Looking for cash envelope category ideas? Here are 26 categories you might need to include in your budget categories!
While I love going digital for many things, I have to admit that I still love using the cash envelope system for budgeting. Using cash envelopes is simpler, straightforward, and really keeps you disciplined to stay within the budget.
The younger generation calls the cash envelope system “cash stuffing.” It is a budgeting method wherein you withdraw physical money for a certain pay period and divide it into cash envelope categories. You are only allowed to spend within the allotted budget of that budget category.
What I love about the cash envelope system is that you see your money leave the envelopes each time you use them, allowing you to think carefully about spending habits. And if you wing the cash envelope system, you’ll not only stop yourself from overspending but also save money!
Read on for more cash envelope category ideas to create budgets for!
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Each one of us has our own preferred budgeting system. Cash envelopes are likely to work for you if:
- You are new to budgeting.
This budgeting system entails dividing your income into various cash envelope categories. This process is more straightforward than leaving the money on your debit card. If this is the first time you have tried budgeting, then this age-old method is the perfect way to get started.
- You want to curb overspending.
The cash envelope budget works effectively for people who need help with overspending. However, with this method, you can only spend money inside each envelope on the assigned category of expenses. With limited funds in each cash envelope category, you must be more careful and vigilant with your spending. You can’t overspend!
- You want to save money.
Using cash envelopes is also a fantastic way to save money. You are restricted to spending only what you have budgeted for each category. Any money left at the end of that pay period can be saved for worthwhile financial goals or rolled over to the next paycheck’s budget.
- You want to get out of credit card debt.
Cash is an effective way to limit the use of credit cards. Using a cash envelope makes you more aware of your spending than swiping a credit card. In addition, paying with cash eliminates fees and interest rates on your credit card bill. Consider using cash envelopes if you want to put your spending under wraps and reduce credit card debt.
Cash envelopes eliminate impulsive purchases and give you back control over spending money. Here’s how the cash envelope budget work:
- Determine your monthly budget. Figure out how much you earn monthly by subtracting your monthly expenses from your monthly income. Also, subtract the amount for spending categories not included in cash envelope categories (especially for things you’d rather pay online than with cash).
- Withdraw cash.
- Identify cash envelope categories. These are expense categories that you would typically spend cash on. Include all fixed and variable spending categories.
- Allocate money to budget categories. For example, put $500 for food, $100 for fun money, and $200 for fuel. The recommended cash envelope categories can vary from one person to another, but what matters is that you work out a budget that covers all your cash envelope categories.
- Create physical envelopes. Now start putting money in separate envelopes, ensuring you place the correct amount in the proper expense category.
- Label with the correct cash envelope categories. This helps you quickly identify the right envelope for the correct expense. For example, you can only use the money from your grocery envelope to pay for groceries.
- Organize cash envelopes. Some people use cash envelope wallets to place all their cash envelopes in one place. You may also opt to bring the right envelope for specific purchases. For example, if you only intend to do groceries, then only get your cash envelope for your grocery budget and leave the others behind. This method helps curb overspending because you don’t have the money for impulse purchases.
- Track your spending. Write down how much you’ve spent for each envelope category as you incur an expense or make a purchase. Then, you’ll immediately see how much cash you have left, allowing you to decide more carefully on your subsequent purchases.
- Decide what to do with your extra cash. If you have the firm resolve to stick to the budget in each cash envelope category, you may have some extra cash left over. You can deposit the money to your bank account to grow your savings, use it to treat or reward yourself, or roll it over on your next budget.
If you’re ready to start cash stuffing, you must identify cash envelope category ideas. Your envelope categories may look different from others, and that’s okay! You’re also paying online purchases with your debit card instead of cash, and that’s fine too. What’s more important is to identify budget categories where you use cash. To help you get started, here are the top cash envelope categories you can use in your cash envelope system.
Groceries are one of the variable expenses, so you can easily adjust the amount depending on your needs. This category includes food products, household supplies, and products purchased at supermarkets and farmers’ markets.
This cash envelope category covers food expenses that are not cooked at home, including meals available at restaurants and cafes and take-out food orders.
This is one of the basic cash envelope categories. The transportation budget includes all vehicle-related expenses, including fuel, parking fees, toll fees, vehicle repair and maintenance, car payments, and auto insurance.
These are variable expenses that include anything leisurely, whether those are concert tickets, movies, trips to theme parks, and more.
