As most of you know, the cash envelope method is my favorite budgeting method. Not only has it helped me pay off more than $30,000 of credit card debt, but it also helps me control my spending so I can save more of my money.
Stuffing my cash envelopes has become one of my favorite days of the month, There’s something magical about watching the numbers you have written down on your budget turn into physical cash in your hand.
With the cash envelope method, people always assume you need cash for it to work. It’s true that your money becomes more tangible if you use physical cash, but the method can still work and have the same psychological effect without it.
It does take a little more self-control to use the envelope system budget without cash, but once you have your system perfected, it gets easier to manage.
HOW THE CASH ENVELOPE SYSTEM WORKS
The basic steps on using the cash envelope method are pretty much the same with or without cash. You create a budget by writing down your expected income and expenses. After paying your regular bills, you use any leftover over money for variable spending.
You figure out which categories to use for your envelopes, and pull out cash to stuff your envelopes every payday. Once you run out of cash in an envelope, you have met your budget for that pay period. Once the cash is gone, it’s gone.
I have a VERY detailed article that explains the steps on how to set up and use the cash envelope method here.
REASONS FOR NOT USING CASH
So what do you do when you don’t have access to cash? For me, using cash has never been a problem. My bank is on my way home from work, and I have never had issues going inside the bank to ask for a specific amount of cash for my envelopes.
After sharing my budgeting journey on Instagram, I realized that using cash for the envelope method was a lot harder for some people than I expected. Everyone has their own approach to budgeting that works for them, and sometimes spending cash doesn’t work.
The cashless envelope system is great if you like using your debit card. I get it, swiping your debit card is convenient at the store. It’s also great if you don’t like the idea of carrying cash in your purse or wallet. For some, it can be uncomfortable knowing that there is the potential for losing or having the cash stolen.
For example, I had a reader who reached out to me and explained that her purse was stolen with all of her cash envelopes inside. In a matter of minutes, she lost all of her spending money for an entire week. It then became tough for her to feel comfortable carrying any cash in her purse.
It’s also a great system if you like using your rewards credit card, and are disciplined enough to pay off your credit card every month. If you pay all of your bills and expenses throughout the month to take advantage of travel rewards or cash back, using physical cash doesn’t make sense.
There are also situations where having access to cash is impossible. What do you do if you live two hours away from your bank, or live on a military base and don’t have access to a branch or ATM?
As you can see, there are many reasons why using cash for the cash envelope method just doesn’t work. So let’s talk about the cashless system.
THE CASHLESS ENVELOPE METHOD
The idea is the same as the regular cash envelope method. You have a budget, and you need to be able to have a system in place that ensures that you don’t overspend.
You still need to create a budget and determine which categories you want to use for your envelopes. On payday, you pay your regular bills, but instead of going to the bank to get cash for your envelopes, you would use cashless envelope trackers to record and track your spending.
USING CASHLESS ENVELOPE TRACKERS
The cashless envelope trackers work in the same way as regular envelopes, just without the cash. So essentially, instead of carrying around envelopes, you are carrying around trackers instead. Print them off and keep them in your purse or wallet. Record the spending category and budgeted amount at the top. Then as you spend money, track it on your tracker.
With the cashless system, it becomes more critical than ever to track your spending. You need to write down every purchase on your tracker and keep a running total of how much you have to spend.
Once you reach your spending limit for a category, then you can’t spend any more money from that category! Just like using cash, make sure you don’t fall into the trap of moving funds from one tracker (envelope) to another to accommodate overspending.
If you find that you are always running out of money for specific categories, or have leftover money for others, then you need to examine your budget because it might be time to make adjustments.
Grab your cashless envelope printables here. I recommend printing them on heavier cardstock to prevent them from tearing or bending easily.
HOW TO USE THE CASH ENVELOPE METHOD WITHOUT CASH
Even if you don’t use cash, the cashless envelope method is still a fantastic system to use for budgeting. It is essential that you continue to track your spending, and create category limits, so you never go over budget.
So, let’s recap the steps you need to take to start using the cashless envelope system:
- Create a budget. You can find a helpful post on how to do that here.
- Track your expenses. Here is the tracking method that I swear by.
- Categorize your spending.
- Set spending limits for each category.
- Decide which days you want to pay bills online and start your cashless envelope trackers. I create a budget, pay my bills, and pull out cash for my envelopes every time I get paid, which is twice a month. Using the cashless envelope method, you wouldn’t pull out cash. Instead, you would add your budgeted amount for each category to the top of your cashless tracker.
- Pay your regular bills online.
- Track your spending and keep an updated balance of what you have left to spend for each category on your tracker.
If you have wanted to try it, but have been holding off because you don’t want to use cash, give the cashless envelope method a try! Grab your cashless envelope trackers and get started today!