love food, and you earn enough to spend money on what you love. But the thing is, I didn't even think twice about it. Oh, sure, I noticed I was blowing my budget a little every now and then. Life happens. A friend comes into town one month; I throw a party the next. But I was blowing my budget by the hundreds on a regular basis, and maybe I was in denial, but I failed to admit that.

Being restricted by cash helped me understand how liberal I was being with my debit card.

Expect the Unexpected

This week, we had a couple of friends unexpectedly come into town. They wanted to go out and enjoy the city, and we wanted to show them around. Of course, dinner was involved, because you can't come to Los Angeles without eating Umami Burger.

“We just won't go out this weekend,” I told Brian. He argued that their visit shouldn't come out of the envelope money, as it was unexpected. We talked about it for a while and eventually realized that most of our overspending is usually due to the unexpected: A friend comes into town. It's someone's birthday. We have to bring a pie to an impromptu potluck. The things that don't happen every month keep happening every month. Thus, when we calculate our food budget, we should expect the unexpected.

Planned Splurges Are More Enjoyable

A couple of Saturdays ago, we headed downtown with some good friends. These friends know where all the best spots are to eat, drink and play. We knew we were going to spend money, so before we left, we talked about how much cash we should bring. We decided on $60. Taking out $150 every Friday, this would give us $90 for the week, which should be plenty.

Going out that day, we were conservative with our money. We still enjoyed each spot we visited, but we didn't spend carelessly, as we knew the $60 would have to last us the entire day. We were more conscious of what we wanted to spend money on. This kept me from ordering cheese fries when I wasn't even that hungry to begin with. Under the old system, I would've ordered the fries without thinking about my budget. Under the old system, my budget was something I dealt with later — I already spent $240? Okay, then I'll try to only spend $10 for the rest of the month. But using cash made the budget something I had to consider as I was spending. This made budgeting much more effective. No kidding, right?

That day, we held back enough to enjoy the most delicious bowl of ramen later that night. I'd been looking forward to that Ramen all day. Knowing that we planned for this splurge made it all the more tasty.

Leftover Money Feels Awesome

This week, we'll actually have $12 left over. It's just $12, but the fact that we stayed within our budget feels great — because it wasn't hard. We didn't go out as much, and when we did go out, I ordered less food. I only paid money for things I really wanted. And I don't feel any different; I don't feel as if I missed out on anything.

I thought it would be painful to return to the envelope system. It's a little surprising that spending less has been so easy.

Another thing I learned: it's important to make a regular habit of looking at the big picture when it comes to my finances. I assumed I was being a good little saver who just had a few occasional unexpected expenses. I didn't take a step back and consider that I was being haphazard about my spending.

These days, I'm in a much better financial position compared to my college days. The ramen I eat now is a little more sophisticated, a little more expensive. My lifestyle and savings goals now are different than they were in college, but the envelope system works just as well now as it did back then.

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kelly
kelly
7 years ago

Yes! I have just returned to the envelope system too for food. It is amazing how much more in control and how much less is spent–why didn’t I do it sooner?

Elizabeth
Elizabeth
7 years ago

Sounds like a good strategy. I’ve used the envelop method when I travel but it hadn’t occurred to me to try it for one part of my budget such as groceries. I tend to overspend at the farmers’ market and then end up scrambling to use up the food before it spoils. The market is cash only, but I think need to have a cash allowance for the month — that might help me decide what to buy this week and what to buy next week. Kristin, does your budget allow for sales as well? Lately I find myself stocking… Read more »

Lisa
Lisa
7 years ago
Reply to  Elizabeth

Elizabeth- I too use a cash only system for groceries and eating out. I’ve tried to set aside a small portion of the total amount for items at a stock up price (like pasta @ .69/box, etc.). It’s definitely made me a more selective shopper but has allowed me to build a stockpile without breaking the bank. I do the same thing at our local orchard, buying peach or tomato seconds (as a current example) but enough to preserve or freeze for the year. I find this way that I can stay within my budget but still have a pantry-full… Read more »

