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Guest Post: The Envelope System Experiment

photo by pfala

Guest Post by Jenny Whitney

Paying with cash…we all did it at one point. When you are a child and are too young to have a credit card or debit card or checkbook, it is quite socially acceptable to pay with your allowance or hard-earned lemonade stand money.

At some point in our society, though, paying with cash becomes more unusual. I, like most Americans, have a credit card, and since we pay it off in full each month, I always thought I was being as responsible as possible with our finances.

But as I started to learn about deals, I became intrigued by this Envelope System that I read about (you can read about it here, here, and here). Could it possibly help me to be a better steward of the money we’ve been given?

I decided to give it a try–but on a smaller scale. Our budget for groceries and consumable household supplies (soap, detergent, toilet paper, etc.) is $40 per week and I do almost all of the grocery shopping, so that seemed like a logical place to start. So it began.

Here’s basically how it worked for me:

As I headed out to go grocery shopping on my first cash-only day, I stopped by the ATM and took out $40. I stuck it in an envelope and only used that to pay for all of our groceries. If I happened to purchase other items (gifts, clothing, etc.) while I was grocery shopping, I just asked the cashier to do separate transactions.

The following week, I added another $40 to the change from the previous week. And this same pattern has repeated now for about three months. It seems so simple–but it’s teaching me a lot about how I shop. 

Here are six lessons I am learning:

1) No Mental Math Needed–Before trying out the envelope system, I would mentally try to add up how much I had spent at various stores in my head to see how much I had left. Well, if you’ve ever taught mental math, you know that estimation is an oft-used strategy. Needless to say, I often went over my budget using this strategy (without even realizing it until checking our statements later).

Many weeks, the amount was as little as $5, but that adds up to $260 over the course of a year–the equivalent of over 6 weeks of groceries on our budget! With the envelopes, figuring out how much I have left to spend is easy–just look in the envelope.

2) When You’re Done, You’re Done–It was so tempting for me to “borrow” from future weeks before trying out the envelope system. If I found a great deal, or just really wanted to make a particular recipe, I would just tell myself I would spend less the next week. Of course, when next week rolled around, I would have either forgotten or have convinced myself that I should go ahead and spend the full budgeted amount. Having a certain amount in cash has really helped me develop the discipline of saying, “Enough’s enough.”

3) Jell-O is Not a Food Group–Although I try to stockpile, there are certain staples that we need to get pretty regularly (like milk, eggs, fresh fruits, and vegetables, etc.). The first week that I tried out the envelope system, I realized something very important: If I do the “deals” first and then look to buy the staples, I’ll run out of money and have to decide between eggs and milk.  Although I meal-planned and shopped off of a list before going cash-only, I now prioritize my list based on what we need and what we can do without.

4) What’s the OOP (really?)–Check out many deal forums and you’ll see a discussion on a “free” item, only to realize that you’ll get a gift card/Catalina/ECB/Register Reward when you purchase the item for the amount you spent.  Before the envelope system, it was really easy to let myself believe that I was getting the item for free–but what I’ve learned is that when I pull out some money from that envelope, that’s money I no longer have to spend.

Although I might have a money replacement, I am often limited on where and when I can use it. That doesn’t mean I never do these deals, but it does help me to be much more aware of what my real out-of-pocket expenses are and I don’t justify going over my budget by saying that I’ll get a gift card back. 

(Note: I know “rolling” gift cards and Catalinas makes for some great deals; I just think it was easy for me to forget they actually cost something to start with.)

5) Life Will Go On–If you are anything like me, discovering the world of coupons and deals was a turning point in my life (“You mean I don’t have to pay for toothpaste or razors ever again?”). I will admit that during the first few months, I went a bit overboard.  I felt the need to do every deal and print out every coupon.

With the Envelope System, I am learning to let go of some of the deals and I am finding out that it is okay–we still have more than we need.

6) Rely on the Lord. I like being in control and couponing fed that feeling for me. I know more about “the systems” than most cashiers around here and I know what I am able to get for free or really cheap.  I found that putting limitations on my couponing (through having to prioritize, miss deals, etc.) has helped me to remember the real Source of all that we have and consequently not worry about it.

