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Ask the Readers: What should I do with extra cash at the end of the month?

Today’s question is from Sarah:

I just started doing the money envelope system for my house budget, and at the end of the month, I have some extra money! I’m wondering how I should use this extra cash? Should I leave it in the envelope for a month that may have more expenses, put it towards a debt, or something else? -Sarah

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59 Comments

  • Katie says:

    Its yours! Do what you want with it! Sometimes we use ours for an extra dinner out, save it for the next month, add it to our emergency fund….its up to you. Putting it towards debt is probably the best. Yay for money!

  • Shannon says:

    First of all, Congratulations and way to go! What a fantastic problem to have. I have done the cash envelope system for years and our current home is paid off. When I have extra money during any given month I put it in an envelope and begin or add to the existing envelope titled “unexpected gifts.” Although I do my best each month to plan and budget for birthdays, boss gifts, etc., there is always a surprise celebration that pops up and I am prepared.

  • Victoria says:

    In general if it is the food envelope that has a surplus I leave it in there to use to stock up on rock bottom deals I find the next month, giving us even more wiggle room in our food budgets for splurges such as birthday parties or hosting get together meals with our friends. I also save the gas envelope money surplus if there is any so that I can save up for an extra tank of gas when we take a day off to the big city an hour or so away. As for the other envelopes such as eating out and such I like saving some of the surplus and blowing a bit of it. For instance the family might run through drive thru for a round of $1 ice-cream cones and then put the rest in savings.

  • Kelly Hess says:

    Any extra money we have at the end of the month goes directly to pay off students loans. If you have no debt, then fund your emergency fund, if it i funded, have fun with it or save up for a vacation!

  • hlynnf says:

    I agree with Victoria! I think after you have been doing the system for a while, you determine what really works best for you, but we (like you) typically let the food envelope build unless it gets to be “too much” (what a nice problem to have, when we have it) and then we move it to savings. There are also times when we indulge in an ice cream night as well!!

    If Sarah (the person who asked the question) is still working on paying off debt – they might want to consider splitting it – some for debt and some for a little splurge. I would wait on that for a few months though because I found the envelope system sometimes needs to “normalize”. You might do fantastic one month and have a large surplus and the following month it might be a real struggle until you get everything really set and routine. Once it has been working for a bit and you are very solid on your budgeting it will be easier to decide what to do with your surplus, in my opinion.

  • Beth says:

    I usually place my extra in savings if it’s $100 or more. I can do it simply by an online transsfer with my bank. It moves the cash on over and gives me some extra when we are looking at a special trip, like Disney next summer with friends from over seas.

    However, if I know a tight time is coming up, example: mortgage and school based fees in the same pay, then I set it aside for those extra expenses that aren’t necesarrily budgeted.

  • ashley says:

    If you just started using this system, it may be wise to leave the extra money in the same envelope for a few months to make sure that you considered all your expenses that you need to plan for. Some expenses slip my mind since they only roll around once or twice a year.

    Otherwise, I’d say pay off debt with it!

  • Megan says:

    If you see that you have extra money every month, you may need to make your envelope amounts less regularly and contribute more to debt. I never have money leftover…..wish I did. But I don’t have debt but our house so I’m ok with that!

  • When I have extra grocery money at the end of the month, I put it in a separate envelope and save it up for purchasing meat, grains, etc. in bulk that I normally wouldn’t be able to afford with my regular monthly budget.

  • Charity says:

    Not knowing your situation at all, I would say that’s totally up to you!

  • Meredith says:

    Well, this may not be the most popular thing to do with it, but our leftover cash is our entertainment fund. We have used it to go bowling, movies, what ever we want, etc. If there is extra change we put that in a bag and once every three months, we go to coin star and get an even exchange for an amazon gift card. We use the gift card for things that come up that we may need we weren’t thinking about. For example, I just got my husband some socks. I guess you should put it towards debt if you need to but this way makes our lives easier.

  • yasmin says:

    Same thing has happend to me! I am a college student learning to use the envelope student and so far its working out great. What I do is alternate months by putting the extra cash one month into savings, another month by paying off college loans, and then the 3rd month buying myself something nice, like spring shoes! 🙂

  • Sarah says:

    Great job going to a cash envelope system. I know it makes a huge impact on the budget at our house. Stick with it and you will reap the benefits.

