Cash Envelope System

Life would have been so much easier for many of us if only we had paid closer attention to what we heard and saw around us that are useful for our personal application. One of such is the simple ways that monies were efficiently managed in homes in times past to the

extent that there were a lot of families who lived debt free effortlessly. 

Such families saw owing money as a taboo. This might sound strange to many these days but, that was a very good approach to managing money. Honestly, we have made our lives so complicated and unnecessarily so with the vast range of products offered by financial institutions and other businesses. It has become so that being in debt is now fashionable. What the Mexicans refer to as 'Big Hat No Cattle'.

I believe that by now a lot of readers would have noticed how much I seem to rant about debts and financial freedom along with simple every day, no-brainer solutions. Debts as I have come to realize, is probably one of the most common problems a huge number of people are facing all over the world and there are very many who are still groping for a way out to this day. People like Dave Ramsey and Chris Hogan have stated on their shows, websites and so on, that money problems are the leading cause of a large number of divorces in the U.S today. However it would be a good idea not to zero it as just a U.S. problem alone. It cuts across all locations and people. So, why not share my ideas of possible solutions for humanity right?

I would be dishonest if I said that I have never lived a life of debts. I also am a work in progress really. You can read more about that on my post 'Debts * Another Face Of Slavery'. I had gone so deep into debts that I decided to let them stay unattended. I also know that there are others who simply sweep their debts under their carpets and hope that the debts would eventually go away. I believe in miracles just like the next person but thinking that a miracle would happen that would cause debts that you entered into deliberately to just disappear is kind of silly, don't you think? It is irresponsible not to want to work to ensure that such debts are paid off. I decided that I needed to revisit these debts and get them out of my life once and for all and so I made a list of all the debts that I owed.

I am not being judgmental. Not at all. I have been there myself, hoping that somehow the load of debts I owed would miraculously be waived. Well, that never happened. What happened was that after I made the decision to begin systematically paying off these debts, they really began to disappear. After each successful payoff, I mentally patted myself on my back as a way of congratulating myself for a job well done. This is the miraculous debt payoff - taking the bulls of debts by the horn.

Sadly though, I had relocated and some persons that I owed had also relocated and we lost touch that way. That is why it is so not good leaving off paying your debts. I have made it a point to ensure that should I come across those I lost touch with, I would make sure to pay them whatever I owed. For those that I still could reach, I began to gradually pay them off.

Debts are a sure way to loose all personal respect. People who would normally respect you and those who could never hold a touch to you on a normal day, would begin to look down their noses at you as a result. Many would even create gossip topics from your mess and snicker behind your backs loudly calling you out yet you cannot respond out of shame for your situation. Something that was quite hurtful on its own, and I promised myself that I had had it with debts. I mean it was more work to owe than not to owe, right? so what was the point?

My biggest challenge with owing was more due to the fact that I was a habitual spender or better put, an impulse spender and needed to draw in the reins on my spending habit.

I began to do a reset of my lifestyle to address everything that contributed to my running into debts. I admitted to myself too that I was an impulse spender and that had to stop. So I got out pen and paper and began to write and write and write about everything thing in my life that had to be handled differently, because if I was going to get different results, I was going to have to do things differently. 

I remember that in those times whilst I had made a journey to pay my parents a visit, I continued to write and write and write. My parents would walk past watching me and wondering what on earth had got into me.

Usually between my parents, my mother was usually the messenger and whenever my mother made a move at something, it was very likely that my father had asked her to investigate so , when one day my mother came up to me writing, writing as usual and asked me what it was that I had been writing, I knew husband and wife had had a discussion. Well my frank answer to her was "I am restructuring my life". I guess she got the message because after that I was left to write and write and write.

What exactly was I writing you might wonder. I was taking time to write out all I had done well and still doing well in my life on the one hand, and all that I had done wrong and was still doing wrong in my life. This included my attitude to things, my level of discipline, self control, integrity and so on. I chose to be really brutal to myself because I was not about to continue a life that was getting sunken deeper into mud.

