The cash handling system is a great way to avoid over budgeting. Your spending is limited to the amount of money you put in envelopes to represent different budget categories.
However, the pandemic has made it less convenient to stick to this budgeting method. Many of us shop more online and many avoid the germs that cash handling can expose us to.
However, you can still follow the basic principles of the envelope budgeting method without using cash. Here are four ways to move to a cashless version.
1. Use gift cards
Use gift cards instead of filling your spending envelopes with cash. Buy gift cards that match your different spending categories at the beginning of the month.
For example, you may get one card for groceries, another for gasoline, and another for entertainment purchases. You can save money on activation fees by purchasing a gift card for a specific retailer – such as a Target or Walmart gift card – instead of a Visa or Mastercard gift card.
Before you buy gift cards, read the fine print so you know whether expiration dates or fees apply. You may need to adjust your spending limits to match the gift card labels.
2. Use a budgeting app based on the cargo handling system
There were apps for budgeting handling systems long before COVID-19 changed our worlds. Goodbudget and Mvelopes are two apps based on this budgeting method.
With the free version of Goodbudget, you get 20 envelopes to manage your expenses. The paid version, which costs $ 7 a month or $ 60 a year, offers unlimited envelopes. Goodbudget is not synchronized with your bank account. You must therefore manually update your transactions to keep your handling balances up to date.
Mvelopes, however, is linked to your bank account so that your expenses are recorded in real time. With this app, you can choose from three paid plans – a basic version for $ 6 a month, an intermediate price of $ 19 a month, and a full plan for $ 59 a month. Although there is no free version, you can use a free trial for a month.
3. Use multiple accounts for different types of expenses
Another way to create digital "envelopes" is to use separate bank accounts for different areas of expenditure. You may just want to stick to a few broad budget categories so you don't have to open a number of bank accounts.
For example, you may want to have an account that covers food and household items, rather than four separate accounts for groceries, take-out, beauty products, and housewares.
If your bank allows you to create sub-accounts, use them to separate your money for different purposes.
If you work with multiple bank accounts, you want to have a main account that receives your paycheck, and then distribute money to each spending account. You can set up bank notifications to know when your balance reaches a certain level so you don't overdraw.
4. Track your expenses after every transaction
Another way to stay within your budget is to be aware of your spending. Use a makeshift ledger that you carry with you on your debit card – it can be an empty envelope, an index card, or a small notebook – to record your expenses.
Before you buy, take a minute to review your budget and see how much you can spend in that category. After completing the transaction, quickly calculate to update your remaining balance.
It will take a little more self-discipline to meet your spending limits, but it can be done without resorting to cash.
Feeling overwhelmed? Create a budget that works for you with our budgeting boot camp!
Nicole Dow is a senior writer at The Penny Hoarder.
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