We've been doing cash based spending for years as well. Surveys have shown that you spend less when using cash vs check vs credit card. In addition to the physical limitation of what is in the envelope, there's something emotional about buying stuff that's harder to resist without the boundaries. And physically letting go of the cash (vs virtual money) both counters the emotions as well as allows you to think about the purchase (i.e. going to the atm or whatever) if your instinct is not to use a credit card.
*** I would start ASAP (especially heading into the holiday spending season). ***
1. Have a meeting to write out a budget. Anticipate a fight if it's your first time really looking at money with your spouse... Talk about it ahead of time and your common goals. See what you're fixed expenses are. There are plenty of generic ones online you can Google to give you a head start. Do you NEED to have your fixed expenses? Are you on the same page with many common goals? Make you talk about how much cash you 'need' for each category. IMO, start out using a few envelopes (food, entertainment, gas, etc) for your normal day to day type purchases. Don't worry about an envelope for stuff like saving for a chainsaw, lawnmower, vacation...
2. After you've determined how much cash you 'need' each week/paycheck, withdraw the total amount from the bank and put that in each envelope.
3. Commit to not using credit cards or shifting money back and forth. Commit to a spending limit that you don't make impulse buys from (we've done $50 for the longest time - even items you're passionate about - Yes, I'm talking to the gun enthusiasts!
). Then keep receipts of what you spent your money on for that first 'cash cycle.'
4. At the end of that 'cash cycle' have another meeting to assess how you did. Do you really NEED that much money in each envelope? Do you NEED more cash in a few envelopes? Are you spending your cash wisely?
5. Reassess after each cash cycle until you and your spouse are comfortable with the cash amounts and each others discipline. At that point, you can cut back on the assessment to be once a month (when you're doing the bills). And you can probably stop saving the receipts .
My wife and I basically started out like this but over time we've adjusted it a bit. We now do one 'envelope' where we just pull out a total cash amount and we've decided to do credit cards for gas for the car (convenience/non-impulse) and 'savings' purchases (like the lawnmower). But we do cash for stuff like food, entertainment, Christmas where there is an impulse/emotional pull.
We keep a ledger/budget on Excel similar to this. The first line are your 'accounts', the second is your starting point, 11/2 and 11/16 line are paychecks, 11/9 is the envelope cash, 11/23 are bills being paid and envelope cash. There's a running total of what you're saving for at the bottom (new car, car insurance, gifts, lawnmower), and you've accounted for every dime of your paycheck. It's a good place to see allocations for your emergency fund savings too. (I was just throwing numbers on this spreadsheet, so don't get stuck on the numbers and categories.)
Mortgage Food New Car Car Insurance Gas (car) Gas (house) Gifts Lawnmower Debt Total Activity Ending Bal
Begin Bal. 200 100 0 0 0 50 0 200 0 550 550
2-Nov 500 200 100 50 50 40 25 10 25 1000 1550
9-Nov -200 -50 -250 1300
16-Nov 500 200 100 50 50 40 25 10 25 1000 2300
23-Nov -1000 -200 -50 -80 -50 -1380 920
Total 200 100 200 100 0 50 50 220 0 920
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Enjoy the journey and celebrate the victories!
