#124: How Our Family Uses Cash Envelopes (12 Years Later)

Have you ever asked yourself, "Where does my money go?" Well, you've come to the right place. Over the last twelve years, I've embarked on a personal adventure, exploring the power of cash envelopes for budgeting. Today, I'm thrilled to share my valuable insights with you.

In this episode, we'll dive deep into the world of cash envelopes. We'll explore their functionality and the pivotal role they play in effective budgeting. I'll divulge my own experiences of using cash for various categories, ranging from babysitting to groceries. And guess what? I still rely on cash for specific categories to this day.

Prepare yourself for an enlightening conversation about budgeting habits, controlling your spending, and establishing financial boundaries. It's time for you to regain control over your money. Let's get started!

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Transcript

Speaker 1: 0:00

So, for me, having cash in clothing $50 a month allows me to take the edge off of buying clothes unexpectedly whenever my kids suddenly need something, and when I think about that, I'm thinking particularly about shoes, because they are typically $60 to $70 a pair. Hey, this is Allison, and welcome to the Inspire Budget Podcast, where we talk all things budgeting debt and saving money. Today, I am giving a 12-year update on using cash envelopes. You see, I have been using cash envelopes for the past 12 years, and how I used cash envelopes for our family and managing our money 12 years ago looks different than how I use them today. It's completely changed over time and that's okay. That's one thing in this personal finance journey that I have learned is that it's okay to pivot and change course and tweak things so that way they continue to work for us. So that's what I'm going to be talking about today. We're going to be talking about how I used to manage cash envelopes and how it's changed over time, and how my husband and I still use cash envelopes today in a way that might be a little bit different but still serves us well. Now, if you're wondering what cash envelopes are, you actually can go back and listen to episode number 21 of the Inspire Budget Podcast, where I do a deep dive into cash envelopes, what they are, how they work, where to keep the money and really the details of it. But just to give you a, I guess, simple overview, cash envelopes is when you create a budget, you plan out how much you're going to spend in certain categories and in certain categories you pull cash out of the bank instead of using your debit card or credit card. The idea is that using cash allows you to actually physically see the money going away. It gives you a really nice boundary around how much you're going to spend and it hurts a little bit more to use cash than it does to swipe a debit card or swipe a credit card.

Speaker 1: 2:06

I remember the first time I started with cash envelopes, I thought people were literally pulling out their entire paycheck in cash. If you got a paycheck that was $2,000, people would go to the bank and pull out $2,000 in cash, which is not the way it's supposed to work, but what I thought it was. Instead, you're only pulling out cash for certain categories of your budget. After you pull out that cash, you place your cash into envelopes. If you plan to spend $600 at the grocery store on groceries, then you would pull out from the bank, you would withdraw $600 bills and you would place them in your envelope-labeled groceries. The key is that you take your envelope. You take your cash with you when you want to use it. Then, when the money is gone, it's gone. It essentially forces you to be careful with your spending and stay within your budget.

Speaker 1: 3:03

Now, cash envelopes are not new. They have been used for many, many years. I think now people will call it cash stuffing is what I think it's called, sometimes on TikTok now. Regardless, it's the same thing, recycled with a different name.

Speaker 1: 3:19

There's a reason why more people use they choose to use cash every single day. Research shows that people overspend by $7,400 each year. Can you imagine that $7,400, a study shows. I'll link to that study down in the show notes. What's crazy here is that I like to think about what could that $7,400 have been spent on? Do I want it spent on extra food that I end up throwing away or stuff that I don't really need? Or do I want that $7,400 to go towards a really nice family vacation or two regular family vacations? Or do you want that money to go towards paying off debt so you can become debt-free sooner, or to max out a Roth IRA and have money left over. Clearly, people tend to spend without thinking I know I do.

Speaker 1: 4:14

It's much easier to spend when you're using a debit card or credit card. Handing over cash is harder. People have this emotional connection to physical money. I see it even in my own kids. Our kids do have debit cards and we pay them for their chores every week through their debit card, through this account. But it's more difficult for them to spend $20 in cash to part with that $20 bill than to spend $20 on a debit card. Now, the number one reason why cash envelopes work, and have for so many years, is that they help you stay on track with your budget. Cash envelopes train you to take back control right. It's pretty simple If you have $50 to spend on clothes and you end up at the register with $57 worth of clothing, something has to be put back. Using cash just essentially helps you develop better boundaries with your money.

