Creating and sticking to a household budget is no small feat, especially if you are new to budgeting. Chronic overspending causes carrying credit card debt, so it’s crucial to master budgeting and learn to live below your means.
The cash envelope is a budgeting system that only uses cash to pay for specific cost categories. Each cash envelope holds the money you allocate to that category for the month. This significantly reduces impulse buying and overspending. Using cash to pay is an excellent way to track and control spending.
First, determine the categories you tend to overspend on. Tracking your spending is the best way to figure out where your money is going. Track yourself every day for two or three months to get a clear picture of your spending habits.
Next, head to the bank to withdraw the money to place in your cash envelopes. Withdraw the funds in congruence with when you get paid. Divide the total amount of money you will need by your number of paychecks for the month to determine the cash to withdraw.