After I was done writing, I took time to study what I had written (yes you read right, study what I had written) and to ponder on them. I noted those things that I had begun to do wrong whilst knowing they were wrong and yet had not made effort to check. Truth is that procrastination is another culprit. I say this because I knew I was doing wrong with my money management quite early but I was always putting off the day to take action. If I had acted when the debts were still very negligible an amount, I would have saved myself the embarrassment that is associated with owing. I discovered that there were major renovations to be done in my life if ever I would become better. Now the problem would be "how ready was I to act on correcting the errors?" Tough! You see, things had been left for so long that the road to recovery was not going to be an easy one to travel.

Anyhow, I told my self I needed to do something and fast! I classified it as an emergency and even though I was not sure if I could be consistent, I told myself I only had to keep trying. It doesn't hurt to try right? So the journey began.

In a bid to address each aspect that I had noted, I began to look everywhere seeking out people who had very similar struggles and what practical solutions were that they had adopted that worked for them which I could borrow from to better my lot. I saw it like the time had come. My search was mostly online.

I discovered something very interesting was going on and that was in societies where going cashless was becoming major. People had experience where cash dealings was helping them take control of their finances! Can you register that?!

That was the period that I first heard of and began to voraciously research on the "Cash Envelope System".

This system was all about using cash for regular transactions as opposed to any other means of transacting. The idea is that it is harder for you to give away your hard earned cash mostly when you can physically see the exchange-that is leaving from your hand to another hand.

As I studied this method, I realized that I had actually heard of it some time back being what grandmothers and mothers of yester-years used in efficiently managing their homes. It was not a new concept. Just a concept that had been swept under the carpet for a long time and then someone somewhere happened upon it, dusted it and put it back to good use I must say. 

Anyway, I thought it was a good idea to try it out. The idea was simply taking planning a budget into more focus than you normally do. Take note of your income per period, take note of your expenses and bills too. This is a way to know where your money is going. After noting your regular/fixed bills such as rent (which by the way is a good idea to keep aside monthly to avoid pandemonium when it comes due), your cable TV if you use one, your electricity, water bills and what ever you pay on regularly (monthly, bi-monthly, quarterly, annually or whatever payments you need to make regularly). After setting these amounts aside, you go on to what to me is the main matter in your spending because this is where many of us get careless to the point of un-accountability. These are your variable expenses (because they are usually not fixed) like groceries, household upkeep, gas money (car) if you own a car or transportation in the absence of a car, blow money or fun money depending on your preferred term (personal expenses which is a category kept for your personal needs for the month, this category is quite critical and should not be omitted or ignored because if you do not make available some cash to give yourself treats, pamper yourself a little, you are likely to spend it from other categories) and any other category as you see fit. These categories can be split up and put in envelopes labeled accordingly. You could use regular letter envelopes. Nothing fancy.  

The regular envelopes for letters is okay to use though many people I have come across online design their envelopes to make it look attractive rather than plain white or plain brown. Good even, is that there are also websites who design and make available free to download and print envelopes as well. You can download such free printable, pre-designed cash envelopes to use. 

In recent times people are now going the extra mile to either pass the envelopes through a printer to create neater lettering or customize their envelopes.  There are a lot of shops these days on sites like Etsy where you have a vast variety of customized envelopes that would blow your mind. What to settle for to use is entirely up to you. I would not advice that you start out with spending on customized envelopes because they are clearly costlier than regular envelopes and will still wear with continuous use, so why not your letter envelopes? But hey, some of us are freaks for beauty eh? I remember coming across on Amazon or Ebay, a set of cash envelopes that the seller promises to be anti-tear and water resistant besides being nice looking. Now that sounds interesting.

 

The amounts put in these envelopes could be set up or topped up weekly, bi-weekly or monthly depending on what you prefer. I personally prefer monthly with the aim to reduce the extent of bank charges but decided to do it bi-weekly for security reasons as having a lot of cash lying around is not a good idea. Weekly is also not a bad idea but if you want to live frugally, you would not want to incur more in bank charges.   

 In building your financial muscles, you need to live like you are "poor". Increases in income is not to increase your expenses but to have more stashed up in savings and for investing purposes. Of course it is a good idea to slightly adjust your budgets until you strike a comfortable balance. 