Speaker 1: 5:11

When our family started using cash envelopes back in the year 2011, we needed that control. We were learning how to manage our money. We were learning more about our spending habits and our patterns and so being able to use cash for different purchases like groceries and restaurants, clothing money and fund money, it really helped us feel like we were in control, because we were still learning about our own habits, and that was incredible for us. In fact, we used cash for a lot of categories back then. So, from the year 2011 to about 2020, we would pull out cash every single month or every paycheck for a couple of things, actually, a lot of things Baby sitting Now we don't usually have a babysitter, our kids are getting older but we did have a babysitter that would come every single week, so my husband and I could go out to dinner or have a date night and we would obviously pay our babysitter and cash.

Speaker 1: 6:13

Groceries and restaurants. I always felt like it was really easy to overspend at the grocery store or on restaurants, and having cash and pulling out cash really helped us kind of rein it in. So we would pull out a month's worth of grocery money at one time and it allowed us to really look. While we were meal planning, we would look and see how much money do we have left in our grocery cash envelope? How many weeks do we have left of buying food? Okay, if we're down to only $200 in our grocery cash envelope and we need to buy food for two weeks. That meant we had to get scrappy with our meal plan. It looked like going into our freezer and checking and making sure we have used up all of our meat or seeing if we have any extras of anything that we could use, going into our pantry and using food that we had in there that maybe we had just been forgetting about, and it allowed us to create a meal plan around how much money we had left. Now, of course, I say $200 two weeks. That was many years ago, but it really helped us stay on track with some of those variable expenses that we would tend to go overboard in any other day. Right, we would go overboard and not realize how much that money was adding up.

Speaker 1: 7:31

We would pull out cash for fun money, and this was family fun money, so if we wanted to take the kids to a trampoline park or do something fun with them, that was our fun money. We would pull out cash every month for clothing, car maintenance, christmas savings and our personal spending money. That's a lot of categories, a lot of categories to have in cash, and it worked for us for a long time and then something happened in 2020. There was the coin shortage. Do you guys remember that? There was the coin shortage? Because COVID hit and I guess they couldn't make coins because everything shut down. And so when you would go to stores, a lot of stores would say we are not accepting cash because we don't have enough coins to provide you with change. And that's what we were faced with.

Speaker 1: 8:23

So we had been doing something that was working for a long time until it no longer worked, and that's whenever we altered a little bit the cash envelopes that we started using. So we completely stopped using cash envelopes for certain categories of our budget, like groceries, restaurants and even saving money for Christmas, and instead we went back to just putting our groceries and restaurants spending on a debit card and tracking it in quicken. We stopped paying for a babysitter because we couldn't go out anymore, and we only kept cash envelopes for a few categories. One thing I'm really thankful for is that by the time this happened, by the time we were basically forced to change the way we used cash envelopes and spent our money. We had the patterns down, we knew our habits, we knew our patterns, we had essentially budgeting and spending money almost to a science. Now, no one's perfect. Yes, we still overspent at the grocery store at times. Of course, we overspent at restaurants, but now that we don't have debt, we have more wiggle room in our spending every month, that it's okay if we go over budget a little bit here and there, whereas in the past it wasn't okay.

Speaker 1: 9:47

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Speaker 1: 11:13

We've already talked about the cash envelopes that we used to use. So what do we use now? We have narrowed down our cash envelopes to four categories only. So, yes, we still use cash envelopes. I'm a big proponent of them, especially when you are first starting out and trying to create some of that discipline surrounding your money. But now we are down to four categories and hey, maybe it'll change, maybe we'll go back to using cash envelopes in the future, maybe we'll cut these out altogether. But here are the four cash envelope categories that we still pull out cash for to this day.

Speaker 1: 11:49

The first is car maintenance. Now, this is not something we have to do, but I like to intentionally set aside money for car maintenance every single month. We only set aside $50 a month in the past, when we had older vehicles that we knew would require more maintenance, we would set aside $150 a month because we didn't want to be caught off guard by some of those just aging vehicle costs. You know what I mean. So now we set aside $50 a month in our car maintenance envelope and what this does is it allows us to just take the edge off of some of those costs that might be coming up. For instance, when my husband goes to get an oil change it's pretty costly He'll grab the cash envelope because he knows he's going in advance and he will pay for that. It allows us to cover some of these costs that come up, sometimes unexpectedly. It allows us to cover them without having a really big impact on our present spending. You see, what I have found is that whenever we're hit with unexpected expenses like new tires or air filters that need to be changing your car or just I don't know other car things, it causes stress in me and our home and in our spending. So if I can have some money kind of set aside for that. I feel less stressed when those things happen.

Speaker 1: 13:12

The second category that we still pull out cash for to this day is clothing. Now, I don't think I would have a clothing envelope or a clothing category if I did not have kids. For me personally, clothing is not something I am tempted to spend money on. I don't overspend on clothing. It's just never been my vice or it hasn't been my vice since I was about in college. But with kids I feel like I'm constantly buying new clothes, new shoes, and shoes in particular are very expensive.

