A few days into the month, you spend $20 on gas on your credit card. So, say you start with $100 in your digital envelope for gas. You need to make sure you accurately track spending. A digital cash envelope system is no different. The most important part of any budget system is tracking expenses. Label it accurately (e.g., Groceries) so you can keep track of things more easily. Once you have found your bank, open a sub-account for each spending category. Just make sure they don’t charge fees for having multiple accounts with low balances! If your bank doesn’t have envelope budgeting per-say, you can still make this work. The first thing you need for a virtual envelope system is a bank with envelope budgeting. How to Get Started with a Virtual Envelope System Keep reading to learn how to get started with virtual envelopes. There are even some banks with envelope budgeting. Many banks allow you to open up multiple sub-accounts under your primary account. Rather than being physical, your envelopes will be separate bank accounts or buckets if your bank has that option. That is where a digital cash envelope system comes in.Ī cashless envelope system works just like a real cash envelope system. After all, if you’re anything like me, online shopping is my go-to! Plus, many people worry about having so much cash lying around. Now that you know what the cash envelope system is, you might wonder, why should you use it? And how does it work?įirst, using digital cash envelopes is more convenient than actually paying for everything with cash. Using a Digital/Cashless Cash Envelope System Things will get messy and you will still have the problem of not knowing where your money went. So, if you have a little extra gas money this month, don’t use it for extra grocery spending. Most experts also recommend not “sharing” money between categories. Then, throughout the month, you will use the cash envelopes for their corresponding expenses. You would add $50 at your first paycheck of the month and $50 with your send paycheck (if you get paid bi-weekly).Īlternatively, if you have enough money in savings, you can put the entire $100 in at the beginning of the month. For example, let’s say you plan to budget $100 for gas. First, add the budgeted amount of cash to the envelope at the beginning of the month or after each paycheck. For me, the grocery budget is the killer!įor the cash envelope system, here’s what you do. Most people who struggle with budgeting will have the hardest time with these categories. These categories include things such as food, clothing, dining out, entertainment, and so on. It is especially important for tricky line items where it is easy to overspend. Plus, since you pay a fixed rate each month there isn’t a possibility of overspending in these areas.įor all other categories, you pay cash from your envelopes. Paying your utilities, your car payment, rent, or other similar expenses with cash isn’t necessary. It is important to note it doesn’t make sense for all categories. The basic premise behind the cash envelope system is using a separate envelope filled with cash for each budget category. For those of you who aren’t as familiar with this budget method or who need a refresher, let’s do a quick review. If you have ever heard of Dave Ramsey, you’ve probably heard of the cash envelope system. Conclusion What is The Cash Envelope System
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