"Automate everything!"
That's the typical advice from financial planners about budgeting, and I love it. Program your direct deposit to split off a bit into retirement and savings. Sign up for automatic billing so you don't miss utilities. All good. But if you're like most people, the bulk of your money in and out can't be automated.
The cash envelope method is one way to get around this. I kind of did this when I was in my 20s... every week, I'd take out my budgeted cash for spending on groceries, lunches, coffees, and nights out with my friends. I was young and single and didn't have many complicated expenses so this worked for me. It was also a million years ago, because I am old.
Years later two things changed: First, I had a family. I couldn't feed four of us on a few dollars a day, taking cash out for the week felt like a heavy pile of cash. It was never traceable, it was bulky to carry around, and the system depended on physically going to an ATM every week... I was done.
So we went with a debit card system, but with very careful limits. Here's how we did it:
1) One bank account for big stuff. Paychecks, monthly bills... stuff we knew was happening.
2) Another bank account for spending. It was tied to a debit card and had a phone app where we could quickly check the balance. Overdraft was turned OFF so if we tried to use the debit card and the money wasn't there, the card declined.
3) We figured up our weekly food budgets based on the published USDA food prices - see my calculator here.
4) Went to the bank website and set the right amount to transfer into the debit card account every other day.
We were forced to spend less. We bought less, ate less, wasted less, and scrounged around the house if the debit account was empty. Having the deposits auto-transfer every other day helped us manage our shopping a lot better by breaking it into small chunks, so at the end of the month we always had extra left over in the big checking account that we could use to pay down debt.
It's been a few years since we had to be that harsh with ourselves. Once we were in the habit of spending that certain amount every week, we switched to a chase credit card for spending because it has the best app for monitoring where you're at on any given day.
But when we really had to budget, those auto-transfers saved us. It's just too hard to budget a month at a time, so my advice to everybody is to get SMALLER. Budget a week at a time, or even every day. If you can't go a week between grocery store trips, don't pile your budget into a whole week. Break it out. And banks are great at auto-transfers between accounts now! It's easy to set up and I haven't found a bank that doesn't do it.
If you REALLY need to restrict your spending, this is the way that worked for me, and I hope it helps you too.
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