The clothing envelope pays for anything related to clothes, including clothes, shoes, bags, accessories, and more.
Gifts and events
These are also variable cash envelope categories that cover expenses related to gift-giving and holidays. For example, you can draw money from this envelope when getting a gift for or throwing a party for someone. This also covers costs related to holiday events like Christmas and Thanksgiving.
The household expense category covers anything related to keeping and maintaining your home, which includes mortgage or rent, home insurance, home cleaning supplies, home repairs, furniture and decor, and more.
These are monthly bills that cover utilities at home, including electricity, water, phone, cable, and internet expenses.
This is another variable expense that covers anything related to grooming yourself, from skincare to cosmetics, spa and facial expenses, and more.
The envelope labeled medical expenses is for out-of-the-pocket medical bills or medical expenses not covered by your insurance.
These are recreational expenses related to your hobbies. Depending on your hobby, you may spend money on crafts supplies, sports gear, gardening tools, new books, etc.
It’s also good to use a separate envelope for travels or vacations. This cash budget covers travel-related expenses, such as fuel for your car, airline tickets, accommodations, tickets and passes, food, clothes, shopping, etc.
Miscellaneous expenses are expenses that don’t fall into other categories, such as pet care.
No two budgets are exactly the same, so your cash envelope categories may be different from the person next to you. You want to create separate envelopes for basic expenses first, such as food and grocery, transportation, and household expenses. However, you create other cash envelope categories that apply to your situation. Here are additional envelope categories you might consider:
- Kids’ allowances (if you have kids)
- Kids’ lessons and activities, such as swimming, dancing, and sports, and expenses related to that.
- Pet expenses, including pet food, vitamins, vet check-ups, and more.
- Date nights
- Outings with family
- Food at work
- Coffee outside the home
- Gym membership
- House tools
- Medications, vitamins, and supplements
It depends on the number of spending categories you have. You can start with the five basic spending categories if you don’t want to keep track of too many envelope categories.
But if you want to account for exactly how much money you spend, then you can get more specific. So instead of putting transportation, you can create separate envelopes for “gas,” “car payment,” and “car insurance.”
You can organize your cash envelopes by first getting envelopes and then labeling them with the right categories. Then, place the right amount in the appropriate envelope. You can find a lot of printable cash envelopes and templates online if you want to personalize or pretty up a boring-looking envelope. Also, you can use a binder or cash envelope wallet to keep all your cash envelopes in one place.
The cash envelope system is already pretty straightforward as it is. It allows you to control spending by putting dollar bills into expense category envelopes. But if you want to take your budgeting strategy to the next level, consider doing these cash envelope tips and tricks.
- Be real with your budget. Look over your bank statements and check where you tend to overspend. There’s nothing much you can do with fixed expenses, but you can modify your variable expenses to fit your overall budget.
- Take advantage of automatic transfers. It’s very likely that you’re not paying cash for everything. It’s a great idea to do automatic transfers for bills that you need to pay straight from your bank account. For example, you may pay your mortgage, insurance, credit card bills, and loans right away so you don’t miss their due dates.
- Use cash every day. This system works great for purchases that you usually pay for in cash. So instead of swiping your debit card or credit card at the grocery stores and gas pumps, use cash instead. This allows you to see money leave your envelope and gives you a deeper sense of your spending habits.
- Develop a sinking fund. You can create another envelope for sinking funds or funds you’ll use later for a specific goal. You could set up sinking funds for your vacation, home remodels, or your child’s upcoming birthday party. You keep adding to this envelope until you’ve reached your target amount.
- Your budget should be reviewed regularly and adjusted as needed based on changes to your income, expenses, or financial goals.
- Stick to your budget but leave room for some flexibility. The envelope system is an amazing way to get you more committed to your budget. But life happens; sometimes, a financial emergency can throw things out of whack. You can tweak things up to make your budget work.
- If you want to implement the envelope system but don’t want to deal with real cash, then check out cash envelope apps like Qube, GoodBudget, and Envy.
Cash envelopes can be a useful tool for managing personal finances and adhering to a budget. You can make sure to prioritize necessary expenses, track spending, and avoid overspending by designating a certain amount of money to specific categories.This budgeting system is not perfect from the get-go. You may have to go through a trial and error phase to make it work for you perfectly and efficiently. Once you’ve set up a system that works for you, you’ll feel that budgeting money is much easier and more rewarding.