For those struggling to get control of their finances, one of the often prescribed measures is to create an envelope system and live on a cash-only basis. This worked well for us when we initially made our financial turnaround. We have since graduated to a debit card, but still use envelope budgeting for a couple spending categories that we tend to overrun each month if not kept in check.
One of the knocks of an envelope system is that it is not portable, or that it is difficult to manage when on the go. Often times I needed to stop by the store on the way home from work, but the “Grocery” envelope was sitting on our desk at home, or still in my wife’s purse from our last shopping trip. Another complaint is that takes too much to manage. For instance, a trip to Wal-mart for groceries, shampoo and a new basketball for the kids may require the use of three envelopes representing three separate spending categories. Below are a few strategies that worked for us when we had to take our envelope budget system on the road.
- When funding your envelopes, ask for small bills. This step may require you to go inside the bank to withdraw money from checking, but it is worth the hassle you’ll save later when managing your envelope system. Smaller bills make it easier to move money around envelopes in a pinch, or to settle up from a shopping trip that crossed multiple spending categories. If the only thing in your envelope is twenty-dollar bills it makes it difficult to incrementally shift things around.
- Separate shopping carts. One of the biggest conflicts we had within our envelope system was “Food” and “Household,” because the two categories often overlapped, and because we often picked up items from both lists during the same shopping trip. When my wife and I shop together we each grab a shopping cart and only place food in one or our carts. All other non-food household items go in my cart. If shopping alone you can get a shopping cart, and place one of those hand-held shopping baskets inside the cart to separate items. I toss things like shampoo, razor cartridges, over-the-counter medicines, etc. in the hand-held basket, while freeing up the shopping cart for food items.
- Review receipts when you get home. Depending on the crowd at the checkout line we may run each shopping cart through as a separate transaction. However, if there is a long line, or we’ve selected a cranky grocery clerk, we’ll often ask the cashier to subtotal the items on the receipt for us after running through each spending category. We pay for the entire balance by grabbing enough cash from one or all of the envelopes and settle up when we get home.
- Leave grocery envelope in your car’s glove box. After the initial grocery shopping trip of the month (or pay period), consider stashing your “Grocery” envelope in your car’s glove box. For added security, you may want to lock the glove box, unless you need access to something while driving. This way, if you are out and about and see a sign for a great deal on boneless chicken breasts you don’t have to go all the way home just to get your food envelope.
- Create a sub-envelope, or two. Another way to take the envelope system on the road is to save those envelopes you get back from the teller when making cash withdrawals and use them to fund smaller envelopes that stay in your wallet or purse. For a while, my wife and I did this with our “Household” budget envelopes. Our household budget was $150 a pay period and included things like diapers, baby supplies, cleaning supplies, etc. My wife kept $50 of the envelope money in her wallet inside a teller envelope labeled “Household.” If she saw a great deal on diapers somewhere she could pick them up without having to return home, or carry the entire envelope system with her. We simply replenished her sub-envelope from the one kept at home. Note, this method does take some discipline–just because you have money in your wallet doesn’t mean you have to spend it!
The envelope system is a great budgeting tool, particularly if you are new to budgeting, or are having trouble sticking to a budget, as we were. The visual reinforcement of peering into a nearly-empty “Entertainment” envelope when considering a day at the movies forces you to find a frugal alternative. As you get more disciplined it might make sense to move to a debit card for added convenience, or even run everything through a credit card and pay it off each month (this takes maximum discipline and I do not recommend this method for non-essential spending categories). However, most people who give the envelope system a try find it to be a great budgeting tool. By implelementing the ideas above you can improve the system even more by improving its portability.
For additional portable envelope budget system ideas, visit NeoBudget.com.