Sunday, July 12, 2009

Envelope System Update

So last month I decided to try out the envelope system. It's definitely something that requires perfecting over time and here is what I did and didn't like as well as a few tips. Overall I give the system two thumbs up and will continue to update.

The upsides:
  • Because you have taken out cash, you aren't scared of checking the bank account online.
  • I felt like I had much more control over my budget and spent much less time stressing over money. I new that I had money for the bills to be paid when they came, and still money for groceries, entertainment, etc.
  • You tend to spend less and prioritize better. For instance you only have $50 left in your eating out fund. You're a lot less likely to mindlessly spend it on take-out and instead save it for a date night
  • It reduced fighting over money with my husband we both had our "fun" money. That way we didn't overspent on something for themselves, causing stress down the line. We didn't have to feel guilty for purchases the other one of us may not understand or think is a waste.

The downsides:

  • Coming face to face with your money reality is not fun. Once you take out money for bills and necessities there can be a lot less money for "fun" like eating out and entertainment. You no longer just look at your account online and decide it's okay to spend because you have money in your account.
  • Keeping track of the cash can be a royal pain. For instance if I took 10 dollars with me to work that day for lunch, and then needed to pick up something from the grocery store, I may have to put it on my debit as I don't have enough cash. Then you have to take cash out of the grocery envelope and repay it to the checking account.
  • It's difficult to throttle your spending. We burnt through almost all of our entertainment budget in the first two weeks. So the last two were a bit frustrating.
  • It takes a while to get the correct amounts in each category. For example we spent all of our entertainment budget, but had a ton left in eating out.


  • At the beginning of the month determine your cash needs and go to the bank to take out the cash ASAP.
  • Don't take out the cash in a lump sum. Make sure you've determined how many of each bill you will need for each category. For instance if I have $150 for entertainment and $150 for eating out, I wouldn't want to get 3 $100 bills, but instead 2 $100 bills and 2 $50 bills
  • Get used to carry cash. I always made sure to have $20 on me in case an impromptu lunch or happy hour came up. I'd also keep a bit on me from the grocery fund (in a separate part of my wallet) in case I needed to stop by the store.
  • Stay on top of it. I find myself checking our online account (in case my husband or I had to use the debit in a pinch) and repaying the bank or different envelopes all the time. It does get better though so don't give up.
  • I find it easier to keep the money in the account for all of the bills as we use online bill pay.
  • Decide what envelopes you will "borrow" from if any. For instance we decided we could borrow from entertainment to eat out. But not to eat out from groceries.
  • Be patient. I still don't fully have the hang of it. But I do like the system. It won't be perfect the first month and you will make mistakes. I recommend trying it for at least 3 months before you decide it isn't for you.

For those of you who have tried the system. Any suggestions?

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