So, what’s the bottom line? I tried out the envelope system thinking that I might save some money, and I have. More importantly, though, I’ve learned lessons that will help me to be a better steward of the money we have. I don’t know if the rest of our lives will transfer over to the Envelope System, but I know the things I’ve learned will.

Note: These are simply lessons I am learning; I don’t suggest that they are universal to all bargain shoppers. However, I would encourage you to try out a cash-only system (even if only for groceries) and see what you learn about yourself. You just might be surprised!

Jenny Whitney is a stay-at-home mom of a lively one-year-old son. She is learning to be a loving graceful wife and mother, happy homemaker, and responsible steward of all of her resources.

From Crystal: Do you follow The Envelope System or have a cash-only policy for some or most of your purchases? If so, I'd love to hear how it works for your family. If you'd like to learn how it works for us or how to get started making it work for you, too, you can check out my article here.

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  • jennifer says:

    Thank you!! I have been couponing(with help from hubby) for the last 5 months. It has made things much better for us since his paycheck is variable. But I also fed off the feeling that I could get all this STUFF for free. I still ended up feeling short. You reminded me that my security is not in a paycheck, or my ability to get free stuff, but the Lord. Thank you!

  • J. Serre says:

    Kelly V~sounds like my hubby. It was too tempting for him to not just swipe the debit card… so he stopped carrying it with him!! That way he has to actually plan ahead and have the cash, it has saved us TONS!

    I’m inspired by all of these envelope success stories! I think I will give it a try and just start in one area- groceries/household/hba/toilet paper, etc.
    I would guess (?) it should work pretty well since I have a great stockpile I should have plenty of $$ to get the necessities (eggs, fruit, veggies, milk) and stay on some of the deals

  • Annie says:

    Thanks for this reminder. I’ve found, like many of the commenters, that coupons/deals can be consuming. With the addition of our second baby, I have far less time to spend on finding deals and going store to store to get them. I’m trying to let go of some of them. I’m also trying to remember that it’s not MY money I’m spending, but God’s. I’m trying to create a habit of praying before entering a store that He would give me wisdom on what to buy and what to pass on and that He would give me favorable prices on things we must have to make the most of His money. With a few changes, God has helped us cut our grocery bill (for our now family of 4) from $350 a month to $175 a month. Thank you, Jesus! I’ll be trying the envelope system with just our groceries as a discipline tool to become a better steward of the money to which we’ve been entrusted.

  • eve k says:

    This is for Kelly but can help anyone who does not always see eye-to-eye with their spouse.
    I used to be the overspender in our family. The more my husband nagged me, the worse it was….because we both work and bring home the same amount of money, I felt he was trying to deprive me or control me in some way…
    When he stopped nagging or even mentioning it….all of a sudden “I” got the idea to get into couponing about a year ago. Since it was “my” idea and more of a challenge/hobby, it was fun. Now it is almost a contest with us–who can find the best deals. We have put the savings into a special account to save for some specific items that we have wanted.
    If there is a way that you can get this to be a challenge or contest (in good fun of course), you may have more success.
    I still go over my budget sometimes, but we are still saving at least $5000 per year (not kidding).

    Cash is the way to go for a bunch of reasons. Not to go on a tangent, but the credit card companies and banks are tracking your purchases and predicting your credit worthiness based on what you buy! NO thanks! We pay our bills on time, so I don’t think some computer should decide that I am a poor risk because I bought beer this week or stocked up on toilet paper last week! Sheesh.

  • eve k says:

    I just want to add that I am amazed that someone feeds a family on $40 a week. That is awesome.
    Before I started budgeting and couponing, we spent so much on food (2 adults and one dog)–I don’t even want to tell you. My husband says I used to spend $800 a week but he is exaggerating. The truth is, I shopped at the closest store, did not have a clue what things should cost, shopped when I was hungry, tired and stressed at the end of the day (absolutely the worst scenario!!), etc…
    It was probably $400 a week for the two of us.
    My husband also needs meat at every meal and has to have his certain junk food snacks, but I have my own idiosyncracies (organic stuff, splurging on occasional pricey ingredients to make a special meal) so we are now down to $100 per week. We really have not suffered from a change in lifestyle–we eat just as well or better but just get more bang for the buck.

