I’m staring incredulously at my bank account balance on my mobile banking app thinking, “Is this even possible? Wow, how did this happen?” And then, my inner critic starts thinking of ways to spend the $2900 balance. It’s been three months and I’ve managed to accumulate a regular (and increasing) stash of cash at the end of each month. For three months, I’ve been using the cash envelope system budget – it’s been heaven and it’s been hell. It’s also been a lot of retraining my brain and removing nasty bad habits that have been accrued over my 41 years on this planet. (I turned 41 last week, yay! Er, not yay?)
Today’s post is dedicated to sharing the first 90 days of using the cash envelope system budget. I’ll share the highs, lows, and tricks I used to stay motivated this February, March and April.
But first, what is a cash envelope system anyways?
For those of you that may be wondering what on earth a cash envelope budget system is, it’s a budget where you strictly use cash for all your expenses. Each month, you set aside cash for your bills and all your discretionary spending. Nothing is to be charged to credit cards (or, very little). The only items I permit to go on my credit card are recurring monthly bills like: internet, mobile phone, car insurance, life insurance, etc.
Everything else like entertainment, coffee, groceries, personal care, clothing, books, and so on, come out of a pretty labelled envelope filled with cash. Where does the cash come from? Well, it’s a monthly amount that you budget and stash in handy envelopes labelled with categories of your choosing.
I use a zero based budget for monthly recurring bills and for some discretionary spending categories, I stash the money in a high interest savings account to save for when I need it. Like what? Well, money for car maintenance, skincare, makeup, clothing and the savings jar (for a new computer) all roll over and accrue from month to month. I also allow money for pet expenses to roll over each month. Categories like groceries, entertainment, and restaurants are zero based and any leftover cash is stashed in the savings jar.
Want your own handy cash envelopes? You can find my FREE template here and the how to post for getting started.
The 3 Month Check in
Alright dearies, let’s get down to it. I’m sure you want to know how the first 3 months have worked out using this system. I have to admit, it has worked out swimmingly. It has exceeded my expectations and I’m super happy.
Have I faced challenges? You betcha.
Have I had successes? Yes and hell yes.
Have I wanted to quit and throw in the towel? Yes indeedy. But I didn’t and refuse to.
I’ve faced every spectrum of emotion available. There have been moments of frustration when I realize I have very little left for the end of the month, then there have been moments of jubilation at seeing a cash buffer building in my bank account.
Month One was super easy. Everything was shiny and new and I followed everything to the letter. I came in under budget. Yay! Overall though, I was still catching up and was in the hole.
Month Two was a bit more difficult but I managed to start having cash rollover from month to month. I let cash sit in my bank account until it was needed. No more spend everything you set your eyes on. I had a net of $392 in my bank account at month end.
After 3 months, I’ve finally squashed the paycheck to paycheck beast. We all dread that don’t we? It’s not fun when there’s only $20 left in your bank account at the end of the month and it has to last a week and have your $3.95 monthly bank fee taken out. Yikes! I ended April with a net of $959!!
So, with that little synopsis, let’s get down to the challenges faced and the jubilant successes.
What challenges did I face?
Juggling physical cash. Yes, I had a fun time juggling physical cash. It’s clear that I’ve become so accustomed to using plastic that cash had my mind reeling. Thankfully, it didn’t take long to wrap my brain around cash again. It took patience and setting aside time to load the envelopes with money and fiddle with making change but it ended well. It probably took 20 minutes total. On another note and a surprising one, was that many people got frustrated with me in line at stores for taking too long to get cash out. I mean, really people? After a bit, I simply brushed this off and thought too darn bad. This is helping me and you’ll have to deal.
Envelopes, what envelopes? For the first month, I had to remind myself to bring the envelopes with me. I started out taking cash and putting it in my wallet but that soon became confusing. Keeping track of what went where when I got home was a nightmare. Now, I toss my handy pouch with envelopes inside into my purse. Easy peasy!
Dropping money. This one’s funny. A few times I was in a hurry and would simply toss change into the big pouch that houses all my envelopes. Well, the sad side effect is that sometimes the money wouldn’t stay in there and I dumped money all over the floor a few times. Oops! A trivial challenge to face but one nonetheless.
Old habits crept back in. Isn’t it funny how old habits find their way back into our lives? Credit cards have become such an old friend (nemesis?) in my life that its easy to slip back into the habit simply out of convenience. And that’s all it is. You have to be disciplined and mindful to not fall back into old habits. A trick – remind yourself that for your moment of convenience, you’ll have to go to the bank, deposit the money for whatever you’re buying and then transfer it to your credit card. That’s a lot of wasted time simply for a moment of convenience. Ironic isn’t it?
Budget changes mid month. Setting a budget at the start of the month doesn’t mean it’s set in stone. I mean, you should stick to your budget but I guess what I’m trying to say is that poop happens. You try to budget for everything you can each month, but sometimes, you need a little extra. In April, I realized I needed more gas for the car and a few more dollars for groceries. Both categories are required for survival so it doesn’t bother me too much to increase them if there’s extra cash available.
This system is not meant to deprive you or have you starve. It’s there to help you develop discipline for living within your means.
