Use the ‘Envelope System’ to Curb Your Spending

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From the hidden costs of lifestyle creep to the glaring costs of inflation, it’s all too easy to watch your spending grow out of control. And if your primary means of spending is with a credit card, it’s equally all too easy to rack up serious debt. One of the easiest, yet often overlooked strategies to ensure you stick to your budget: stuffing cash in envelopes. Here’s how cold, hard cash can help you cut back on spending and get on the other side of your debt.

How to start cash stuffing

The cash-stuffing method, “envelope system,” is usually credited to finance guru Dave Ramsey. Here’s the main idea: You have different physical envelopes for different expenses, and you stuff each envelope with a budgeted amount of cash for that month (or pay period).

Of course, this means the first step to cash-stuffing is making a budget. You need to identify which expenses warrant an envelope and how much cash goes into each one. Common categories for cash stuffing include groceries, entertainment, restaurants, gas, rent, etc.

The key here is you can only spend money in a certain category from its designated envelope. Once the envelope is empty, that’s that for the month.

Cash stuffing works because it forces you to be more intentional (deciding how much money gets allocated into your envelopes) and more disciplined (you can’t put more money into the envelope once it runs out).

The bottom line

Using cash to budget isn’t anything new. As we’ve previously covered, and as you’ve probably noticed in your own life, touching money and giving it away hurts inside your brain. So if you need a mental nudge to stick to your budget, the physicality of an empty envelope is much more powerful than checking your online bank account.

Of course, cash isn’t exactly king these days. Carrying around envelopes full of cash is too risky for some, and many establishments have switched to cash-free payment. You don’t have to switch to cash cold-turkey—the point here is to give yourself a concrete system to track and control your spending.

Even if you don’t apply cash stuffing to your entire budget, using it for some expenses will help you see where your money is going (literally). If you struggle with reckless credit card swiping, the envelope system is a good place to start becoming a more conscientious spender. At the end of the day, physically handling cash is a powerful mental hack to curb impulsive spending.

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