I’ve written a few times over the years about Dave Ramsey’s envelope system he suggests for budgeting. There is nothing more painful than handing over a wad of 20’s for your groceries. A frappuccino doesn’t seem so important when you have to hand over a $5 bill instead of swiping a a bar code on an app. It’s pretty amazing how you suddenly want to stay home so you don’t have to use that gas you emptied your envelope for. Cold hard cash will help you stick to a budget, no doubt.
I find there is nothing more burdensome than spending money you don’t have and nothing more freeing than sticking to your budget.
However, we are terrible with cash. We found it difficult to manage between two people. We often forgot our envelopes when we went somewhere and didn’t know how much to spend. Dealing with change at the end of the week was a pain. When we misplaced $100 cash, that was our breaking point.
We started managing the entire budget through a spreadsheet and monitoring spending in mint.com (post). I love mint.com, but really, it’s so easy to go right over your budget.
So, for months and months we’d figure out our budget and then watch those red lines in mint.com start showing up and then do absolutely nothing about it. I always said mint.com was really good at helping me see our budget go in the red. Red lines everywhere!
However, I think we’ve found a secret that keeps us on budget using the envelope system without cash.
I’ve mentioned since the beginning of the year that we’ve gotten back on track financially. We’ve managed to stick to our budget using the envelope system and not get a single dollar out of the ATM. Want to hear our secret?
Play money.
Seriously.
I’ve been shocked with how well this works. We’ve stayed on budget, it requires zero cash and we haven’t used our credit cards.
So here’s how it works.
1 – I create a zero-based budget using a spreadsheet. I do it a month at a time and then refine every two weeks since that’s how often we both get paid. I know where every dollar is supposed to go before we even get paid (thank you, Dave Ramsey).
2 – Then, instead of getting cash, we printed this free educational printable money and cut it out so it looked like real cash. The kids thought this was the best thing ever. We use envelopes for our variable expenses like groceries, clothing, restaurants and blow money.
3 – We use our debit card for those purchases and every day I check our account for purchases and take the money out of the envelope as we spend it.
4 – For bills that are automated, I just check off on my spreadsheet that they’ve been paid as expected.
How does this help?
Even though it’s play money and seems like a lot of double work, there is something about seeing and feeling even the fake money that registers in my brain how much I can spend. It’s a built-in accountability system that the online tool just doesn’t provide. Scott doesn’t check anything online at all so having the box of envelopes in person in front of both of us keeps it at the forefront of both our minds.
And—if a bill gets lost, it doesn’t matter!
Also, we’ve been able to get our kids involved in budgeting. We don’t share the entire budget with them, but we get them to help fill each envelope every two weeks. They even know to ask if we have money in our budget to do something.
For example, we started a special entertainment bucket so we could have family events each month and it’s actually made it more special limiting it to one event per month. It’s taken the guilt from us for spending the money, we all have a good time trying to stay on budget and for some reason it’s much easier for the kids to process that there’s no money left in the envelope than us saying, “No, you can’t have that.”
We’ve only been doing this for about 2 months, but I’ve been so excited how well it’s working.
Perhaps if the envelope system hasn’t worked for you in the past, some fun play money just might be the trick!
Update:
I’ve uploaded our personalized budget template (based off Dave Ramsey’s) for anyone that would like to see it .
I print the second tab every two weeks and keep it on my desk. I use that in conjunction with Mint and the envelopes to stay on track.
https://drive.google.com/file/d/0B6KcRo_9sTric0VyNGpxMWRtUG8/edit?usp=sharing
The ones that are marked in yellow are the ones we have envelopes for and the ones in blue are the ones that get transferred out to a savings account for later use.
This post is linked to Works for Me Wednesday.
What a great idea!
As a fellow paper-person, I think you’ll enjoy this!
