Cash Envelope Systems - with Ellen.Plans
Ultimate Family Planner is about all family's, not just mine. We will be regularly featuring other Mums with their tips, tricks, advice and opinions on multiple matters. Today we are starting with the amazing Ellen from Ellen.Plans. Ellen has a YouTube Channel dedicated to planning, minimalism, budgeting and cooking.
We are super excited to share a post she has written specifically for us Ultimate Family Planners, on Cash Envelope Systems.
CASH ENVELOPE SYSTEMS
There is so much I could tell you about budgeting using the cash envelope method but mention money and most people’s eyes glaze over or they get a panicked look because they have bad money memories from childhood so mention budgets and their pulse starts racing.
Instead I want you to imagine this – it's December and you are about to start Christmas shopping for your family. You head to the shops with your list and your cash envelope marked ‘Christmas’ which has $1,000 in it ready to spend. How good do you feel?
Setting a budget is not about deprivation or going without – it’s about deciding on your priorities and telling your money where to go, and then giving yourself permission to spend that money. How cool is that? You have permission to go out and spend money, no guilt or shame allowed! And you know once that money is spent on a new handbag, shoes for the kids, plants for the garden or a gift for a friend that you still have all the money you need for the bills due next week.
You can totally budget this way digitally as well (using spreadsheets, a budget book or an app) but I think there is something visceral in handing over cold hard cash and once it’s gone its gone – so no chance of spending more than you have allocated.
If you are interested in starting a cash budget I suggest you choose two or three categories to start with; easy ones are groceries, clothing, gifts or eating out. Set yourself a budget for each category then head to the ATM and withdraw the cash needed (some ATMs even let you pick the denominations of the notes which makes things really easy!) and then stuff that cash in to your envelopes. Zip lock bags or plain white envelopes are great for starting out. Try using only cash for those categories for the week and see how it goes, you have nothing to lose here!
You can also use cash envelopes as sinking funds (like my Christmas example earlier). A sinking fund is money put aside a little at a time towards a larger goal. This could be $100 a week towards a vacation or $50 a month towards your yearly car registration. The great things about sinking funds is they lessen the financial blow of a big expense. I also choose to keep my sinking funds as cash so that I can add to them each pay and won’t accidentally spend that money on something else.
Personal finance is personal, it’s all about finding the best way for you to handle your money and what feels like the right fit for your family. Cash envelopes might be just the thing for you to make 2021 your best financial year ever!