Cash budget items include those expenditures that are easily paid for in cash. Budget categories such as Gas, Groceries, Clothing and Entertainment are all areas of your budget where cash should be used for purchases.

In the prior step you used our budget template to create your monthly household budget. Most people would stop there and believe they had done all they could to ensure they would live within their means.

However, there is still more to be done to ensure that you are successful at staying within the bounds of your monthly budget.

For over a century, successful money managers have used "The Cash Budget Envelope System" to their advantage.

The envelope system is simple and easy to use. First, you identify the categories within your budget spreadsheet that can be easily paid for using cash. CASH - (a tangible item of value that can be seen and held) is typically harder for people to part with - as opposed to quickly swiping a thin piece of plastic to make a purchase.

Once you've identified your cash categories, determine how much money you will assign to each category and then place that exact amount of cash into separate envelopes.

We are providing a free Cash Budget Envelope System template to help keep you organized.

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After printing off the desired number of cash envelope templates, simply staple, glue or tape the template to the back of each cash envelope. Write the total amount of cash in each envelope at the top of the template. As you make a purchase, keep a running total of how much cash is left in the envelope.

Envelope budgeting is a proven strategy that will keep you focused on the true value of the purchases you want to make. As you watch the cash diminish in each envelope over the course of the month, you will be constantly reminded of how much cash you are spending and how much cash is remaining until the next payday.

Over time, you will begin to challenge yourself to see how much cash you can have left over at the end of the month. When this happens, use a small amount of cash to reward yourself for a job well done. Next, take the bulk of the remaining cash and apply it toward your debt reduction program.

Cash budget envelope categories might include the following:

• Birthday Gifts
• Gas
• Entertainment
• Charity/Donations
• Clothing
• Groceries
• Mad Money

The more you plan to pay using cash the better. However, we suggest that you keep the number of envelopes to a manageable amount - no more than five cash envelopes to begin with.

At first, using the cash budget envelope system might seem awkward. You may feel that it takes more time and is more work. That may be true, at first. However, once you get into a habit of managing your cash using this system you will realize the value that the process brings to your financial life.

An envelope budget system is just one more tool that you now have at your disposal. Try it out for the next several months, realizing that it will take at least a month or two before it begins to feel comfortable. Then you can decide if you want to continue the cash budget system or not.

At the same time, get ready for Step Eight as we being the all important process of planning for the unexpected.

• You Are Struggling - This let’s other people know they are not alone.


• You Are Making Steady Progress - This gives others hope that they can do the same.


• You Have Conquered Your Debt - Tell us how you did it so others will be motivated to not give up! What tools worked best for you? Share anything about how you used the cash budget envelope system, or any debt relief tips that you feel will help others to achieve a debt free lifestyle.

Return to 10 Steps to Conquer Debt page from.... Step Seven: Cash Budget Envelope System page.