Bringing this back 
When I quit my job and began staying at home with my children, I needed to get a lock down on our expenses. Our income dropped by 50%–so we pretty much needed to get it together!
Couponing helped but I always felt the that I never actually “knew” how much I was spending every month. Then I discovered this system that got our spending together called the “Envelope System” This helps us see the actual cash and keeps us from over spending. Basically it works like this:
- Total up your monthly income
- Write a list of your monthly expenses and then write each expense on an envelope.
- Every time you are paid, split the money amongst the envelopes, make sure all expenses are covered
- Throughout the month spend like you should to cover the expenses
- If you find that you have run out of money in one envelope–you must take away from a different envelope-to make up the difference. OR you can simply do without.
For us..any left over money goes into our savings.
To Begin the Envelope system is pretty simple.
You must know your budget for the month. I usually sit down a couple days before the 1st and calculate everything that we are expecting.
Our family only has 5 different envelopes all labeled:
- –Grocery
- –Stockpile
- – Clothing
- – Entertainment (this has little separate envelopes inside a larger one labeled: Spending Money, Date Night and Eating out)
- –Gas
I stick to a Grocery budget and never overspend because of this. Also, my Stockpile money goes to any great deals that I may want to stock up on (ie. Juice, Pasta) and leaves me feeling confident about saving money. This also challenges me to find ways to pay less out of pocket so that my stockpile money goes further.
Using cash makes the world of difference. You think twice about using cash vs using a credit card or your debit card. Cash just seems more valuable–so it tends to move slower.
Any other bills that we have come directly out of the bank via online bill pay. This is extremely hopeful because we do not need to sit and think about writing checks. We set the bills for the month–they are never late and we don’t have to worry about not having the funds to pay for them because we may have “overspent” on dinner last night. 
My list of envelopes above are expenses that I know that I can control. Things such as Electric and water–fluctuate and I can only do so much to control those expenses–so I leave that to the bill pay. You will be surprised at how much you save by using this method–I was shocked to realize how much we used to spend as a two-income family!
My Name is Josie and I live in sunny Southern California and I am a stay at home mom to three beautiful boys. We all know that living in California is a task of it's own and saving in California IS possible! I started this blog mainly to share all the awesome deals out there and show others how to save in any area of life. Even though you may make the commitment to be frugal and pinch your pennies doesn’t mean you have to sacrifice!
If you don’t mind me asking, how much do you budget for groceries and stockpiling per month? I’m working on my family budget but I’m not sure what is a reasonable amount.
We use this system also. We have a few more catagories such as dogs, cat, gifts, and a few others that work well for us. Its been great for keeping things on track. And the extra $$ left in the envelopes gets used for a special treat for us or extra towards the mortgage!
I started using cash only for grocery/drug store stops shortly after I started couponing and it works like a charm. I agree that physical cash seems somewhat more valuable, so I don’t use it nearly as quickly as I might if using my debit card. I still use my debit card for gas, but I have a monthly budget and since I don’t often drive more than to work and errands, it’s pretty easy to stick to it.
Josie- thanks so much for posting! Where did you get your envelopes? I love that they’re see-through with the tabs!
We started an envelope system with the beginning of this year to achieve our resolution of being credit-card-debt-free by the end of the year, and after only a little over a month, I’m amazed at how much extra money there is to pay off our credit cards when you actually see where your money goes (I’m talking hundreds of extra dollars a month)! Last year, in our first year of marriage we felt like we were living paycheck to paycheck while accumulating tons of credit card debt. We had put together a budget, which showed that we had plenty of money to pay bills and have extra money to spend…so we didn’t understand why we still had to use credit cards. Now that we’re on the envelope system, not only do we have enough money to meet all of our financial obligations AND have money for date night and fun stuff, but we actually have money to pay down the debt! The envelope system forces you to be cautious about what you’re spending your money on and makes you stick to your budget. We cut up all our credit cards and only use the debit card for gas. I love it!
I have a similar system using a spreadsheet and never use cash because if we have cash I spend it.
heres a idea for money envelope DIY
http://kelleighratzlaff.com/featured/free-envelope-template-and-a-tutorial/
Love this post! Thank you!
This is great! It really helps to know that other people are in the same boat when it comes to being on a strict budget. I’m jealous of the date night envelope! My husband and I have been out of the house less than 20 times together since our first son was born 11 years ago. And three of those times out was to go to the hospital to have our three other sons!! lol.
I’d love to see your stockpile, btw.
Good idea!! Everyone needs to find a system that works for them. My husband and I each give ourselves an allowance every week. We can spend it on whatever we want or save. I don’t care what he does with his and vice versa. I choose starbucks =) and he buys parts for his car. I am a spreadsheet nutball so I keep track of my spending for couponing. I input all transactions, amount saved and how much under my set budget I am. How you handle your finances is based on your behavior. You have to figure out a system that works for you and stick to it =)
There is also a great budgeting envelope system on crown.org called mvelopes. This is for people like me who do not like to carry cash. All your transactions go to the envelopes and you fund the envelopes with your bugeted amount. When you put the transaction in the envelope it tells you how much you have left for the month down to the penny. This keeps all my transactions and lets me do everything electronically with my debit card. I like the convienance of being able to do it from my phone,computer or iPad! It has saved our family hundreds!
love the envelopes. where did you get them?
I actually got them as a free sample about a year ago.
we do that! =)
it hurts to pay with cash. i’m glad i coupon so i feel good about spending cash. plus the kids see that money is real and it hurts to blow it.
thanks for sharing this.
@Elizarae – I found these exact folders at staples today. They are actually Avery brand Pocket Tabs 5 1/8″x8 5/16 and come in a five pack.I found them located next to all of the dividers. If can be fixed to the dividers, or if you choose, you can remove the sicky backing(which I did). This will make them completely clear. Hope this helps!
@Sonia – oh, and they were $5.39 at my store.