Welcome to another edition of my Low Income Budget series. This edition is my first time trying out cash envelopes. While I’ve been able to accomplish a few goals in this budgeting journey, I am still slacking when it comes to overspending. I’m not holding myself accountable for every dollar. I’m going to try incorporating cash envelopes, but will it be a success of a failure?
As always, be sure to click the links throughout this post for related posts and links to purchase items/similar styles featured.
Disclaimer: I am not a financial expert or accountant. I am on the road to financial freedom like many others and decided to document my journey.
What Is the Cash Envelope System?
Simply put, you organize cash into categories and carry it with you. You’re able to not only set the limit, but see it on a daily basis when you check the envelope(s). It’s recommended that this system is helpful for those that may overspend in a certain category.
As I’m just trying this out, I decided to go with a cheap envelop that I’d be able to have easy access to and actually keep up with. I found a 4-pocket folder at Office Depot and knew that it would work for what I wanted. For just $1, you can’t go wrong.
The day that I decided to try out the cash envelopes, I came across E.Michelle on YouTube doing hers. It was very helpful. Watching videos doesn’t mean you have to follow exactly what their doing, but the tips are helpful and a guide for you to get started.
There were a few categories that I knew I needed specifically – gas and takeout. Gas for my car is something that’s a necessity, while eating out has been eating all my money. Pun intended. So, with that in mind, I broke it into 4 categories to match the 4 slots in the folder.
- Sinking Funds
Sinking funds are a category I didn’t know much about. In other words, it’s a type of emergency fund separate from your savings. You set a little bit aside and when something comes up like a birthday, minor car expense, etc., you take from there instead of dipping into your savings.
I have a lot of things coming up from an engagement party to car expenses. You know the usual like an oil change and car registration. That falls into the sinking funds category.
For gas I averaged out $20 a week, although I swear these gas prices are hiking up more and more. Grocery is a category I want to use because I’m spending more on takeout than I should (we’ll discuss that in a future episode). Personal is just to get by, a just in case. Sinking funds, I just put $30 because I knew I had an oil change coming up.
How Was This a Fail?
Simply put, this was a fail because I didn’t have enough cash on hand. There was cash I needed to put in the bank, since that is how I’m paid, so it wasn’t going to work to put it in this system.
To correct the issue, doing the cash envelopes bi-weekly, or even weekly starting out, might work better. This way if I have anything rolled over from the previous week I can take that into account when I’m estimating how much to allocate in April.
Not giving up just yet. I mean, I only tried it once. I’m still researching and seeing what I an tweak to make this work because I do need something more concrete in my life. There’s no such thing as “leftover money.” I need to know where every dollar is going, period.