From Envelope System to Debit Cards and Back


This was posted on one of the forums on

* * * * * * * * * * * *My wife and I used to operate heavily using cash and the envelope system, i.e., putting cash into specified envelopes for certain expenditures. We used cash for (among other things) groceries, restaurants, “Blow” money, clothing, oil changes, and books.

Those were blessed days. We had little income; but we were content, knew where our money was going, and were able to save around 25-30% of our income.

Then we stopped using the envelope system. Which led to increased debit card usage. Which made it harder to track the flow of money and feel the pain of how much things actually cost to purchase.

Well, I’m glad to be back on the cash/envelope system.

A few thoughts/tips to share what is helpful to us:

1) We keep a clothespin attached to the cabinet door that is above our “landing strip” (key bowls, spare change, etc.; the place where you set stuff down as you enter the house) in our kitchen. Any receipts from our outings instantly go right there when we enter the house. When I need to update the checkbook register every few days, it is easy to grab the receipts and enter them.

2) It is a question for some about whether it is better to use cash or a debit card for gas purchases. My wife will always use a debit card – safety, children in car. But what about me?

Using a card saves valuable time – no waiting in the nasty little buildings (typically nasty, that is). Also, using a card keeps you from the temptations of buying useless sodas, junk food, etc. I am not much tempted these days in this department, but I know it is a real issue for some.

On the other hand, cash always hurts. It could be helpful to look into the envelope and say, “Well, honey, we aren’t going to the regional mall today because we don’t have enough gas money to get there and back. But we can go next Wednesday when we replenish the envelope.” Sure, you can do that if know how much in your checking account is set aside for gas – but when it’s only numbers in a checkbook or online, it’s easier to cheat and say, “Yeah, but we’ll just use less gas next week to compensate.” Yeah, right!

3) When using a debit card for gas and the receipt dispenser fails – which it will – I just email myself a note with the amount of the purchase as the subject line of the email. Easy to transfer into checkbook as soon as I’m back home.

Or just keep a small notepad and pen handy in the car. Don’t trust your memory. You must capture your gas expenditures. This is for the sake of discipline as well as tracking it so you can adjust your budget from time to time to reflect reality. (It’s looking like we may be able to budget $50 less per month than our current budget calls for, for example.)

4) I don’t use one of these, but there are phone apps out there that allow you to track gas, mileage, etc. for your cars. I have looked at a few, and they sem like a good idea for those who are into techie stuff like that. I have only looked at iPhone apps, but I am sure there are apps for the other platforms as well.

5) This is obvious, but it is essential to budget for car repairs/maintenance. Duh – but many of us fall too easily into thinking that running a car is simply a matter of car payments + gas (and oil if you’re really sophisticated). Not so. Your car will need maintenance, and it will break. If your budget doesn’t haven an allowance for this, then it is not actually a budget.

We are struggling with this now because I know we are not budgeting enough in this category; but we are budgeting what we can.

If possible, jump start that section of your checking account (or envelope) with some hundreds of dollars, as you are able. Then add a reasonable amount every month. My guess (yes, guess) is that somewhere around $150 -$200 per month is reasonable as a minimum if you are running two cars. That gives you about $1800 – $2400 per year to put towards repairs. That’s not that much if you get hit with a couple of serious repairs on both cars in a given year, plus maintenance. Think about… tires!

I think of trips to the mechanic in terms of increments of $300. That way, anytime I spend less than $300, I am happy. Not grumbling about the cost. Or if the bill is $450, then hey, that’s under the $600 threshold, right? I am not saying you shouldn’t negotiate and look for deals on car repair. But it is expensive, and you need two things to keep from getting uptight about spending money on the vehicle: !) money set aside for the purpose; and 2) realistic expectations about the actual cost of repairs combined with a mental ability (I use the $300 increment rule) to keep yourself from getting too bummed out when they throw the bill at you.


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