![]() ![]() It prevents you from overspending in that one problem area - If you find yourself blowing through your clothing budget month after month, the cash envelope system could be the answer.Using cash upfront helps you feel and see the monetary consequence of each purchase, resulting in lower spending. A 2001 study by Drazen Prelec and Duncan Simester of MIT found that shoppers spend up to 100% more when using their credit card to pay instead of cash. It’s been proven to make you spend less money - This has to do with the difference between using cash and using credit cards.Cash envelope budgeting makes you pay attention to how every cent of your budget is spent. You may set an initial budget and decide that $150 every two weeks for entertainment sounds perfect, then be shocked to learn that you blow through that in one weekend. It teaches you to pay attention to where your money goes - When you live on plastic, it’s easy to lose track of how much you’re spend on each category.Actually holding cash in your hands and watching it go away when you spend it helps your brain treat it like what it is - a finite resource to be conserved and used carefully. The money doesn’t feel real, so your brain doesn’t even realize how much you’re spending over multiple card swipes. When you’re swiping a card, it’s difficult to visualize how much of your budget you’re using up. It makes money tangible - As discussed above, this is the key mechanism of cash envelope budgeting.Take a look at the proven benefits of this old-fashioned budgeting system: Cash envelope budgeting works because it makes money tangible and grounds your spending in the reality of how much money you actually possess. ![]() Spending money shouldn’t be so easy that you can do it without thinking and blow through your budget in mere days. Yes, we realize that withdrawing cash and physically going into stores is inconvenient, but that’s the point. If this list makes you feel attacked, cash envelope budgeting is most likely the answer to your money misery.
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