Tuesday, April 17, 2012

Budgeting and Cash Envelopes

This week my husband is working out of town, so I won't be cooking much. I thought I'd take this opportunity to blog about a few non-food items I've found on Pinterest that have been helpful in my life. Maybe they'll be helpful to you too!

The very first project I made from Pinterest was a cash envelope. Actually, it was five cash envelopes. Some time last summer or fall, I can't really remember when, we decided we needed to be on a budget. My husband was making pretty good money, but it never seemed to last as long as it should, and we never seemed to get ahead. At the time he was working out of town permanently, and the only way we could get him home was to put ourselves in a better financial situation.

We'd tried budgeting before, back when we were newlyweds. It didn't work out really great. We just continued to use our debit card for whatever we were buying, regardless of what the money was supposed to be set aside for. This time around I was a little more desperate to make it work, so I decided that cash would be the way to go, at least at first, until I could get everything figured out. (I should mention that I'm saying "I" because my husband is involved in the decision making process, but when it really comes down to it, I handle our money on a daily basis.)

I remember that my grandma kept her money in little envelopes. When day planners became fashionable, she got one that had little zippered plastic bags in it, and then she kept her money in those. I don't know how she broke down her budget, but I'm sure there was one for groceries, one for gas, one for bills, etc. I pay all my bills online through my bank's bill pay service, so I didn't need cash for everything, just for certain things. I'll break down how I did our budget, and maybe one or two ideas will work for you.

When my husband gets paid, the first thing I do is log in to my bank's bill pay system and pay all the bills that are due before the next pay day. As I go, I subtract everything I pay from the amount of the paycheck. Next, I subtract the amount that I set aside for fuel. At most places it's more convenient to pay at the pump, so I didn't want to use cash for that. Next, I figure out how much cash I need. The first time I did it I had to guess, then I've just adjusted it as needed. Now I have it pretty exact, so I take out the same amount of cash every time. If there is money left after all that, I transfer a certain amount into savings for Christmas, and if there's still money left, my husband and I discuss what we want to do with it. Usually it goes into savings. After budgeting this way for a few months, we were able to save up $5,000.

I take cash out for groceries, dog supplies, entertainment/dining out, gifts, and personal spending money. At first I just used regular envelopes that I had in my desk drawer. They worked okay, but they didn't fit very well in my wallet. Then, one day on Pinterest, I saw a template for cash envelopes! Someone took the time to design it and post it on the internet, so all I had to do was print out five copies, fold them up, glue them, and label them. They are just wide enough to fit money in. They fit perfectly in my wallet. They are awesome.

I'm sure you noticed they have a place on them for you to track what you've spent so you know how much you have left. I don't use that. For one thing, I don't really feel the need to know what I spent it on. If I took money out of my groceries envelope, I spent it on groceries. The other reason I chose not to track my money like that is I didn't want to have to continually make new envelopes. I printed mine out on card stock, so they've lasted for a long time.

At Christmas time, my sister-in-law made one for Christmas shopping money. She's a scrapbooker, so she printed hers out on cute paper. I wish I had thought of that! After that I bought cute paper so I could make mine cute, but as you can see, I haven't done it yet. When these ones start to fall apart, I'll replace them with the new and improved version. When I do it, I'm going to fold them so the writing is on the inside, since I don't use it anyway.

If you are thinking about budgeting, I highly recommend using cash. It makes you realize how much you really spend. Now when I go to the grocery store, I'm more careful about planning out my meals so I only buy what we really need. When I want to stop and get lunch on my way home from the grocery store, I ask myself if I really want to spend that money, because once I've used up my allowance, there's no eating out until next payday! I'm not going to lie, at first it is miserable. I felt like we were so broke! In reality, we had the same amount of money we always had, but it was all tucked away and set aside for what we really needed it for. No more spending the dog food money on pizza! At Christmas time, we paid cash for every gift we bought because we'd budgeted for it. We'd been setting money aside just for that for a few months. This year we'll have even more when Christmas rolls around. There are just so many positive aspects to cash budgeting! I can't imagine going back to using my debit card to pay for everything.

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