Cash Envelope Binder System

Whether you have been budgeting for a long time or are a newbie, you have most likely heard about cash envelopes.  The idea comes from the fact that you tend to spend less than if you had to swipe a card when you use cash.  Using cash allows you to physically see where your money is going.

Here is how you use the cash envelope binder system. 

Step 1. Create a Budget

I know! The dreaded “B” word.  But you have to be in charge and tell your money where to go.  And it’s biblical!  Jesus says this:

“For which of you, wanting to build a tower, doesn’t first sit down and calculate the cost to see if he has enough to complete it?  Otherwise, after he has laid the foundation and cannot finish it, all the onlookers will begin to ridicule him, saying, ‘This man started to build and wasn’t able to finish.’ – Luke 14: 28-30 NLT

So grab a sheet of paper (budgeting templates coming soon!) and write down your income.  Then, list out every single expense that you have each month.  Don’t forget about those pesky auto-renewals and subscriptions.  Write down the things that come out once or twice a year also.  Be sure to include incidentals.  You know your car is going to need an oil change and possibly new tires.  There may be something in the house that needs to be fixed.  Write down everything and assign a dollar amount to it.

Step 2. Get Paid and Head to the Bank

Once you have been paid, it’s time to go to the bank and take out your cash.  Take a moment to feel the money.  Heck, smell it even.  Remember how it feels to hold this stack of cash in your hands.

If you need help determining how many of each denomination to get from the bank, check out my Denomination Worksheet.

Step 3. Stuff Your Envelopes

Here comes the fun part.  

Using your budget, add the amount of cash you have allotted for the month into each category.  Remember, if you run out of money in an envelope, that’s it.  Don’t borrow from another envelope.  Adjust next month, if needed.

If you have money left over, that’s great! You can either use it next month and reduce the amount that you need to fund that category.  Or you can use it to pay off debt or add to savings.  Or you can have extra in that envelope for next month.