For me, my categories for variable expenses include; grocery, household, personal, church (since I am a christian, I pay tithes, offerings and sow seeds), car (includes gas and car maintenance), health, education, treats/entertainment (because as I mentioned earlier, if you do not make room to entertain yourself, you will spend it from another category), miscellaneous (I did not believe in this category earlier, but then I saw reason with those who had this category. Their argument is that there might be unplanned expenses that could arise which is not among your budget for that month and if you have a miscellaneous, it helps to provide a source to draw on for such unplanned expenses. This way you save yourself from panic attack so to speak). Finally, gift. This category comes on and off for me at the moment because sometimes I tell myself that gifts could fall under miscellaneous to reduce the number of categories. I might finally leave that category in for good as a stand alone category. Some people keep in a category they also call entertainment separate from treats. These are those who see eating out either with spouse, family or friends as part of their lifestyle so if you do that a lot, well it would make sense. Frugal living discourages eating out a lot and should be kept to the barest minimum and for those on a debt free journey, I think eating out should not be an option, but do you!

Now ladies and gentlemen! You must ensure that you pull out your savings before you begin to split your money into categories. In fact, treat savings as a category of its own. 

Well, anyway, after you have created the categories you want to work with, the next thing is to create envelopes for each category as earlier mentioned, then place the amount you have designated to spend for each category for a period say one week, two weeks etc in their respective envelopes.   

After you stuff your cash as you have apportioned for each category into the designated envelopes, your spending must always come from these envelopes and no where else and when any category is spent out, it is spent out! (Yes you read right, spent out! finished! until the next top up time)You do not borrow from anywhere or any category to makeup for the shortfall. This then means that you need to be mindful of how you spend on each category bearing in mind that it should last you till when you have scheduled the next top up.

I will reiterate here that it would not be a good idea to keep all your spending cash at home mostly for security reasons so I would suggest that you make the trip to the bank once a week for that week or every two weeks which would mean keeping cash for every two weeks. I personally prefer the two weeks interval judging from the fact that if you are using an ATM different than your bank's and even your bank's, you would most likely incur withdrawal charges and other charges such as alert notification charges COT, VAT and so on. So this should reduce the amount of charges you would incur. You also need to have a fixed day weekly (say Saturdays or Sundays) to top up your envelopes and also to review the past week's handling. 

Some persons like myself have a template in my computer where I transfer my transactions to at the end of every month. Some people do this weekly. The idea is just to gradually build your financial records. This template could be in excel format or you could download a template designed by other budgeters and template designers for use. Since these are pre-designed, it could help you easily set up what information you need to keep track off. There are tonnes of templates out there so feel free to compare and decide on or even modify them to suit you. Now it doesn't have to be anything complicated. Your major focus is cash flow - inflow and out flow. 

When you start off first like it happened to me, you are bound to have many fails and misses but that is fine, it is part of the training process. Your becoming used to the cash envelope system eventually might take you up to three months of trials so don't beat yourself up if you seem to not be getting it right from the word go. It took me about five months. It will be a good idea to always remember that you do not need to quit because you will eventually get there.People say within three months you should have got the hang of it but it took me longer. Now this happened because after I began to see results, for some reason I decided to ignore this method for a month or two and I saw how I messed my spending up again. After that, I realized that I needed to stay on the cash envelope system. You know what they say, some of us learn by experience which we really don't need to. You make quicker progress by riding on the shoulders of other people's experience. You need to hang in there for as long as it takes you to master your money handling or even for ever! Oh yes for-ever like I already see myself going to do. There are several families who have come to rely so much on this method that they have settled for it as a permanent method.

Note that you do not need to live frugal forever, just the period when you are getting out of debts and building your financial muscles, however, you cannot and should not live at all without a budget.

I want to tell you with confidence that the cash envelope system is fun and also a great way to manage your money. Since I began using this system, I realized that I could easily spread my income to take care of me and my needs for a whole month and still have my savings growing.  

Let us know in the comment section what other way you have been able to succeed with managing your monthly or periodic spending.