Monday, April 22, 2013

Cash Envelopes: A Budget's Best Friend

Hello, Birdies! Sorry for the several weeks absence. I have been fighting off tonsillitis since Easter which has been a real treat......nope, that's a lie. It has been AWFUL. So between working and the regular grind, I haven't done much of anything. Anything clearly including blogging. My apologies but rest assured I am ready to dive back in! Are you? :-)

So previously we looked at how to make and use a budget. You can find that link here and download the free budget form here. I also teased about using cash envelopes. Some of you may be wondering what exactly cash envelopes are. The money you plan to spend for the month (which is decided based off of your budget) is divided into the appropriate categories and then placed in envelopes. I got real deep there, I know. Using this type of system isn't anything new. People have done it for generations, until the past few decades that is. Apparently financial guru, Dave Ramsey, saw that decline in the concept and brought it back to the mainstream. Through taking his course, Financial Peace University, I first learned about using cash for my monthly expenses. Now Dave is big on not using credit cards and I agree but I thought, "Surely I can just use my debit card for everything." Eh, not quite. Maybe some people have more self discipline than me but I have found that I am likely to spend quite a bit more with the swipe of my card as opposed to pulling cash out and handing it to the cashier. My husband and I pay the ol' bills online but for our everyday purchases we use cash. We have practiced using cash envelopes pretty much since we've been married and I think it has made all the difference to our finances. Here is why:

1. Using cash envelopes keeps you organized! 
They coincide perfectly with a budget by keeping the money where it needs to stay. Instead of considering your money being thrown into one big pot where you just grab it when you need, you see that your money has a specific place to go. The grocery money isn't the same as the gas money and the hair cut money certainly isn't the same as the entertainment money. If you go with the money pot mentality, every time you look at the "pot" you may think that you are fine because it is still full until you finally reach your hand in there and realize there are no more bills to grab. Seeing your money in specific envelopes and seeing those funds shrink through the month keep things in perspective.

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2. It empowers you to use your money wisely! 
Before getting married, I used my debit card for EVERYTHING. I rarely carried cash. Am I the only one?? Because of this I was constantly running through my funds in no time flat! It's like I wasn't thinking when I used my card. Every purchase kind of became an impulse buy. Now when I want something I really evaluate the choice, "Do I need this? Could I get a better deal?" Sometimes I tell myself to wait then, many times, I find that I have completely forgotten about the thing I "had to have." Other times I realize that whatever item is something important to me so I will save up and/or find the best deal possible. I owe that to the cash system. If I were still addicted to my debit card I don't think I would be as happy with my finances or purchases.

3. It gets you closer to your goals!
Because this system keeps you organized and helps you keep things in perspective, it gets you closer and closer to your BIG PICTURE goals. Personally, it is so easy for me to say "I want this" or "I need this" or "why don't we have this yet?" but then I take a step back and look at the big picture. If we had always used our debit cards or started using credit cards, never made a budget, or never used cash envelopes, my husband and I would never even be close to where we are now. If we had stayed on the old path we would be even further from our big picture goals.

If you feel disheartened with your financial future, I encourage you to take the plunge towards financial freedom. First step, make a budget. A REALISTIC budget. Second step? You got it. Using cash envelopes. I have a challenge for all of you. Try those two things for 3 months, along with couponing, and see where this path takes you. You may be pleasantly surprised!

Do you use cash envelopes now? What do you think about the idea of using cash for the everyday expenses instead of using a card? ARE YOU READY FOR THE CHALLENGE? 

Thanks for sticking with me! I appreciate you stopping by my itty-bitty area of the blogosphere! HAVE A GREAT NIGHT! :-)

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