The envelope system to save more money at the end of the month
It can be tough to save money at the end of the month when you’re already tight on cash.
Most people find it difficult to save money, especially if they don’t have a lot of extra cash at the end of the month.
The envelope system is an old-school technique that still works today. You simply put your set budget for each category (groceries, entertainment, etc.) into an envelope and when the money’s gone, it’s gone. This system can help you stay within your budget and avoid overspending.
Through this post, I will describe a method that works well: the checkout envelope method. This method is not new and has been around for a very long time.
Even though the latter has been around for a long time, many people still don’t know how it works or what its benefits are.
- How are invoices paid on the envelope system?
- Can you still do the envelope system if you do everything online?
- What happens when the money runs out?
- How do you do when you have a spouse and he also needs money?
These are just some of the questions you ask yourself. So it’s time to write an article about the ultimate guide to the checkout wrap system.
The Envelope System To Save More Money at The End of The Month
This post contains affiliate links, and I earn a commission if you make a purchase through one of the links listed here, at no cost to you.
How does it work?
The great thing about the Envelope System is that you can literally get started today. You don’t need to save money to get started or go shopping for fancy envelopes. I actually used card stock to make my envelopes and everything was color-coded.
Here is how it works
Suppose you are paid twice a month for a total net income of €1,000. You budget €500/month for your shopping. When you get your first paycheck of the month, you go to the bank and withdraw $250, put that money in an envelope, and label it as “groceries.”
The only thing you can spend linking to this envelope is linking to this grocery envelope. This is where you have to have discipline. If you go to the store after work and realize you don’t have your envelope, you need to take that envelope into consideration.
If you spend $251 on a single grocery trip, you have to hand something back, because you don’t have a lot of cash in your envelope.
There’s no cheating using your debit card or telling yourself you’ll do better next month. That’s it. This is your chance to take control of your money. Righteousness is the key to any money-saving method.
You repeat this procedure for your second paycheck of the month. This will total $500/month for your grocery budget.
Repeat this process for all major categories in your budget, such as gas, restaurants, clothing, beauty, entertaining, etc.
What happens if your spouse goes grocery shopping from time to time too?
This was a problem that you will surely encounter. Your husband is heading to the grocery store after work to shop for dinner and you have the cash envelope. If you have this problem too, you need to figure out how much money to give your husband.
Maybe you go to the grocery store most of the time, but your husband might go too. If so, out of the €250/month you have in cash from your first salary, withdraw €50 and make envelopes for your husband. You will have $200/month for groceries in your cash envelope and your husband will have $50/month.
It might take a few months before everything goes well, but in the end, it works for many people so why not test this process?
How to Create the Cash Envelope System: Step-by-Step Instructions
In the beginning, you have to decide on some things. Do you want to fill your envelopes with money every week or every payday? Do you have your list of expenses?
For this example, I’m going to give you step-by-step instructions on how you can use the checkout envelope method.
You must list all cash inflows and all cash outflows.
You may also like:
- How to use the cash envelopes method without cash?
- How to Stick to a Budget: 18 Budgeting Tips for Beginners
What about invoices?
Most likely, you have things that are due on the same day every month for the same amount. These are things like the whole family’s phone line, your mortgage, and your car payment. These bills are called fixed expenses.
You must leave money in this current account for bills, as they are all paid automatically. You will need to withdraw money for everything else.
This is the best way to help you budget smoothly. By doing this, you won’t be going back to the bank to deposit cash to pay for every fixed expense.
You will then create a spreadsheet according to the expense items and create envelopes linked to the item principle and allocate a sum to it according to your expenses and income.
When you list expenses for each paycheck, you should ALWAYS compare them to your spreadsheet. I want to make sure that any irregular diets, such as dinner with a friend, are included in my salary expense list.
For example, if you know that you are going to dine out with friends or with your husband, you should take note of this and devote a little more of your budget to the “restaurant” category.