Kristin Wong
Kristin Wong
7 years ago
Reply to  Elizabeth

When planning my budget, I did give us a small cushion for stuff like this. I’ll definitely stock up on awesome sale items, but only if it doesn’t break my budget. Maybe that doesn’t make practical sense, but psychologically, I know if I tell myself, “okay, well I’m spending $20 extra this week; I’ll just spend $20 less next week,” I won’t actually abide by it. Example: Recently, I found a ton of rice on mega-sale, and I nabbed a bunch of it up. I won’t have to buy rice for a while–ha! But I didn’t stock up as much… Read more »

Honey Smith
Honey Smith
7 years ago
Reply to  Kristin Wong

***this also prevents hoarding 😉

Elizabeth
Elizabeth
7 years ago
Reply to  Honey Smith

And waste! Nothing is worse that a food item spoiling, going stale or going past its expiration date before you use it.

Between the three grocery chains in my area, I can often buy enough to get me to the next sale. There’s no need to buy six months worth of something — chances are someone will have a sale within a month or two. It just means I might be buying a month or two’s worth of a staple one week rather than spreading it out over four to eight.

Elizabeth
Elizabeth
7 years ago
Reply to  Kristin Wong

I remember a tip from a money tweet chat where someone suggested “buying back” the stuff in your pantry. So if you stocked up on a certain item one month, each time you used an item you would deduct the cost of the item from your grocery budget that week/month.

I’ve never tried it, but I think it might be useful for budget purposes – and to resist that urge to use lots of something simply because its plentiful at the moment.

Liz
Liz
7 years ago
Reply to  Elizabeth

I do this, particularly with items that I buy in the summer to can. There’s nothing like a jar of home canned peaches on a miserable January day (my daughter calls them sunshine in a jar). But I charge myself 50 cents for a pint and 75 cents for a quart. I actually throw the money in a container in my pantry, then use that money the following summer to buy the canning supplies and fruits and veggies to can. This also gives me a stash of quarters that I can sell to my sister for laundry, so I don’t… Read more »

Thomas | Your Daily Finance
Thomas | Your Daily Finance
7 years ago

That sounds like the wifey and I discussing how much we use to spend on food and going out. That was before we got a handle on our finances. We used the envelope system to get us on track and boy did it ever turn us around. We dont use it know but its because I am very very strict when it comes to the budget and I track almost everything. I know some people will say I go overboard but it helps me and its what I am comfortable with and hey it works. When my wifey is the… Read more »

Kristin Wong
Kristin Wong
7 years ago

Exactly. I’ve been doing pretty well at saving and putting away for retirement, so I didn’t question whether or not I was spending money on something I might have deemed wasteful if I quantified it. I love going out to eat, but I love having an extra several hundred bucks a month to save more. I’m still splurging and enjoying my money, I’m just doing a better job of planning out those splurges.

Holly@ClubThrifty
7 years ago

I like the envelope system in theory, but I just could not get used to actually hauling envelopes around.

I’ve had better luck keeping track of my purchases and just stopping myself when I reached the spending limit in each category.

But, to each their own! If it works for someone then that’s all that really matters.

Michael
Michael
7 years ago

Right. And then there’s the risk of losing your envelopes full’o’cash.

Kristin Wong
Kristin Wong
7 years ago

Haha yeah, I can see how its not the most appealing solution. We usually just take out the cash we need and leave the actual envelopes at home. This also helps to limit our spending. Of course, there have been a couple of times that I’ve almost forgotten to take the envelope money with me, so yeah, it’s a little inconvenient. Really, I think for me, it’s about habit. I got used to spending a certain amount, and this forced me to break the habit and spend less. Once we get into a better habit, I’m sure I’ll go back… Read more »

hnh
hnh
7 years ago

I use a 21st century version of the envelope system and love it! I have my direct deposit set up so that a predetermined amount goes into a ‘Bills’ checking account, a ‘Spending’ checking account and my savings. My ‘Bills’ account is for necessities, spending that I cannot avoid (rent, student loan payment, utilities, etc). This account is totally automated, the money goes in automatically and my bills are automatically debited. My ‘Spending’ account is the account that I’m using whenever I whip out my debit card during my daily life. It is discretionary spending(personal care, entertainment, eating out, and… Read more »

Viola
Viola
7 years ago
Reply to  hnh

Oh! This sounds like something I ought to try. Thanks for sharing.

