How to Simply Improve Your Saving (The Envelope System)

Have you ever asked yourself at the end of the month where in the world did all my money go?

My bank account is showing me all zeros.

My wallet is woeful!

My purse is pitiful!

I know I started the month with some money, but it’s like it just up and vanished into thin air.

Let’s learn how to put some cash back in your hands and keep you from overspending. This is a really simple concept and it’s worked for tens-of-thousands of people.

  1. At the beginning of each month, you go to the bank.
  2. You take out only enough cash to cover what you plan to spend in certain areas of your life, like eating out, or groceries, or clothing.
  3. You divide the cash into envelopes based on your spending categories
  4. You only spend what’s in the envelope for the month

All you’re doing is preventing yourself from overspending in areas of your life that you typically might overspend.

Why does paying with cash work?

Studies show when you spend cash you will spend 12–18% less than when using a credit card. Spending cash hurts more because it’s real money. You’ll naturally spend less when you pay for things with cash.

An envelope system example

For example, let’s say you’ve decided to spend $250 a month on eating out. You put $250 cash in an envelope, and that’s the money you use for eating out for the month. Simple, right?

But I’ll have to go to the bank once a month.

But how am I going to remember to bring cash?
You put one of these on your door:

The Envelope System Cash Reminder
This is the post-it-note stuck on the door leading to my garage.

But isn’t this going to ruin all my fun?
Quite honestly it’s more fun being out of debt and having more savings than using a credit card.

I promise that after a few months you will be an expert managing your cash this way. You’ll be making better and more informed choices to make sure you have enough cash so you can go out with your friends for happy hour at the end of the month at your favorite restaurant. At the same time, you won’t be overspending.

How I use the envelope system

I’ve used this system for years and years for eating out and buying groceries – areas in my own life where it’s easy to overspend.

The envelope system has been critical to me- critical – for saving money and being debt free.

When I leave the house for Costco I grab some cash out of the grocery envelope. If my wife Katie goes to Target for a new shirt, or Kohl’s for a new shirt, or to Macy’s for a new shirt, or to the Gap for a new shirt, she grabs some cash out of her personal spending envelope.

It helps us not to overspend – and it will help you too.

Please – if you’re finally ready to take control of your spending, try it out for just 90 days and see what happens. You’ll be absolutely amazed at the results.  And if you’re trying to get out of debt the envelope system and a written spending plan are the 1-2 punch you need to knock out debt forever.

Question: How do you feel about using cash for your spending? If you’ve tried it what were the results? Share your answer in the comments below.

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