How to Budget When You've Failed in the Past
If you struggle to stick to your budget; you are not alone!
Budgeting is one of those things, like dieting, that we all want to do well but we just suck at it.
But why?
Budgeting is such a simple concept, right?
You create a budget for the month, knowing exactly how much money you plan to spend in each category and build that plan to align with your financial goals. Simple… except it isn’t.
Despite coming in with the best of intentions, you end up veering from your budget when all the craziness of life happens. Then you are picking up the pieces next month and trying to start again. Soon, you have fallen off the wagon and have convinced yourself budgeting is not for you.
Sound familiar?
Why does this happen? It’s because budgeting is simple, but behavior change is not. Money and personal finance are a behavior.
Let's think about New Year’s Resolutions for a second. Every year so many of us are bound and determined to change; committing to exercising and dedicated to losing weight and being healthy. We start out strong, then crash and burn mid-January when life gets in the way and our motivation starts to dwindle.
I know you’re nodding your head as you’re reading because YOU KNOW EXACTLY WHAT I’M TALKING ABOUT.
If you allow your brain to make excuses, justify, and negotiate your way into spending more money than you planned, then you are two things:
1. Completely normal
2. Never going stick to your budget
If in the past you’ve struggled to stick to a budget, the cash envelope system will be a game-changer for you. The cash envelope system is amazing at preventing you from overspending.
What Is the Cash Envelope System?
The cash envelope system is a way to track how much money you have in each budget category by keeping your cash tucked away in envelopes. As you work through the month, you can see how much cash is left in a category by taking a quick peek in your envelope.
The cash envelope system is perfect if you’re constantly going overboard in a certain category (like groceries). By taking along only the cash you’ve budgeted, you are forced to stick to your budget.
When you shop for a category, only use what’s in your envelope. And when the money is gone, it’s gone. That’s it—this forces you to stop overspending.
Advantages to Using Cash Envelopes
It keeps you on track.
It enforces discipline.
You’re held accountable.
It’s hard to overspend.
How the Cash Envelope System Works
Right now, you overspend because there is nothing telling you when to stop. This is exactly where the cash envelope system comes in. So how does it work…
Determine Which Budget Categories Need an Envelope
Not all budget categories need an envelope and having an abundance of envelopes is going to overwhelm you. Your fixed monthly expense don’t need an envelope because you know exactly what you’re going to spend.
You need cash envelopes for those budget categories where you tend to overspend. Think of all those budget busting categories. Things like eating out, entertainment, clothing, groceries, and gas.
It’s up to you to decide which budget categories need an envelope, but here are a few that I believe will be most useful.
Groceries
Eating Out
Gas
Hair care/makeup
Clothing
Entertainment/Fun Money
Gifts
Plan Your Budget Amounts
If you’re someone who tends to overspend on things like birthdays, baby showers and impulse purchases, then limit your budget to a set amount each month.
Groceries were always killing my budget, so I figured out how much I wanted to spend each week and I stick to it. No Matter What.
Get Your Envelopes and Fill Them With Budgeted Amounts
Get your envelopes, label them accordingly, and fill them with your budgeted amounts. If you budget $600 a month for groceries, take out the amount you need each week and head to the store. Don’t take more than you’ve budgeted or you will overspend.
If you take $150 in cash and your total comes to $170, you’re going to have to put some things back. Put some things back? I know; I get it. It’s hard! But that is what's going to keep you from spending in excess and busting your entire monthly budget.
If you take $150 in cash and only spend $140, make sure you put that $10 back in your envelope.
Looking for some great cash envelope systems? When switching to the cash envelope system, I wanted something easy to use that also didn't sacrifice "cuteness". Here are a couple of my favorite cash envelope systems from Amazon.
Magicfly Cash Envelope Wallet, All-in-One Budget System Wallet with 12 Budget Envelopes
This one is my FAVORITE! I love the black and gold styling and the ease of keeping everything together. It's the perfect cash envelope wallet at an unbeatable price.
These were the cash envelopes I started with. They were easy to throw in my purse and didn't require me to carry ALL MY CASH with me. I loved that the envelopes buttoned, that I could reuse them every month, and that I could write on them with a marker.
Don’t Steal From One Envelope to Overspend on Another
The only money coming out of your grocery envelope is MONEY FOR GROCERIES. This is a simple concept, but what am I getting at…
We humans have a tendency to rationalize our behaviors. We make promises to ourselves that we can’t keep.. here’s an example:
Don’t justify running through the drive-thru by telling yourself that you’ll skimp on shampoo or paper towels for the month. If you know you need those things, don’t make a promise you can’t keep.
If we are completely honest with ourselves, it’s not the Dunkin runs or the drive-thru trips that are killing the budget.. it’s our BEHAVIOR.
Budgeting is 80% behavior and 20% math.
Are some of your behaviors killing your finances? Check out some great strategies to get a handle on your spending.
You will never be able to budget and achieve your financial goals if you can’t alter your behaviors.
How Do I Know a Budget Category Needs an Envelope?
Here’s a great way to determine if you need a cash envelope . Ask yourself these questions:
Do I tend to overspend in this category?
Do I do my shopping for this category in a physical store? (no online purchases)
Do I feel comfortable carrying this amount of cash?
If you answered yes, to all three of these questions, then you need a cash envelope for that category. Comb over your budget and figure out which categories you need a cash envelope for. Try to shoot for no more than seven cash envelopes.
What If I Run Out of Money?
I know it can be tempting to shuffle cash from one envelope to fund another, but do not to borrow from the other cash envelopes.
Remember, the whole purpose of using a cash envelope system is to control your spending and help you stick to your budget. So, when you spend all the money in your eating out envelope ignore that voice telling you to rob money from your grocery envelope.
If you run out of eating out money, have some leftovers instead. When envelope funds are getting low, find creative ways to make your money stretch.
What Do To Do With Leftover Money at the End of the Month?
The first thing I want you to do is, celebrate! You planned and stuck to your budget for the month.
Now, there are a few things you can do with that extra cash. It’s your budget so you get to decide.
Reward yourself! Go out to dinner or grab yourself a delicious latte. It’s important to celebrate and keep yourself motivated.
Roll your monthly savings into an account set aside for fun purchases; for splurges when you feel the need.
If you’re working on paying down some debt, throw that extra money at your debt payments.
Why Use a Cash Envelope System
The cash envelope system is the simplest and most effective way to control your spending. Cash envelopes are a powerful weapon in the fight against overspending. When your cash is gone, you can’t spend anymore . No credit cards, no IOUs; simply no spending. Get back to basics by using the cash envelope system. You will thank yourself; I promise you!