Carla
Carla
7 years ago

Exactly. I never carry more than enough cash to get out of an emergency (enough for a cab ride home, etc).

I use a small notepad and pen in my purse and track all purchases via debit or credit card. At the end of the day I deduct it from what’s been budgeted. I never spend a lot of money at once so this works for me.

Carrying loads of money on me or even just having it in the house doesn’t make me feel secure.

CandiR
CandiR
7 years ago

I use YNAB (I think it’s been covered here in the software reviews), which is essentially the envelope system, but on the computer. Using it faithfully for 6 months changed my world (then I got frugal-fatigue, and fell into the same pattern of “it’s within my global budget–hey, gee, I spent HOW MUCH on groceries?!?!) So, I was technically on-budget, but the savings for future wants and needs was shrinking as I spent “in the moment” I’m getting back into using it, and have the app on my phone. I’m trying to train myself to be good about checking my… Read more »

Martin
Martin
7 years ago
Reply to  CandiR

Yup. Another vote for YNAB. I have just crossed a full year of using it, and it’s incredible how well it works, and how much information I have today that I didn’t have before. Not to mention the fact that somehow, miraculously, I am $4000 better off now than I was a year ago–and that’s just liquid funds, it doesn’t consider my investments. Keeping track of where my money goes and staying within budget is extremely helpful.

FI Pilgrim
FI Pilgrim
7 years ago
Reply to  CandiR

+1 for YouNeedABudget.com, I’ve been using it for almost a year as well and it’s a habit for me now. The thing I enjoy the most is how much easier it is for my wife and I to converse about where we stand with our envelopes.

nicoleandmaggie
nicoleandmaggie
7 years ago

Glad that works for you! Also glad we don’t have to do it!

Ramblin' Ma'am
Ramblin' Ma'am
7 years ago

“Under the old system, my budget was something I dealt with later — I already spent $240? Okay, then I’ll try to only spend $10 for the rest of the month.”

Yeah, that sounds like me. Then I end up using my credit cards so I don’t run out of cash. I pay the credit card off before the interest kicks in, but that leaves me low on cash for the next month. Etc.

It doesn’t happen every month. Like you said, it’s the irregular expenses, which aren’t actually that irregular, that do me in.

Debi
Debi
7 years ago

Am I the only person who separates restaurant eating from groceries? To me they are totally different. Eating in a restaurant is primarily entertainment. Instead of watching an actor in a movie you’re hiring someone else to cook and serve you food. The price of the actual food consumed in negligable to the end cost.

Sheryl
Sheryl
7 years ago
Reply to  Debi

I treat them separately as well. Groceries have a set amount per week that we can spend, but restaurants fall into either our entertainment budget if my husband and I go together, or our personal spending if one of us goes on our own. Groceries are essential, restaurants are not.

EMH
EMH
7 years ago
Reply to  Debi

We separate our restaurant and grocery spending, too. In an ideal world, I would get up early enough to have a cup of coffee with breakfast at home, bring my lunch into work and then make a nice dinner. Sadly, I do not live in an ideal world and our restaurant budget far exceeds our grocery budget. We are working on it!

Debi
Debi
7 years ago
Reply to  EMH

For me it really helps to set up the coffee maker the night before and just press the “on” button in the morning. Lunches are made the night before as well. They’re both good to grab and go in the morning. Once this gets worked into your daily routine you’d be amazed at how easy it becomes.