That being said, it’s not a ticket to load another $50 for Starbucks simply because you ran through your $25 initial budget too quickly. You don’t need Starbucks to survive (you don’t) and I’m quite sure you can make coffee at home. Some of you may feel deprived without Starbucks, but I don’t consider this a “deprived” worthy category. Gas and groceries on the other hand? Those are important. Without gas, you can’t get to work to make money. Without groceries, you starve. Simple. Without Starbucks? You’ll live. Albeit a little bit grumpier.
The inner critic. Yes lovelies, your inner critic will rear it’s ugly head. It will want to rebel, to cause chaos, and mass destruction. It will want to tell you repeatedly that there’s no way in hell you’ll come out of this challenge alive and you might as well go back to your comfort zone. Fight back at all costs! Do not let your inner critic win. Remind yourself why you’re making a change. It could be you crave simplifying your finances, or you’re tired of overspending, or you want to save up for something important. #keepgoing
What were my successes?
Yay! Let’s get on to the good stuff. The successes are like a Tom Cruise jumping on Oprah’s couch moment – gratitude worthy.
A cash buffer. Yay! No more paycheck to paycheck squeaking by. As of April 30th, I have a cash buffer of $2900. This is a HUGE success. It’s hard when you’re living paycheck to paycheck. It’s super stressful and can leave you with feelings of hopelessness. You begin to feel like the cycle will never end. But, with some hard work and discipline, it can end. Living proof right here. It is possible. The next mission is to put all that money to work. What kind of work? Well, alot my $500 for discretionary spending for May. Set aside money for May’s bills and then pay down some debt!
Stick to-it-ness. Super high five here! It may seem small, but you should always find moments to pat yourself on the back. Associating happiness with your money instead of pain, will change your money mindset. it tells your subconcious that money is not to be feared, and you can keep it in your bank account. So, I get kudos for doing weekly budget check ins with YNAB (finance software), monthly check ins to figure out what went right and what didn’t, and the sheer determination I had for staying focused. There’s many a time I could have caved and used my credit card but didn’t. Yes, I did on occasion cave but I got right back on track again.
A better understanding of money and time spent earning it. One of the best personal finance books I’ve read is Your Money or Your Life. The basic premise of the book is understanding the relationship between how much time (your life) you give up to earn money. And when you spend money, how much time it took to earn that money to buy that item. It’s how I think now. It’s how I weigh every purchase decision. If I want a $200 pair of shoes, I understand now that it takes me 20 hours of working part-time at Starbucks to buy those shoes. When you start looking at your money from this perspective, you value your money so much more and make more mindful purchases.
Building good money habits. What do I mean? Well, for starters, finally understanding that there is a limit to the money I can spend and fully comprehending that. I’ve always known there’s a limit and how much I earn, but the challenge was I always used the neverending pool of credit to satisfy my every whim and mood. No more! Developing an understanding for limits and the discipline to stick to it no matter what are key to financial success.
Better meal planning and less waste. According to the David Suzuki Foundation, close to half of all food produced worldwide is wasted. And, the average US household throws away about 215 KG of food per year, or around $600 dollars worth. Yikes! Having a budget for groceries and a meal plan is key.
Money in the savings jar! Yes lovelies, I now have $67 in the savings jar! It’s a combination of tips and envelope leftovers. I’m that much closer to a new computer!
So you’ve made it through three months, Yay! Maybe you’re like me, and things start to slide after several months of doing something, so how do you keep moving forward?
How to keep moving forward with the cash envelope system
- Use your succeses and failures as a jumping off point. The successes remind us of what we can accomplish and keep us motivated. And the failures, well, those are learning points – the “let’s not do that again” moments.
- Continue to focus on the abundance you have. We all have incredible amounts of abundance in our lives every single day. We simply choose to ignore it and instead long for more. If you’re mindful of what you already have, you’ll realize you have more than enough to survive and thrive. It stops unnecessary spending dead in its tracks.
- Gratitude. What could be simpler? Am I right? Gratitude, abundance, and mindfulness all lead to a simpler life. A cash diet and budget are not there to deprive you. They’re tools to help you manage your time and money. I mean, why throw away your money needlessly? Because you know what? You’re throwing precious time and life energy away at the same time. Each time you toss something purchased in haste, you toss away precious life energy. Can you get that time back? Nope. That’s valuable time that could have been spent better.
- Don’t dwell on the past. Mistakes are mistakes. What’s done is done. You cannot reverse time or turn back the clock. Instead, practice gratitude and be grateful you’ve developed a better understanding of your money. Use that newfound knowledge to boost your progress and keep yourself moving forward. We don’t do backwards here. Nuh uh. No backwards please.
- It’s not hard or complicated. Why oh why do we love to make mountains out of molehills? And why do we whine incessantly over it (whether internaly or externally)? In life, it’s our job to do the work. Show up. Do the work and achieve success. And my lovelies, success is what you make it. Don’t take someone else’s success and believe you have to achieve that level. A win for you could look like having an extra $5 at the end of the month.
- The Savings Jar. Wait for it….ready? I have a grand total of $67 in the savings jar. Woot! It’s a combination of tips from work and leftover cash at month end. Not to shabby.