The “cash envelope” method is a great way to save money, to pay off debt and even to build your retirement account. It’s actually an easy way of achieving some of your goals, you get to save for that dream holiday, for the house of your dreams, for the huge wedding you’ve always dreamt of or even to plan the move for the country you’ve always wanted to live in.
So, here’s how this method works:
1.Figure out what you can work with.
Start with your tax and expenses free income. Know exactly the amount you’ll be able to take out of your bank to use it on the envelopes. Keep in mind, some things are paid with your debit card, just make sure to incorporate them on your budget.
2. The categories
This step may be different from mine. I’ll give a few examples with my categories, but you should adjust them to your life. Mine are: Groceries, needs, knowledge investment and fun money.
3. Choose the envelopes
Try to get envelopes with different colours, this will help you memorize which envelopes correspond to which categories and also because they’re cuter! I use paper envelopes but there are other envelope systems, for example, the Dave Ramsey’s.
4. Fill your envelopes
Now that you know your budget and you have the categories on your envelopes, you can start filling them with the specific amount that you designated for each.
Don’t forget to leave the money meant for the things you’ll pay with the debit card in the bank.
5. What’s next?
Well, now you go shopping and only spend what’s in the envelopes. Some people like to just have their envelops when they’re going shopping. To be quite honest, it’s something that bothers me, so when I go shopping I take the amount from the specific category and put it in my purse.
6. At the end of the month
Whatever is left on the envelopes and on my bank account that I didn’t use that month, I put it into savings. That was key to sky-rocket my savings account.
I really hope you try this method. Thank you for reading it. I will see you in my next post.