EMH
EMH
7 years ago
Reply to  Debi

These are good ideas! Thanks. I will definitely set up the coffee maker in the evening and let it brew while I shower. The lunch part isn’t the lack of making the lunch, it is always forgetting to bring it because it isn’t habit as of yet. I resorted to putting “DON’T FORGET YOUR LUNCH” on the back door before heading out to the train and then I remember but sometimes I forget to put up the reminder. What I need to do is to set an alarm on my phone to remind me to bring lunch. Or maybe I… Read more »

Alain
Alain
7 years ago
Reply to  Debi

I know this sounds weird, but when I cannot forget something I put my car’s key over or inside it. If don’t want to forget your lunch just leave the keys over it 🙂

Bethany
Bethany
7 years ago
Reply to  Debi

One of my husbands co-workers will bring a 6-pack of hoagie rolls, lunchmeat, & sliced cheese to the office on Monday; then he makes fresh sandwiches for lunch all week.

Beth
Beth
7 years ago
Reply to  Debi

I separate it, too. I try to be as detailed as possible with my budget, because if I lumped every food-related purchase in one category it would be difficult for me to see what I needed to work on. If I lumped groceries with restaurant spending in one category, I’d have no real way of knowing where I spent most of my money.

Kristin Wong
Kristin Wong
7 years ago
Reply to  Debi

Yeah, I used to separate them, but I found I was spending more money that way, so I just decided to combine. It definitely makes more sense to separate and keep your budget as detailed as possible. Not sure why this didn’t work for me! Probably because we were eating out A LOT. And what added up was the small stuff, like ordering pizza because I hadn’t bought any groceries for the week. Combining forced me to rely more on groceries than eating out. I guess I didn’t realize just how much we were spending here and there on dining… Read more »

Debi
Debi
7 years ago
Reply to  Kristin Wong

Hence you and Brian were both surprised to see the gigantic number for food at the end of the month! My husband and I don’t separate spending into “his” and “her”. All income and spending is “ours” so that we have total transparancy. It works for us . . . zero fights about money in 30 years of marriage! There’s something I don’t understand about why it’s so popular these days to keep money separate so that he pay for this and she pays for that, etc.

Kristin Wong
Kristin Wong
7 years ago
Reply to  Debi

Well, we’re not married yet (HELLO, BRIAN–jk), but yeah, the experience has definitely made me understand the advantages of combining finances 🙂 Cohabiting, we’ve been able to work with our separated and combined budgets pretty well. But we’ll probably soon consider options for sharing our finances more.

Christina
Christina
7 years ago
Reply to  Debi

We’re the same, and we’re younger (no way we could have been married 30 years already). Even though my husband was earning a paycheck 4 years before me, our finances have always been combined – even in college (got married young). I can’t imagine having to figure out how we would share costs. Although I understand why people would do it to prevent arguments.

Elizabeth
Elizabeth
7 years ago
Reply to  Debi

I separate them too — though I seldom eat out due to food intolerances. (I often go along for the company and have a drink instead.)

One flaw I’ve got in my grocery budget is food I make for potlucks or occasional events (if someone has a baby or there’s a death in the family). It’s usually not food I can eat myself, so I end up buying special ingredients to do it. (Like milk and butter). So is it grocery? Entertainment? Gifts/donations? I’m not sure what to make of it.

Thoughts, anyone?

Kristin Wong
Kristin Wong
7 years ago
Reply to  Elizabeth

You could just add extra cushion to your grocery/food budget, no? Or, yeah, even make a separate “potluck” budget. I found that this type of stuff happened just about every month, whether it was a family gathering or a pool party or whatever, so I just incorporated it into my food budget.

The important thing is to put a limit on it and stick with it!

Liz
Liz
7 years ago
Reply to  Elizabeth

I have a budgeted savings account set aside for “sharing”. I use it for gifts, charity, and expenses I feel socially obligated to participate in (e.g., everyone’s pitching in for dinner out to celebrate someone’s whatever and we’re going to cover the guest of honor’s items and split the bill evenly because math). I spent a while adjusting the amount until I reached a happy medium between what I’d ideally like to set aside each month for such things and not feeling like I have to skimp on presents or back out of events because the money’s not there. If… Read more »

Carla
Carla
7 years ago
Reply to  Debi

I separate groceries from eating out and I also separate groceries from household supplies, personal care items, etc. Groceries are just that, groceries/food.

