Cash Envelopes: The Key for Reaching My Savings Goals?
It's not even September yet, but my husband and I decided we need to get a little more serious about our savings goals in the new school year. In order to really be aware of what is coming in and out of our bank account, we've decided to go to a cash envelope system for our variable expenses, like groceries, restaurants, and clothing.
We had heard of Dave Ramsey's cash envelope system in the past, but never had the cojones to actually implement it. We finally got around to having a serious financial discussion last week, went through our budget with a fine-tooth comb, and scrutinized every purchase. Not surprisingly, there were quite a few impulse purchases (Oh, how I love you, Zulily!) as well as some house-related items that were necessary but un-budgeted for.
Because we were able to pay our bills every month and have a little (ok, very little) left over, we had grown complacent about our goals for savings and for paying off student loans. These goals are being undermined by the habit of not being mindful of the big picture.
We hope that using cash envelopes will help us to eradicate (or at least minimize) impulse spending and stay on track with our savings goals and our goal of paying off one of our student loans by May.
Here’s a real-life example of how cash envelopes work. In our budget, my husband and I decided $325 a month should be adequate for our grocery bill (don’t worry -- we have a separate account for take-out/restaurants/Starbucks). When we get the first paycheck of the month, I will go to the ATM and take out $325, and put it in a labeled envelope. The next time I go grocery shopping, I will take out $80 (1/4 of $325) in cash and put it in my wallet. That is ALL I get to spend on my family’s groceries that week. This week I only spent $55, so next week I’ll have $80+$25 to spend -- helpful if I need to stock up on meat.
I know it’s kind of crazy to lay our financial goals out there for the whole interwebz to see, but I’m hoping that being more open will provide me with some accountability.
I’d love to hear some responses letting me know how you are achieving your financial goals!