  • Rachelle Burkhead says:

    We have been using an envelope system for years. My husband and I got married while I was still in college. We have never actually seemed to make enough money. We still don’t. With the help of family, we are getting by.
    I was introduced to Crown Financial Mvelopes system. It is totally online and it is attached to your bank account. Every transaction shows up in a window and all I have to is click on it and drag it into whatever envelope it belongs to. I have created a budget on there and allocated certain amounts for each category. We pay all our bills online through our bank. When they show up, I just drag it over to the proper envelope. You can begin the month by funding every envelope with whatever amount you have allocated. You can see throughout the month how you are keeping on track. I really don’t like paying cash for things. I actually don’t usually carry cash at all. This way, I can’t make small, senseless purchases just because I have a little cash in my purse. Every purchase has to go into an envelope. It is basically the same as using real envelopes but I can keep records of my purchases without having to carry around cash.

  • Jessica says:

    We went through Dave Ramsey’s Financial Peace University this year and the Envelope System has been great so far. When the budget is mutually agreed upon, the cash is so freeing! I can buy clothing or groceries or school supplies without guilt. I can also say no to my husband or kids without blame other than to the envelope. My kids (7 and 5) have now learned that when the money is gone from the envelope, it is gone. There is no going to the magic machine for more until pay day! The cash also is a great visual barometer of how we are doing for the month-especially for those things we don’t buy every week such as home or auto repairs. For many things, I have a spreadsheet divided into “envelopes” of which I just deposit into a combined account which is great to see them grow (for Christmas, Vacations, etc.). We divide our cash flow into about 15 envelopes (virtual and real) which can be a bit much at times, but is working for us. We know where every single dollar is going! I LOVE the comments about going coupon and deal crazy! I think everyone does that when they start out. We are part of that Razor-craze and going through so much paper and ink to print coupons that you spend more on coupon supplies than the coupons are saving! Now, things are becomming more even and so much more worthwhile! Thank you MSM and all of you who participate in this adventure!

  • Christy Carden says:

    I am terrified of the envelope system; mainly because we are terrified of carrying around that much cash. I know the chances of being robbed are less than the chances of overspending, but please tell that to my husband, who is paranoid anyway and HAS BEEN robbed at gunpoint (only had about $40 cash in wallet at the time, but later had identity stolen as result of people getting hold of picture id, etc.). I am also extremely ADHD and have a hard time keeping up with things and am afraid that I will lose an envelope/a few dollars change that I didn’t stick back into the envelope immediately because the 2 year old is screaming in the grocery line so it ends up in my pocket, etc. One plastic card is a little easier to keep up with. I think we need to try the “virtual envelope” system with the spreadsheets.

    Just a thought about the OOP expenses/”free” items. I have been thinking about this a lot lately as I should be getting several rebates in the mail and it seems to be taking forever for them to come! Maybe you could start a seperate envelope titled, “free” deals. Put a certain amount of start-up money in it $10, $20, $40, whatever you want — maybe start it up one month when you have leftover $ from another envelope like groceries. Then use the cash from this envelope to pay for the “free” item. When the rebate comes in the mail later, you can cash the check and put the cash in your “free” deal envelope to use on a future purchase. In this way, you will constantly be rolling over your rebates, but sometimes will have to pass on an item if you have no money in the “free” deals envelope at the time. I would just hate to pass up free items (free in the long run, after rebate) if they are items that I would buy anyway (shampoo, etc.) or can donate. Eventually getting the rebates and rolling them over should help to spend less out of the grocery envelope—just a thought. Of course, this would only work for cash rebates, not things like CVS Extra Care Bucks. I had to use about $10 to start that up, but now I just roll them over and spend nothing OOP. So that may need to be seperate and you budget some start up money for that too one month when you are under budget on groceries.

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