How Envelopes Saved Me Money

by Kristin Smith

I’m on the hunt for a house. While researching down payment options, first-time home buyer assistance, and loan information, I realized I needed to save more money, like yesterday. So, I sat down to do a real budget. Not an “I’ll just estimate what I spend on food and guess at what I’ll spend on clothing” budget. A real, all expenses in, all expenses out, budget.

After that I decided to switch to an all-cash (ish) household. I wanted to start handing over cold, hard cash when I bought stuff, instead of mindlessly swiping a card. I left any automatic withdrawals alone (that’s where the -ish comes in) but for everything else, I went to a simple envelope system.

How I got started

I labeled envelopes for expenses like food, clothing, entertainment, books (yes, I count that as a necessary expense) and filled each one with the allotted cash from my budget. The thing with the envelope system is, when the money’s gone, you’re done. You can’t spend any more on that expense until your next pay period, when you start all over.

What I learned

The first thing I realized was, cash goes quick. The FOOD envelope budget accounted for groceries and eating out and that envelope started to empty itself, seemingly overnight. When you pay cash for your groceries, never leave home without your coupons. 

I also learned that I spend A LOT of unnecessary money. It’s so easy to swipe a card without thinking. You never actually FEEL the cash leaving your account. When you force yourself to pay with actual dollar bills, it hurts a little to hand over that money. My spending habits began to change almost immediately.

What happened

I actually SAVED money! At the end of the first two weeks, I had some envelopes with cash still in them. I was spending money mindfully for the first time in a while and it had paid off. I took that money straight to the bank and put it in my savings account. I’ll be a milliona…well, someone with more money in the bank, before I know it.

What’s next

I’m sticking with the envelope system for now, until the lifestyle changes I’ve made become a habit. Then, I should be able to retire. KIDDING! First, a down payment. After that, I’m comin’ for ya student loan debt!