    You have a few opitions for how to handle extra cash at the end of the month…

    1) Leave the extra money in the envelope for use next month. This might be a good option for your grocery money, eating out envelope or spending money, allowing you to stock up on some things next month or splurge a little on some higher priced family favorites.

    2) If you’re paying down debt you could put all the extra cash toward a debt payment. Even if it’s just a few dollars every month it could add up to significant progress over time.

    3) Save all the extra cash for a larger purchase you’re planning. Maybe some new furniture or a family vacation.

    The important thing is to talk with your spouse/family/accountability partner and decide now how you’re going to handle extra money. What’s right for my family may not be right for yours.

    If you’re ending up with lots of extra money at the end of each month I would encourage you to take look at your budget again. Are there areas you’re budgeting more than you really need? Would it be wiser to allocate that money for a different purpose at the begining of the month?

    Good luck!

  • Marie says:

    I say look at where you need the “extra” most. If you have debt you may want to put it towards that. If you have extra in groceries maybe use it for stocking up with or buying half a cow or something along those lines. Or if there is a big purchase you want to make put the extra towards that.
    There is no wrong or right. I think you need to figure out what works best for you. And if you use the “extra” one month then maybe save the next time there’s extra. Great for you being able to save extra. Last month our extra in groceries helped by the food for my daughters birthday party.

  • Susan in St. Louis says:

    I often leave the money in that particular envelope, but if we’re saving for something special, I’ll pull all or some of the “extra” out and set it aside for this. For instance, we did this to buy a Vitamix and now my son and I are saving to fly to TX to visit friends. 🙂

  • Julie C says:

    Over the months, you’ll find out if you are putting too much into one or more envelopes. Many months, I have growing envelopes but I know the large purchase will be made in a few months so the total NEEDS to grow to a large amount.

  • Sandi says:

    I put extra money towards debt, and also don’t forget you could put it in a Roth IRA for retirement.

  • Ashley_P says:

    Do what you think best for your family.

    Grow your emergency fund.
    Stash it into a vacation fund.
    Invest it into a mutual fund or CD.
    Sock it away for Christmas presents or birthday gifts.
    Treat you and hubby to an extra date night.
    Donate it to a church or charity.
    Let your kids use it for a special treat they’ve been wanting. (Might want to make them earn it, if that’s your family rule.)

    Talk to your hubby and pray about what to do with it. Then thank God for your blessing, and enjoy however He tells you to!

    • Christine says:

      I would not spend it all if you need it a different month. I pay my homeowner’s insurance once a year. It is more than a paycheck for us. I also pay auto insurance usually six months at a time. That is also more than a paycheck. They are both due the same month – so I need that extra cash. 🙂

      • Christine says:

        I’m sorry – I didn’t mean this as a reply to the above comment.

      • Em says:

        I have categories on apper that are in one savings accounbt for this type of expense. I divided the amount by 26 and put that amoutn each payday into my savings so when car registration comes around I have the money ready to transfer to my checking account. I have 35 catergories on a paper that I update every pay day.

        • susan says:

          I’d love to see your list of yearly or other long-term categories as I like the idea of saving ahead for these non-monthly expenses. Wonder if listowner could post it somehow.

  • Courtney says:

    I use the envelope system for a few categories and I leave ‘extra money’ in the envelope. This is why. I use the envelopes for things like clothing and car maintenance. I don’t necessarily buy clothes or get my oil changed every month. By leaving the money in the envelope I know the money is there when I need it. If there’s money in my ‘entertainment’ envelope it’s nice to let it build. This way I needn’t feel bad about a big ‘splurge’ like going to the local Harvest Fest or taking my daughter to a bounce house!

  • KristaR says:

    I have an extra envelope tucked away that I put the extra in. The envelope is kept away feom the others, stuck high in a cabinet. I just let it build up and use it for whatever I need it for. Extra groceries, extra gas, emergencies.

  • Alicia says:

    We always put it into savings at the end of the month, no matter how much we have left over. We are saving for a car and to pay off our student loans. If we didn’t have those payments, we would put it towards our morgage. If we didn’t have a morgage, we could put it towards saving for whatever we are saving for. That’s awesome!