Zerro
Zerro
7 years ago
Reply to  Debi

You’re not the only one, rather than having one Food budget in Mint I have them for Groceries, Fast Food, and Restaurants. It has the extra benefit of helping me cut down on the fast food when I see just how much money I’m wasting on it when I could have cooked instead. Restaurants I consider to be food + entertainment, I prefer to go to ones that make stuff I couldn’t cook on my own. Personally I find the envelope system to be silly, something for people who for some reason either can’t or just think that they can’t… Read more »

Kristin Wong
Kristin Wong
7 years ago
Reply to  Zerro

I mean, I guess I can see how it sounds silly; but it worked for me, and I stand by the GRS tenet that “money is more about mind than it is about math.” Silly? Kinda. True? I think so. I also don’t understand the point about losing rewards. Maybe everyone just has mega-awesome rewards cards. Mine has a rewards return of 1.5%. So it’s worth the $3.50 or so that I’d rack up in rewards to save several hundred dollars because I have more restraint with something tangible. It’s not necessarily that I can’t use credit responsibly, I still… Read more »

Financial Independence
Financial Independence
6 years ago
Reply to  Debi

I’m another person who treats groceries and dining out as totally separate expenses. Sure there is a correlation between the two – if you eat out less your grocery bill is likely to be higher but still less. I’m actually surprised people don’t split them – the two areas are quite separate, one is surviving, the other is entertainment.

John S @ Frugal Rules
John S @ Frugal Rules
7 years ago

We’ve been using it for years and have moved to a more modified version. We still pull out the cash, but use our credit card to earn the rewards (in most cases) and just pay it off with the cash. I think that many have the misconception that you’re hauling around all sorts of envelopes with cash when that really isn’t the case. My wife will generally have cash from our grocery budget and for the kids on her and that’s usually it. It makes it much simpler and easier to manage. Planned splurges – so worth it!

Kristen
Kristen
7 years ago

Sorry, perhaps I am taking your comment too literally but how do you pay your credit card with cash that you pulled out?

lmoot
lmoot
7 years ago
Reply to  Kristen

I was confused by that as well. I thought maybe they had sub accounts online that they transferred the “envelope” money to, but then he said his wife carries cash for grocery shopping. Perhaps they do both?

Liz
Liz
7 years ago
Reply to  lmoot

This is exactly what I do – I’ve got multiple accounts set up for different areas of my budget, and when I pay for something with the credit card, I make a transfer from the corresponding savings account to an “upcoming bills” account. When it comes time to pay the credit card, I confirm the total in that account is accurate and pay the bill.

Simon | Modest Money
Simon | Modest Money
7 years ago

Am just mastering the ins and outs of financial responsibility and i think the envelope system has really helped make my journey to financial literacy smooth. The envelope system is clear cut…once you run out of money in an envelope for one category thats it…forces you to really consider and vet your purchase decisions. Maybe its time I upgraded to an electronic solution as well, will give YNAB a try!

Kyle @ Debt Free Diaries
Kyle @ Debt Free Diaries
7 years ago

I love the idea of an envelope system. When our budget was getting out of control we used the envelope system as a way to reign in the spending. The only difference we made was that instead of using physical envelopes I set up a spreadsheet on Google Drive to track our spending.

Old Lady
Old Lady
7 years ago

I wish people would learn difference between reign and rein.

eec
eec
7 years ago

I use mint and have set budgets for ‘eating out’, ‘groceries’, ‘baby stuff’, etc. Seems to be working OK. I just checked my balances today and everything looks good. Groceries is a little close but maybe I need to be realistic and adjust.

mike
mike
7 years ago

Envelope systems are a hassle and not effective for long term financial planning. Also they only treat the symptoms and doesn’t hit on the root cause of saving and your relationship with money. I’m not saying they are totally useless because people get results but I’ve never used them and its easy to fall off the wagon. I have a 2 prong planned only that isn’t that different than the 80/20 plans except mine is closer to 60/40. Saving: Save first, determine how much you want/need and do it, make the money as inaccessible as possible. I keep the majority… Read more »

