7 Problems With the Cash Envelope System and How to Solve Them

Have you tried using the cash envelope system and given up because it was not successful for you? I feel ya; we personally have started and stopped MANY times. But I keep coming back to it as the best way to maintain control of our budget, in spite of its flaws. No system will ever be totally perfect all the time, but ironing out the wrinkles in this one means we'll be that much closer to getting rid of financial frustration for good! And I'm all for that, aren't you?

So today I want to discuss some of the common issues with the cash envelope system and some possible ways to solve them. If we're honest, the issues aren't really flaws with the system itself, but are probably more a result of, well, let's just call it “operator error,” shall we? :-) So let's see if we can come up with ways to change our behavior so that this system will work for us.

BTW, I've already written a post on how to MAKE cash envelopes. You can see it here: How to Make and Use Cash Envelopes for Budgeting.

Common Problems with the Cash Envelope System — and what to do about them!

1) Not getting to the bank to get the cash out.

LOL. This is probably my biggest issue, actually! I don't drive by there super often, and I'm all about staying home as much as possible. But I'm beginning to think that being cash-only is a goal worthy enough to make a special trip — so that will probably be how I handle it.

Another option would be to just use the debit card for the first few days of the month and then subtract whatever you've already spent from the amount of cash you withdraw when you finally do get to the bank. This is not ideal — because you may spend more with the debit card than you would have with cash — but it can be a step in the right direction.

The BEST solution would be to get to the point of living on last month's income. Because then the money for the upcoming month would already be in the bank, and you could withdraw it any time beforehand and set it aside until the start of the month you need it. Hopefully someday…

2) The hubby forgets to get cash before he leaves the house and then spends with the debit card.

Because WE would never do this, would we? Um. Actually, more on that in #3 — let's keep this one aimed at the hubby for now, because in my family this is a real issue, lol.

There are a couple of ways to handle this. One possibility is to split up the cash so that he carries some and you carry some. But he still might run out and you have plenty left, or vice-versa.

So another thought is to leave some of the budget in the bank. Don't withdraw ALL of what you've set aside in each category; then the occasional use of the debit card will not put you into the red. But then DON'T use the debit card just because you know that reserve is there; keep it RESERVED, hello, for just the type of circumstance we're talking about.

3) Forgetting the money yourself.

Haha, reminds me of the days when forgetting your lunch money meant you were VERY HUNGRY by the time you got home from school that afternoon!

If you leave your cash at home, you have several options. If you're not far from the house, you can go back. Or, you can use your debit card to make the purchase, and then redeposit the cash back into your account at a later time. This can be a prime opportunity for overspending, however, or “forgetting” to make that deposit.

Another option is to just not buy whatever it is you were planning on. This is a hard consequence but is perhaps the best way to stay on budget.

4) Robbing from Peter to pay Paul.

Otherwise known as using funds from one envelope to cover another category that you've run out of money in. Um, yea. This is another one that is a bugger in our family, lol.

One thing to remember is that this type of behavior is a work in progress and very dependent on circumstances. Sometimes budget categories need to be adjusted from month to month as we learn what we need in each through trial and error.

Other times, though, it's a matter of self-control. Definitely do NOT steal from a necessities category to fund a want. No, no, no.

Which is a good time to bring up the point that many of our problems in budgeting arise simply from a lack of self-control. I'm preaching to myself here, too, people. So yea. ‘Nuf said. :-)

5) Fear of carrying around so much money.

This is an easy fix. Only take the amount of money you will need for that trip when you leave the house. The rest stays home. As already mentioned above, this is a pretty good way to ensure that you don't overspend at any given time, too. If you didn't bring enough to cover it, don't buy it.

6) Not wanting to leave the car to pay cash at the gas station.

Especially when it's raining or cold or time is short. I sympathize with this one!! I will often send an older child in to pay for me. Muahahaha!

But the truth is that what we really need to do, if we are serious about paying cash to stay on budget, is to just SUCK IT UP. A little temporary rain or cold as we dash into the store won't hurt us. And lack of time is rarely as much of an excuse as we make it out to be. Just sayin'.

7) Actually spending more because of having so much handy.

And then running out before the end of the month. One fix is to just not carry so much — again, like in #5, only bring as much as you will need for the specific needs of the day.

Another possibility is to use paper clips to differentiate immediate cash from cash to be used later in the month. The cash reserved for later gets clipped together, thus making it more obvious when we dip into it — which will hopefully stop us from doing so.

And here's a fairly radical solution to ALL of them:

Don't use cash at all — just pretend like you do. Keep envelopes in your wallet with NO CASH IN THEM, but with the total budgeted amount for each category written somewhere on that category's envelope. Then every time you make a transaction, write the amount you just spent, subtracting from the total every time, until you get down to zero.

Or you could use the mobile version of YNAB budgeting software (or whichever one you use) to record your transactions. This eliminates not only the need for cash but also the need for envelopes!

One would have to be very disciplined to record EVERY transaction with this method. I'm afraid I would not do that. I know for sure The Man would balk at that, as well. Just bein' real, ya'll!

The bigger problem with this for me, though, is that the feel of the cash between my fingers and the physical act of handing it over are things I don't want to give up. I need the reminder that this is REAL MONEY I am spending. It's too easy to live in a world of virtual money with all of the transactions taking place in cyber space. After all, the phrase is that money “changes hands” y'all. I'd kinda like to keep it that way.

So I'm going to stick with the traditional cash in the traditional envelopes — but I think these solutions will make it go better now.

DO YOU HAVE SOLUTIONS THAT HAVE WORKED FOR YOU?? Post them in the comments, so we can all benefit!! :-)