  • MomofTwoPreciousGirls says:

    Think it may depend on he category. Clothing, you don’t necessarily buy every month. For us i may need to get something like a new pack of underwear for my girls and then nothing until season change. Grocery, one week I may have had a light week bc of stockpile, events or late work nights. Another week I run out of household items so it just fluctuates and I keep there. Some months have no birthdays others have several. I generally just carry over. If it starts to be a lot, I check the budget to see what adjustments can be made.

  • Lana says:

    For years I have saved some budget catagories for whatever big ticket item we are in need of at the time. Right now I am saving for a new dishwasher. Some I leave to roll over such as the clothing budget because that one seems to have times when we need nothing and then everything needs replacing at once.

  • Sharon says:

    For me, there are some envelopes I have a limit on. For instance, our clothing envelope has a $100 limit. I put $25 a mont until I have $100 and then I don’t put any more money in (until I spend it, of course). Then I use that $25 a month for debt reduction. I do this with our haircut budget, clothing, car repairs, etc.

    If it’s my food budget that has a little extra money in it, I will usually use it towards next month’s budget or you can use it for debt reduction or something fun. It’s up to you.

  • Jessica says:

    I usually use my extra to put towards something fun we want to do…like a trip or Christmas shopping. Otherwise, I will put in my savings account.

  • Christie says:

    I leave it in the envelope. There are some months were you may need that extra cash in the envelope!

  • Kris says:

    Having been using the envelope system for 3 years now, I will tell you honestly that the “extra” money in the envelopes STAYS in that envelope. We budget a certain amount of cash for those categories for a reason – if it doesn’t get used during that time frame, it carries over. The idea of moving it to another category is akin to using your Visa to pay your MasterCard bill. The idea of a Zero-Balance Budget means you’re allocating where that money goes, not whether it actually gets used for that purpose during that month.
    For example – we budget $30 a paycheck to go into our “Kids’ Clothes” envelope. If I don’t buy something for them during that pay period, the money stays in the envelope building a savings account so I can buy what I need at the best prices, NOT when I happen to have that money there.
    Or, if I am under budget on groceries, that leftover money stays in the FOOD envelope, likewise with hair care, gas, oil changes, whatever our categories are. Just because you’re carrying the cash in your envelopes doesn’t give you free rein to move it to another bucket…

    But that’s just my opinion. As long as the decision-making adults in the household are in agreement, decide what is best for your family!

  • Lyn says:

    what a great thing to have!!! I would recommend you look at your financial goals. Are you trying to pay off debt? save for something? try not to acrue debt? And then place the extra where it makes sense for you and your finances.

  • Christy Y. says:

    I personally believe in a debt-free lifestyle, so I would say put it towards debt. There’s nothing more rewarding than being debt-free. But it’s also alright to occasionally reward yourself either by treating yourself to something special or by saving up for a bigger ticket item (or trip) for yourself or the family. If you save the previous month’s leftover $$ for when you go over budget, you might find yourself using it as a crutch. “Well if I go a little over budget that’s ok because I had a little leftover last month.” And while you could use it that way I think you’ll find yourself being much more accountable, consistent, and feel more rewarded in the long run if you opt for another use.

  • Amy says:

    It was interesting to read others comments. Despite having attended FPU, I never considered putting the extra money towards debt or savings. We have about a dozen envelopes and put money in them each week. Groceries we always use up, along with gas envelopes for each car- but clothing, household, misc do add up. We leave it for when we do need to make a purchase. That was when all three kids need new sneakers it’s not a problem. (Don’t worry- I buy second hand whenever possible!) We adjust if we see too much money is adding up.

  • Amanda L says:

    I leave my surplus in the envelopes. There are months we buy no clothes for example and then a month where someone needs a few new items that would be more than my monthly amount. I also evaluate envelopes regularly. If I see I am developing a large surplus I cut an envelope down and put the extra towards other envelopes or savings. I have also taken money from one envelope to fund another that may be running low that month from unexpected expenses. I think it’s a personal choice on what works for your family and situation. I will say we also have no debts to pay but our mortgage, so debt payments aren’t something we have to consider.