Matt @ Your Living Body
Matt @ Your Living Body
7 years ago

I don’t really like that system very much because I really enjoy earning all the benefits of using my credit card. You just have to be on top of things…

Martin
Martin
7 years ago

Funny, I just had this discussion with a friend last week. He likes credit because of the bonuses, I like cash because it keeps things real in that the numbers are always up to date and where they are. You can’t spend what you don’t have. There are bonuses with cash too. There really is a psychological element to cash. One time, I ran out of cheques to pay my rent and I had to run to the bank machine. I tell you, it was WAY harder to hand over hundreds of dollars in cash than it is to hand… Read more »

lmoot
lmoot
7 years ago

I’ve always loved the idea of the envelope system, but could never take the plunge because of my dislike for cash. I don’t like that I’m missing out on getting paid interest on cash not spent (even if it’s just a 1-2 month float), and not taking advantage of cc reward points. Money is fluttery and sometimes looks like trash, it’s dirty, and for me it’s easier to spend or give away. I’ve thought about using a gift-card envelope system, where I purchase a gift-gard with my cc, for the grocery store I most frequently shop for the month. Of… Read more »

Viola
Viola
7 years ago
Reply to  lmoot

The AmEx Bluebird card would be a good one to try — since it has the fewest fees. And although the fee thing may be infuriating, a couple bucks a month to help keep you on budget may be worth it. Acceptance at checkout shouldn’t be an issue, however many systems decline a card if there aren’t sufficient funds to cover an entire purchase. Therefore, you often can’t “clean off” your prepaid card with $6.00 left on it when the total is $10.00. You have to run a split transaction for the precise amount.

Ely
Ely
7 years ago

I can’t be bothered with this stuff, and it would absolutely drive my free-wheeling husband out of his skull. What works for us is save first, pay the bills, and whatever’s left is play money. Doing it this way has also done wonders for my stress level; tracking and budgeting was really making me miserable.

Carla
Carla
7 years ago
Reply to  Ely

It would drive my SO nuts too. Besides he’s lost one wallet and almost lost another one last year. It would be a horrible situation if it contained a large amount of money (more than his coffee money).

Edward
Edward
7 years ago

Good article! This is called, “identifying lifestyle creep as soon as he walks in the room, grabbing him in a headlock, parading him around for the big fat loser he is, kicking him out the door and locking it behind him.” Well done! Umm… Of course eating out is *different* from buying groceries. (I’m not sure why so many people needed to clarify that for us.) But when I’m done at a restaurant and am no longer hungry there’s some buyer’s remorse that I just ate an entire week’s worth of grocery money in one sitting. Because food is food–it’s… Read more »

Tonya
Tonya
7 years ago

Your story sounds exactly like me! I need to do envelopes. I’ve never really successfully done the cash-only method, but I need to. My groceries budget has creeped out to the point that I don’t really pay attention to how much I spend at the grocery store. I rarely eat out, though I get McDonald’s and Little Caesars for the kids quite often, so I need to rein that in as well. Thanks for the inspiration!!

Alea
Alea
7 years ago

I use the envelope system for X-mas, $50 dollars each month, $600 cash to spend at X-mas on gifts and stuff I might want if there is a great sale. When the money is gone, that’s it, come January no X-mas bills on my credit cards.

Samantha
Samantha
7 years ago

We graduated from the actual cash envelope system a few years, after we developed the habits we needed. Now we keep track of our spending through virtual envelopes, set up with a spreadsheet on Google Drive. It keeps our spending in one place, and we have gotten really good at saying – “better check the ‘envelope’ before we go out!”

To me, its the best of both worlds. We’re keeping disciplined, and its really convenient.

I have decided we should probably separate our restaurant money from our grocery money. That is a good idea.