That is a great idea. I have really been trying to get us moving in the direction of using a budget, but my husband has been VERY resistant to having to track everything. “We already have Mint, why do the extra work?” Because we’re constantly overdrawing our account, that’s why! I don’t know that I will print out play money anytime soon, but if I’m checking the debit card spending (which we use all the time for the same reason you do), maybe I could just keep running totals in a spreadsheet or something to let us know if we’re getting close or going over. Right now I’m just tracking grocery/household type spending, and it is SO CRAZY how much we spend. Definitely lots of room for improvement.
Sarah @ Beauty School Dropout recently posted…The Lighter Side of the Lactation Room
One of the main reasons we can’t do cash is because Scott HATED keeping track of it. Once he saw how bad the budget was though it was a wake-up call and I found this to be the perfect compromise. You should give it a whirl for a month and see how it goes.
Whenever I try to get started with budgeting, I tend to get overwhelmed with all the categories. I know every family is different, but how detailed do you get with your categories? And I assume you don’t do the play money thing with repeating, fixed expenses like mortgage, car payment, etc?
Sarah recently posted…The Lighter Side of the Lactation Room
Here is the actual spreadsheet we use. I print the second tab every two weeks and keep it on my desk. I use that in conjunction with mint and the envelopes to stay on track.
https://drive.google.com/file/d/0B6KcRo_9sTric0VyNGpxMWRtUG8/edit?usp=sharing
The ones that are marked in yellow are the ones we have envelopes for and the ones in blue are the ones that get transferred out to a savings account for later use.
Creative idea for sure. We use YNAB for budgeting and it’s been great since we mostly use debit instead of cash. Check it out.
Youneedabudget.com
I’ve heard good things about YNAB. Thanks for the recommendation!
I totally considered doing that (fake $ in the envelopes) a couple years ago!!! Pretty sure my husband thought it was crazy and then I decided not to try. Thankfully, the all in one spreadsheet I came up with has finally seemed to work for our family and we finally feel like we are getting things under control. It feels so good and has changed my whole perspective on our financial situation. I like how you include your kids with the entertainment envelope especially. So happy you guys found a method that works for you!! 🙂
The play money does feel silly so I can’t blame him but like you said, whatever method works!
Very interesting. I love the IDEA of cash, but the reality is we do it for a couple months and then stop. It becomes overwhelming and the reality is if you’re not doing it you should find a different solution. I NEVER would have thought of play money – but it just might work. Wouldn’t hurt to give it a try. Thanks for sharing your excel sheet. I already have one, but will incorporate some of your ideas into mine. Great post.
Awesome, let me know if it works for you! I just did my daily check of mint and my play money 🙂
Amy recently posted…How to Stick to the Envelope System {Without Cash}
I think the key here is “daily”. If I don’t stay on top of it then I get very overwhelmed. The challenge with the play money is you still have to stick to the amount left when you’re wandering the Costco isles, even when you know you’re still going to swipe the Debit card and technically could go over. All about discipline. How do you keep Scott involved in knowing how much is left in each envelope?
He usually just asks me. Like last night we were at Home Depot and he was wanting a tool. He asked how much blow money he had. If he needs something for the house, he asks how much is left in maintenance. I do all the food shopping and that’s where we usually go over so it’s really up to me to manage that.
If you have smart phones (or even if you dont, but especially if you do) YNAB is awesome! It makes it so everyone’s “envelopes” are synced. I just keep a cash”account and transfer money from my checking to cash if I do want to use cash, otherwise, I can look up quick what I have in any category and see if I have money before putting it on my debit card. Great program for budgeting too even without a smart phone. Best I’ve seen around
Very interesting. We use our credit card for all of our purchases since we get 5% cash back and we pay it off every. single. month. Considering you can’t even get 1% interest in a savings account right now, this is a great way to save even more of your hard-earned $ (if you pay it off like we do). Now that my husband has lost his job though, we need to tighten our budget so I think this system can really help us shrink it down to fit our current income. Thanks for posting!
We did the 100% credit card thing too for a long time to get cash back. We still use it for big purchases and pay it all off the same month but it was making me crazy keeping up with it all on a regular basis.
Great idea! I have not even attempted to try the cash envelope thing because I’m terrible about handling cash properly. (we won’t even get into how many times I’ve lost money because I was careless.)
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