How I Saved 60% of my Monthly Income in 1 Month Using Cash Envelopes

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Yes, I did save that much using this simple budgeting hack – cash envelopes.

Not long ago, I wrote about how not getting a credit card gave me a debt-free life, which I was very proud of. Although I make it a habit to save, I only save what was left of each paycheck. With my past outrageous spending habits, one could only imagine how much savings that would be.

I was the complete opposite of my frugal husband who makes do of almost everything until it wears out. I was what you call a spendthrift and I take joy in eating out (because I’m no use in the kitchen) instead of buying material things.

One day, I just realized I should respect money the way my husband does. I may be earning regularly, but my husband has more net worth than me.

And why is that?

Because he’s good at keeping money and avoiding wasteful spending.

I just decided I should, too.

You would be surprised to know where I got the idea of using cash envelopes in controlling my spending habits: Instagram!

I simply typed the hashtag #frugal in the search box and there in the search results were thousands of photos of cash envelopes inspired by financial guru Dave Ramsey.

What is the Cash Envelope System?

cash envelopes

The cash envelope system is a way of budgeting your income by allocating a certain amount of cash in each category/envelope. This forces you to only use a certain amount of money for a certain category until your next monthly income/salary. You do the budgeting every month or fortnightly, depending on the frequency you receive your paycheck.

And since it’s called a cash envelope system, you need cold hard cash for it to work!

For example, if you set a budget of ₱10,000 for your monthly grocery, the system ensures that you only have access to ₱10,000 – no more, no less- for that category of expenses.

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Hence, you only spend what you’ve put in each envelope or category. When your money is gone, it’s gone!

Starting a budget

If you are like the majority who gets a paycheck every two weeks, you need to assess the needs you have to cover during the two weeks following your paycheck. List all of the expenses you need to cover. You decide how much money goes to your groceries, rent, entertainment, food, phone bill, etc. You need to give every peso or dollar a purpose, including your savings!

Creating a ‘Miscellaneous’ category gives you room for indulgences. A too strict budget can be very frustrating.

Paying utility bills online or through EFT can save you more time and money based on my experience. So, if your salary goes straight to your bank/debit card, it might be more convenient for you to pay bills online. As for everything else, physical money will do the trick of psychologically curbing your spending.

Making the Cash Envelopes

I found budgeting is fun and addictive. Not only that, but it also gets your creative juices flowing. Creating your cash envelopes at home makes the whole process better.

You can actually DIY. Or if you’re busy and want something easy, you can purchase and instantly download printable cash envelopes online. There are a lot of beautiful cash envelopes available on Etsy. You can also find some packs with freebies on this shop.

Once you’ve cut and assembled your envelopes, it’s time to label each envelope with the category you want to spend the money on.

Here are some example categories for your labels:

  • Groceries
  • Restaurants
  • Food
  • Entertainment
  • Shopping
  • Gas
  • Rent
  • School
  • Miscellaneous
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An expense tracker also helps you reassess your spending after you’ve exhausted your budget and create a game plan for your next budget. You just need to list down all of the things you spent your money on in each category for that month or two weeks.

Withdraw your paycheck ASAP

Once you’ve built your budget and made the envelopes for each category, it’s time to go to your bank/ATM and withdraw your paycheck.

Why use cash?

It’s because using cash forces you stick to your budget better. Cash-only users can’t spend more than they’ve allotted and are more likely to feel an emotional connection to their money. Because cash is tangible, it’s difficult to see the money leaving from your hand if you spend it. You are also more aware of how much you’re spending when you use cash

Be careful to only withdraw the total amount you’ve calculated for your budget. You don’t want to accidentally overspend because you over withdrew or put too much money in the envelope.

Remember to only use the amount in the envelope for its assigned category. Do not borrow from the other envelopes once the money from the other envelopes ran out.

For example, if the money in the Restaurant envelope is gone, do not borrow money from the Miscellaneous envelope to eat in your favorite restaurant. Once the assigned money is gone, it’s gone. You just have to cook at home instead of eating out and wait for the next paycheck to eat out.

Remember to keep the budget last for the entire month or two weeks!

If there’s still money left in your envelope from the previous budgeting period, congratulations! You just under budget. You can either roll over the money to your next budget so you can have a bigger budget for a category or you can add it to your savings!

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If you are new to budgeting or an impulsive spender like I used to, then the cash envelope system is perfect for you to effectively save money, curb your spending, and pay off your debts quickly.

With the system, you are able to track where your money goes. You will no longer be scratching your head, thinking where your hard-earned money went when it runs out.

Sure, I was able to save 60% of my income in just 1 month after expenses, but I made a lot of sacrifices just to save that amount. I have to admit I was not being honest with myself when I created that specific budget. We only went out to the mall once and only ate twice at a restaurant during that month. It wasn’t typical of us and the shift I made to become frugal wasn’t gradual.

However, I was happy to discover that I could save as much as that amount if I cut wasteful spending and only focus on the categories that I made for my budget. Since we haven’t gone out much for that month, I had a lot of leftovers from my cash envelope which I rolled over to my personal savings account (my dear husband has a separate savings account).

If you think the cash envelope system could also work for you, try it yourself. You will be more in control and disciplined with your finances. You will be surprised at how much you will be able to save at the end of the month. Sixty-percent might be unrealistic for some or small for the high-earners, but it doesn’t really matter how much you save as long as you start doing it.

You can purchase beautiful Printable Cash Envelopes on this Etsy shop. It comes with a free expense tracker, labels, and grocery shopping list – everything to get you started with your frugal living or debt-free journey.

Good luck!

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Nikkah of Get Financed Lab is a caffeine-fueled work-at-home ninja, hustling her way to financial independence before she turns 40. Like most millennial, she dabs on blogging, starting side-hustles, freelancing, and slaying the mommy life. This blog is her personal finance journey peppered with her words of wisdom, which should always be taken with a grain of salt.