Cindy @ GrowingHerWorth
Cindy @ GrowingHerWorth
7 years ago

I take my “spending” money out each week in cash, but don’t divvy it up further into groceries, restaurants, etc. That way the money is more fluid. If I want to eat out more one week, I can, but other things suffer. And when it’s gone, it’s gone until the next week. This works well being single, but I could see how it wouldn’t work as well if you had a family. “Sorry honey, Mommy wanted a new purse” probably wouldn’t go over well when the grocery money was all gone!

stellamarina
stellamarina
7 years ago

I have used the envelope budget method for decades. It is especially useful in dividing up the household money when I am not working but instead am the housewife. When the kids were young and at home it helped with dividing up the money for their allowances, school lunch money and school bus money etc…..all in small notes so no last minute hunt for change.

Nick @ ayoungpro.com
Nick @ ayoungpro.com
7 years ago

My wife and I have been considering making the switch to the envelope system. It sounds like we should definitely give it a shot!

Michael | The Student Loan Sherpa
Michael | The Student Loan Sherpa
7 years ago

This system sounds great. I’m all for doing whatever it takes to stay on a budget.

Julie
Julie
7 years ago

I like what someone said above: “We still pull out the cash, but use our credit card to earn the rewards (in most cases) and just pay it off with the cash.” I like this idea and I also use the spreadsheet ynab that came out before all these advanced technology that I don’t use. The simple ynab spreadsheet.

zniesienie wspolwlasnosci
zniesienie wspolwlasnosci
7 years ago

Envelope system sounds very interesting. Thank you for this recommendationj. I will check it;)

Snarkfinance
Snarkfinance
7 years ago

It is easy to fall off track in a society that isn’t built to accommodate frugality. Sometimes getting back to basics is the best way to get on track again.

Derek - MoneyAhoy.com
Derek - MoneyAhoy.com
7 years ago

I just try to manage it mentally and pick the most frugal option at all points in time. This prevents me from having to handle the physical envelopes and ensures I always make the best choice.

FI Pilgrim
FI Pilgrim
7 years ago

I’ve also returned to the envelope system in the last year. If you want to bring that concept into the 21st century, check out YouNeedABudget.com. Its an envelope system that you can track from your tablet, smartphone, PC, or Mac.

spiralingsnails
spiralingsnails
7 years ago

We tried the actual cash envelope system for a while (during our Dave Ramsey class) but it reeeeally didn’t work for us. I actually spent MORE on groceries that way. Why? Well if I’m shopping with plastic and I suddenly remember that we might be running low on X, I will go ahead and grab X. If I see a great deal on Y, even if we don’t need it right away, I will stock up on a month or two supply. But with a cash envelope, I would be carefully frugal and only buy exactly what was on my… Read more »

Andrew B
Andrew B
7 years ago

I didn’t find your expenses too exteme. I admire your frugality and attention to knowing exactly how much you spent – I figured you’d pay $400 at restaurants in a month, rather than including groceries. As a bodybuilder, I typically eat 4-6 times a day, and meat for the week (depending on the lb for chicken breast and steak, or ground turkey meat) usually is about 20-30 dollars. After that, lettuce, eggs, oatmeal, etc – the bill can easily run about 60 bucks a week.. and that’s just to eat 100% pescribed, clean, and as bland as possible. Paying 6… Read more »

mEGAN
mEGAN
6 years ago

omg this is so us, in the past 5 years we’ve been frugal enough and raised our incomes enough to pay off 94k in student loans, purchase 2 cars, and buy 2 houses…here I thought we were being all great with money and stuff Until we moved, and until I sat down and looked at what we’ve been spending and realized we could be saving an extra grand per month on useless crap like eating out and bars…trying to talk the hubs into the envelope system, so far he doesn’t get that when the money is gone you don’t just… Read more »

Gerry
Gerry
6 years ago

Some years ago It dawned on me how insignificant and costly it was to dine out frequently. Now, every 6 weeks or so dining out suits me just fine. And I appreciate it more because I don’t do it as often. I save a lot of money….and shed a lot of pounds.

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