The cash envelope system is an extremely easy budget for most people to manage. Basically, at the beginning of the month, you categorize your bills and expenses, write each one on an envelope and give that envelope a dollar amount, then fill each one with the cash needed to pay everything. Once that money is gone, you stop spending money in that category. Budgets aren’t one size fits all though! So what can happen is that someone tries a budget system and maybe even likes it, but it doesn’t work just right for their family. Before they know it, they’re off track, bills are behind, they feel like a failure and the savings account is drained. The envelope system is one of those budgets that will either work really well for a family or it won’t! Here are 4 reasons why you may not want to use the cash envelope system.
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1. It’s Difficult To Share Cash Envelopes
It’s not hard to keep track of your cash envelopes if you are the only one that uses them. But if it’s you and your husband/partner, it may be difficult to juggle who has what envelope and to keep track of the money. For example, if you ask your husband to stop at the grocery store to pick something up. How would he pay for it if he doesn’t have the grocery envelope? If he uses his personal allowance money then you have to be sure to “reimburse” him from the grocery envelope. Or he has to use a debit card or credit card and that defeats the purpose of budgeting with cash. So how you will be handling sharing the envelopes is something to discuss before deciding to use this system.
2. If you primarily pay your bills or do your shopping online, the envelope system may not work for you.
In this case, having cash in an envelope is not going to work for you. An Electronic envelopes system like Mvelopes might work well for you, but if you want to use paper and pencil, go with a good old fashioned simple budget.
3. You will lose out on card rewards programs.
If you are responsible with your credit cards (as in you pay them off every month) then you potentially would lose quite a bit in not accumulating the rewards that most cards offer. Obviously if you have a problem controlling your spending this would not be a reason to not do the cash envelope system! But if overspending and paying bills late is not a problem, then paying for your basic expenses with cash would not allow you to rack up the rewards.
4. You have to go to the bank and withdraw large amounts of cash
First, some people may find it a hassle to have to go to the bank to get a large amount of cash each payday to set up their envelopes. Second, there are also many people that feel uncomfortable or unsafe having a large amount of cash on hand. So you have to gauge your comfort level with having so much cash in your home or on your person. You also have to determine if these extra trips to bank add more stress in your life because they are one more errand you have to do!
The cash envelope system is not going to work for everyone. Luckily, budgets are personal and if it’s not working for your family? There are other options you can try.
Have you ever used the cash envelope system to budget? Did it work for you?
Read my post about the Cash Envelope System of Budgeting & How It Works if you would like to learn more about it.