Speaker 1: 13:48

To get good tennis shoes for my boys and my boys. They don't have a ton of pair of shoes, so whenever their shoes wear out unexpectedly or I finally take a look at them and it's just clear they need new shoes, we need to get new shoes now because they don't have 19 pairs of shoes sitting in their closet. So for me, having cash in clothing $50 a month allows me to take the edge off of buying clothes unexpectedly whenever my kids suddenly need something. And when I think about that, I'm thinking particularly about shoes, because they are typically $60 to $70 a pair. I mean, my 11-year-old son wears a men's shoe size now, so we're no longer shopping in the kids department for him, unfortunately. This has really allowed me to just have a little bit more peace of mind and just be more chill whenever my kids come to me and I realize that, hey, they've grown out of their jeans, they're now highwaters or they need new shoes. It allows me to just be like, okay, we have some money in the clothing cash envelope, let's go and spend it. And it's good for them as well, because if we're looking inside that cash envelope and there's only $50 in there and we do go buy something, they can see hey, there's $50 in here, we're not going to spend more than that, and it gives them a good idea of how spending within your means works.

Speaker 1: 15:16

The third category that we still take out cash for is one that we actually didn't have before, and that is housekeeping. One of the things that we started doing back in oh my goodness, maybe it was 2021, was we have two amazing women come and clean our house every other week. It is the type of luxury that I used to dream about and I still pinch myself thinking, oh my gosh, I get to have this chore, these tasks that we do not enjoy, taken off my plate and I love it. I tell you I will cancel other things out of my budget before I cancel housekeeping. So we do pull out cash every month to cover our housekeeping costs. In fact, they're coming in two days and I already cannot wait. The last category that we still pull out money in cash for is actually my personal spending money.

Speaker 1: 16:10

Now you might be thinking well, what about your husband? Doesn't he get spending money? And he does. My husband is actually a 1099 contractor for me, so he actually edits these podcast episodes. So he listens to them in detail makes me sound really good. Thank you, matt. And I pay him every single month from my business money because he's doing a service for me. I would have to pay someone else to do that because I have no desire to edit my podcast episodes, and that money that I pay him every single month goes to a completely separate checking account. That is his personal spending money. So he gets his spending money from this like part-time contractor work he does for my business, whereas I don't give myself spending money from that. I put it in our family budget. So every single month, I put my spending money in my budget and I pull it out in cash. I do that because there are times whenever it's nice for me to just have a little bit of extra cash, so that way I can spend it on really whatever I want, anything that comes to mind. If I want to go out and grab another coffee or go out to lunch with friends, I'll use my cash for my spending money. So those are the four categories that we still pull out cash for every single month Car maintenance, clothing, housekeeping and my spending money.

Speaker 1: 17:31

Now I do want you to know that our financial situation has changed Over time. From when we started using cash envelopes, we were living paycheck to paycheck. It was really hard. We were trying to pay off debt. Even a $50 unexpected expense would cause a lot of stress in our life and on our money. But now that we have paid off debt, now that we don't have those extra payments every single month, we don't have car payments, we don't have student loan payments these days we do have a better buffer in our budget, and that's thanks to paying off debt and increasing our income but not letting our expenses get out of hand along the way, and because of that, we do feel like we have more flexibility, and so we no longer feel like we need to pull out cash for our groceries or for our restaurants, because we know our patterns. We know our habits. We're really great about tracking our spending and reigning ourselves in without needing cash to do so, but for years, that's what we did, and guess what it worked.

Speaker 1: 18:42

I think the real takeaway here is that just because you manage your money a specific way now doesn't mean you can't change or pivot or be flexible over time. Give yourself room for that flexibility, or change and growth as you learn more about yourself and how you manage money. What serves you now might not serve you forever, and that's perfectly okay. Now here's what I want you to do. I want you to go on Instagram and send me a DM I'm at inspired budget over on Instagram or you can send it on TikTok, too I don't check that as much, though and I want you to tell me that you listened to this episode about how cash envelopes have changed, and I want you to tell me one category that you either currently use cash envelopes for, or one category that you might be willing to try using cash envelopes for, and, of course, if you're like oh my gosh, this sounds like it's something I need to learn more about.

Speaker 1: 19:42

Go back and listen to episode number 21, where I go into a deep dive on how cash envelopes work. I hope you enjoyed today's podcast episode and, as always, if you're liking the podcast, please leave a rating and review. These reviews matter more than you might even imagine because it allows my podcast to be seen by new people and reach new listeners. I really appreciate it. Thank you so much. I'll be back next week with another brand new episode. See you then.