  • If it’s over $100 we put it towards debt. Otherwise, I keep a list of stuff to put extra money towards…

    For us this looks like:

    1. Computer (our current one is dying)
    2. Stockpile/bulk food (we do a CSA, buy our meat in bulk and I’m trying to buy more of our pantry staples in bulk)
    3. Clothing (we budget just $15 a month for the whole family, this year we need new winter coats/shoes so I need a little more wiggle room)
    4. Gas (with our activities during the summer we need more gas money)
    5. Special occasions

    • Jen w says:

      How do you get by with $15/mo for clothes? I buy as many. Items as I can second-hand, and there’s no way we could spend so little. Our budget is more like $125/mo for 1 kid and 2 adults. Our daughter is constantly growing out of shoes…. Just wondering what your trick is for spending so little.

      • I am not the above commenter, but we have a similar clothes budget, so I will give my answer to your question. We do $15/ mo for adults and $5/ mo for kids. Honestly we rarely use it all. We just let it build up until we need it. I go to goodwill once or twice a year to rejuvenate my wardrobe (always on a half off sale, so I pay less than $3 per piece including for pants) I could even live with going less but I find that that time frame works for me and my budget. I generally spend less than $100 per year. My husband mostly buys when something wears out or he finds that he needs a new category of clothing (if he gets a job requiring dressier clothes etc.) So he generally spends less than $40 per year (again generally spending less than $3 a piece). We have 1 son and right now he is 16 mo. He has been surprisingly light on clothes. When he was a newborn he rarely dirtied his clothes, I generally changed him because I thought he had been in that outfit too long. But I had heard that kids went through clothes quickly so I bought plenty and ended up having way too much. Now he dirties his clothes a little faster but still only needs a change once or twice a day. And I still have an overabundance of clothes. For him I buy clothes mostly from online garage sales (or real garage sales in the summer). If you check facebook you may find some virtual garage sales in your area. In my area there are like 8 virtual garage sales. Craigslist is also a possibility. I look for someone who is selling a bunch of the size/season clothes I am looking for and make an offer for the whole amount. I pay $1 or less per piece (usually less) unless it is something I particularly want or it is a special piece like a snowsuit or suit or whatever. I was able to get almost all of my son’s winter and summer wardrobe for this year (including 18 mo-2T since I don’t know when he’ll grow out of a size) and a few extra pieces for later from one lady, I don’t remember the exact price, but I think I got it all for somewhere between $40 and $50. Also since we have several family members who are avid garage salers we got several huge piles of clothing from them before and even after he was born and that helped so we could save a lot of his clothing budget (although we did still spend quite a bit ourselves :)) last year. And we are still working our way through clothes that were given to us. Some of them are as big as size 5 or 6 I think. We may have to increase his budget as he gets older and goes through clothes faster, we’ll play that by ear. Another great way to save is if you have any friends or family that have a same gendered child a little older than your child who would be willing to share their clothes with you when their child is done with them. A lot of my friends and I all store the clothes that we have for a possible future child so we share them with each other when needed so they don’t just sit in storage. Unfortunately we couldn’t use this system with our first because we were among the first in the group to have a boy, and my only family who had a boy old enough to share with us was too far away to make sharing feasible. But we are now expecting our second and I am sure that if we have a girl we will have several friends offering their clothes to us.

        I hope all that helps! I am more than willing to answer any other questions. I will try to remember to check back here but I am busy so if you want to be sure to get an answer feel free to visit me at my blog (just click on my name)!

  • I am on the Dave Ramsey plan so I am putting an extra money for my emergency savings account. Right now we have about 3 months saved so I want it to be at least 6 months before I spend it on anything else.

  • jk says:

    a present for yourself or for someone in need. I wish I had extra money so I can give more to someone who really needs them.

  • Penny says:

    I say you put it in a special kitty for either gifts or a family vacation!

  • Julie says:

    Woohoo!! Way to go!
    If you are in a hurry to get out of debt, put it towards any debt that you may have. Building your savings/emergency fund? Put it there! Save it for a rainy day! Wait for a coupon to eat out and make that extra money go a little further!

    • Nicole says:

      You could send it to me! 🙂 Just kidding! I would put it towards debt, first of all. If you don’t have debt, put it in an emergency fund. A good emergency fund would have 3-6 months of expenses in it.

