We know that using debit cards and credit cards is an easy and fast way than using cash.
What is the cash envelope system method?
The cash envelope system is a budgeting method that requires you to put money into an envelope for a variable expense.
For example, groceries are a variable expense. Each pay period, you will put the amount you have allotted to groceries into an envelope.
The idea is that you spend only what’s in the envelope. When you go shopping, you’ll leave your debit card at home and only have the money that is in the envelope.
But the truth is that using cash when you are trying to get your finances under control is vital.
Believe me; I get it; people always give me the same excuses as to why they don’t use the cash envelope system, and I just listen and respect it and move on.
But the truth is that I was the same way, I will swipe my card all the time, and it was when I decided I needed to change I was living and viewing money that things changed.
Is using the cash more convenient?
Nope! Using a debit card and card is easy. You swipe and don’t get to see your balance going down.
When you use cash, you get to see how much you have and believe me, and it does something to you. It makes you more conscious of your spending.
Can you still use the cash envelope system in today’s world?
Yes, you can, and many people still use it and continue to save.
Today I write about the myths aka excuses people always give me about using cash.
Most of the time, I hear it from people that are still struggling with their finances.
I get it!
But let me clear of one thing.
When it comes to finances, you must do what works for you and your family.
If using cash is what helps you and what is helping you take charge, then do it.
What bugs me about many people is that they believe one size fits all when it comes to personal finance.
The truth is that it is called personal for a reason. Now, I’m not here to knock people who have successfully not used the cash system and have made it work.
Because I believe it works too. Once we had a system going, we used cards and multiple bank accounts to continue managing our money.
But for spenders and people that have never budgeted before, starting with the cash system is a great way to manage their money.
Is about learning where your money is going and learning discipline!
The myths about the cash envelope system I’m going to go over are the top 5 that have been said to me REPEATEDLY.
Let’s find out what this 5 Cash Envelope Myths are and why I think is just plain BS!
5 Cash Envelope System Myths
It’s too much cash to carry around
Top comment I hear about using a cash envelope system is worrying about carrying around cash.
Is having all that cash a bit much for people? It can be. Having “all” that money versus having a card is more convenient.
But didn’t “convenient” get us into this financial mess?
Listen I’m not a fan of the cash system, give me a card, but my reality and my truth are that it works!
Let’s be real for a minute here.
If you have budgeted $650 to fill your cash envelopes, you don’t always need to carry $650 with you.
If you are going grocery shopping, only bring the amount of money you are going to spend on the shopping trip, and that’s it.
Growing up in the city, bodegas didn’t take cards we use cash, and we never go jumped or rob.
The statistic of this happening is slim. When I go shopping, I take the money I need, and that’s it. I don’t need to bring other envelopes with me.
Knowing me if I bring all that cash, this chica will spend more than what is needed.
Bringing the set amount I can spend will make me conscious of my spending and will keep me under budget.
Another thing is not to fill your envelopes once a month.
Fill your envelopes once a week or twice a week. If you budgeted $400 for groceries for that month break it down into 4 weeks.
Every week fill the envelope with $100, and that’s a lot less money to carry around.
The point of using cash to not to make it convenient, but to make you conscious of your spending.
Are you these conscious of how much credit cards you are carrying in your wallet?
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It’s too complicated with too many categories
Our next cash envelope system myth is that its too complicated.
Let's dig into this.
The beauty of the cash envelope system is that you can make it as complicated as you want or not.
Heck if you want to make a system with 2 or 3 categories that work for you.
But let me go into details about categories because I’m going to shock you with a “bold” statement. 😊
When you create a budget, you create categories such as:
- Car service
The good thing about the cash envelope system is that you don’t have to make categories for EVERY category on your budget.
You don’t have to make envelopes for every category! Did you read this?
You make envelopes for categories that you can control or are problematic to you.
You don’t make an envelope for the mortgage because you already know how much your mortgage is each month.
It’s even automated, and each month the mortgage company withdraw it from your account.
Your cash envelope categories should be the ones that affect your finances. The ones that you typically overspend your money on.
Top categories people overspend:
- Personal care
I recommend you stick to 5 or 6 envelopes and not complicate the system if you are starting.
See, is not THAT complicated at all.
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I can’t pay all my bills using cash
Another top cash envelope system myth is paying bills. I hear this a lot so of course, it will be on this list. 🙂
We know that in today’s world, we are not capable of paying all our bills with cash.
This is why I stated previously to only create cash envelopes for those categories that you can.
Fixed expenses such as mortgages, car payment, etc. shouldn’t be paid in cash, and no cash envelope category should be created.
These bills should be paid online and automated if possible.
I buy stuff online
We do too! And you know what you can also. Simply budget for it and make it work.
Here’s the thing, what do you buy online? You can set the cash aside then deposit it.
If you take advantage of Walmart Grocery Pick up, budget for that or put the money on a Walmart gift card.
If you think that online shopping is affecting your finances, then skip shopping online for a bit. I know this is not what you want to hear, but until you figure out a system, it will be the best you don’t shop online.
We love our credit card rewards
Here’s some truth about this, if you are struggling financially right now, how are these credit card rewards fixing your finances and reducing your money stress?
What is the point of gaining reward points if your debt is growing? How is that helping you financially?
In many cases, this view of credit card rewards is the reason many people are in debt.
If you don’t have the discipline to control your spending, then skip using the credit cards for now and stick to a cash budget.
Focus on starting a financial goal, a budget, and using the cash envelope system to help you get control of your finances.
Here are my five top myths people always mention to me about the cash envelope system, and as you can see, there are solutions to each of these myths.
The key to succeeding is to be open, and if you are coming to this financial journey with a negative attitude, you are not going to go anywhere.
Here’s are some truth, back in the day, people used cash and guess what happened?
If you have never budgeted, are a spender and want to start your financial or debt freedom journey, start with the cash envelope system because it will work.
It works for this emotional spender, and it can work for you if you work hard and stay dedicated.