Once my expenses are calculated, I go to the bank and withdraw the amount of cash needed to cover the expenses of that salary. I then organize the money into our different category envelopes.
Envelopes to use
When I first started using the checkout envelope system, I used plain white envelopes. I then wrote the labels for each category on them.
Over time I found it made it easier if the envelopes were color-coded. It is much easier and faster to extract the envelope from my bag if I knew the color (category) I wanted to use.
For example, if I was going to the grocery store, I didn’t have to pull out all the envelopes to find the grocery budget. I knew it was green and it saved time. It also saved me from looking like a budgeting geek when I checked out in the checkout line.
Don’t complicate things and use what works for you.
How to make sure you get this budget template right
I’m not going to lie. No one in the world can make you stick to a budget. No matter what budget you use, sticking to it is always a problem.
You are solely responsible for your budget. The success of this budget depends on your goals.
I can give you step-by-step instructions, tips, and all the advice in the world, but ultimately it’s up to you.
It is very important to realize that budgeting takes work. Creating your budget is the first step, but it’s not the hardest part of budgeting.
You must really want it. It’s almost as if you have to reach a point in your life where you are fed up with your financial situation.
I literally woke up one morning and said to myself, “I hate my finances! I can’t live like this anymore”. And, I also changed my habits: I get up earlier in order to do as many tasks as possible during the day.
It eventually gets easier and becomes a part of your life, but the beginning of the change is the hardest.
Here are a few tips where you will realize very quickly what your weaknesses are. Spot them and attack them immediately.
If you find it hard to stick to an all-cash budget because you keep your debit card in your purse, leave it at home.
If you’re struggling because you end up using money from other envelopes to offset overspending in another category, leave the envelopes you don’t need at home.
What if I spend all the money?
As I mentioned above, the best thing to practice is discipline. I can’t tell you what to spend on each category because everyone’s situation is different.
What I can tell you is that the best thing you can do for your finances is to realize that you started this journey for a reason.
Keep this reason in your mind and remember that you are doing it because you NEED to change your drinking habits.
Always keep a minimum for each expense category and in each envelope. This will leave you some leeway to compensate for certain vagaries of life, such as an unexpected event or a forgotten birthday present.
Use the money you need to cover those unexpected envelope expenses. In the beginning, it will save you more than once.
You will always have a limited amount of money, but if you have self-control, you can really earn money and work for yourself.
I do everything online. Can I still use this system?
The answer to this question is yes. The main advantage of the cash envelope system is to control your expense systems with limited physical cash.
You can still use this system but in a different way. Instead of withdrawing money from your bank account, save the money and list your expenses the same way.
Keep track of your expenses on the envelope and make sure you don’t spend more than you’ve allocated.
List your budget amount by category at the top of the envelope and track your spending as you spend. Look at it as a checkbook.
Use your debit card until you hit your budget for that category and that’s about it.
Keep in mind that without having physical cash as a quick visual means for how much you can spend, you need to be a bit more disciplined using the cashless envelope method.
It’s still a great way to budget and track your expenses, you just need to have a little more willpower.
This method is ideal if you are new to savings. This is also the best method in my opinion if you have a low income.
It lets you see how much you have left to spend quickly, and it does a great job of keeping you accountable.
When I’ve used this system, I don’t even know how many times I’ve gone to the grocery store and wanted to buy sodas (it’s totally my weakness and it’s horrible).
I glanced at my envelope and thought, “I can buy soda with the last of my $25 in the envelope, or use it to buy something bigger like milk. , eggs or this week’s meal plans.
The envelope system is not only a great way to save more money, but it will also help you avoid the temptation of overspending. You can use this technique for any budget and goal – whether you’re saving up for an emergency fund or looking to reduce your monthly grocery bill by $100. To get started with the envelope method, start with what you currently spend on your expenses every month (or week).
Try this method and share with us your results.