  • Diane says:

    We always carry it over to the next month. At the end of the year we re-evaluate our categories and if there’s extra we will put that to pay off our mortgage early.

  • Sandra says:

    Tithe.

  • Sumitha says:

    This is such a nice problem to have, no?

    In our case, we used to throw everything we had leftover at the end of the month towards debt. When we had paid down the debt, we started putting away anything extra we had towards the “home down payment” account. After buying the house, everything extra we had (including any bonus at work, any cash gifts etc.) went towards mortgage. A couple of years back, our mortgage was paid off. And then I started throwing everything I had (and then some) towards a “freedom” fund. At the end of this month, I will quit my job to take a couple of years off and try my hand at other pursuits.

  • Jill says:

    What do you with left over change. I find it gets loose out of the envelope and becomes hard to keep track off.

    • Beth says:

      Donate to charity. I keep at least 5.00 out of our grocery envelope to purchase very needed staple food for our local food pantry. I make a “game “out of it and let my four year old pick out the item to buy. He gets so excited about using a coupon and getting a deal. Hopefully someday he will really know what a good deed he is doing.

  • It depends on where you are in the baby steps. If you are still paying off debt, I would put any extra bit you can squirrel away toward that. If you are still funding the emergency fund again, all extras go toward that. If that is fully funded then if you are just getting started using the envelope system I would suggest leaving it in there to see if you need it later. If you are already established and you know that you won’t need it later than you can funnel it toward whatever fund you want. I have found that for me my expenses per fund tend to vary month to month. For instance some months certain produce is in season and I like to buy a lot and freeze or can it, or I find a sale on meat or something else and stock up, or I am throwing a party that I need to buy extra food for, or baking Christmas cookies etc. So those months I need more money in the food envelope. I find some funds vary more and some less, but I find that most of the time it is nice to have a little padding in each fund to fall on if I need it.

  • Jenny in UT says:

    YAY! for you and this accomplishment. It is such a good feeling to have left over money at the end of the month. When this happens to us, I look over the upcoming month and our goals. If you have debt, I would put it towards debt. Every penny helps! If you are building your savings, then I would put it there. Is there a special occasion coming up? Why not use it for that?
    If our extra is substansial, I divide it three ways and put 1/3 towards themortgage, 1/3 towards savings and 1/3 for something fun.

  • Laressa says:

    PUT IT TOWARDS Debt! People think we are crazy with how we try to be so frugal and then pay off large chunks of our mortgage each month to get it paid off sooner. We would be crazy not to try to pay it off if we pay at the rat e they say it will cost us an extra 25,000 in interest. Any month we have extra we put it towards our house (our only debt) that way once that is paid off we will have more money for other things. look at how much your interest if you have more than one debt and put the extra towards that. It may not be a lot but every little bit helps, and gets it paid off that much sooner!

  • Good for your for budgeting! This is a decision that will change the rest of your life! So, high five to you!

    You said you “just started doing the money envelope system for my house budget.” I would give it 3-6 months before doing anything with the extra money (it’s funny how budget categories fluctuate). If after that time you still see an overage in your envelopes I would lower the amount of money that goes into that envelope. And, putting the extra towards paying down debt is probably the wisest choice – especially if you’re gazelle intense!

  • Donna says:

    Save-stockpile-invest-pay on your principle-give! 🙂
    Congrats on the extra!

  • Erin says:

    I think it depends on your goals and your budget. Keep in mind, especially with bills, some of them are variable. For example, we never spend leftover money set aside for the electric bill, because the next month you may have record highs and end up with a bigger bill. Likewise, we never spend money set aside for transportation expenses because the built up money is used towards expensive car repairs that pop up. Also, keep in mind yearly expenses. For example, here in Kansas, we have yearly car property taxes that are pricey… BUT we include yearly expenses in our overall budget, so there is no need to save the leftover grocery money for it. To be honest, in our house, those larger categories are all electronically managed anyway, so there is no build up of cash but rather a build up of savings. But I do use cash for our every day household expenses: groceries, clothing, baby supplies, household products, entertainment, gifts, hygiene supplies. I set aside some of the extra for the children’s clothing and grocery/household products stockpiling, but the rest I use as fun money. But before using surplus for fun money, I would first be sure all consumer debt is payed off, and second a good emergency fund is in place.

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