Gift Cards: The Envelope System Of The 21st Century?


Tried And True Method

Have you ever tried using the envelope system? If not, you should really give it a try because it helps keep you on the budget by not allowing you to overspend in specific categories. It also helps you shop for deals because you know when that money is gone—it’s gone. So maybe it doesn’t feel as cool to pull out the envelope marked “groceries”, to give the cashier exact change. I have one question for you though.

When it comes to managing your money, do you want to be cool and broke, or freakishly weird with a nice nest egg and growing investments?

Personally, I like freakishly weird! ๐Ÿ˜€

We have used this system for well over a year, but there was a time, in the beginning, where we resisted the change. We cheated by moving cash around from envelope to envelope. It would sometimes cause us to break the budget because we would at some point realize we really did need the money we transferred from the fuel envelope. Maybe we should have waited and saved up for that brand new crock pot. (Heck, we didn’t know gas prices were going to shoot up .50ยข a gallon in just two weeks.)

It is a great idea to use the envelope system for anything that cannot be conveniently paid for online using your debit card. Everything else is fair game, but really—you decide how many categories to try. Some suggest start by funding three categories until you get the hang of it. Not that there’s a learning curve or anything, but there are some basic rules of thumb that take time to get used to, especially if you are used to just whipping out the ol’ credit card. Remind yourself of this again and again. Cool and broke or freakishly weird?

Rules of Thumb

  1. Don’t cheat. All that does is just give you a way to keep the same spending habits. The only difference being that you’re using cash to do it instead of plastic. What’s the point of even doing it?
  2. If you find that you are consistently running short on any category, up your budget in that category until you find an accurate amount.
  3. When you “have to” move money around, make sure to adjust the budget to reflect any changes you made.
  4. When you run out of money—that’s it, there is no more for that category.

I hope I didn’t make it sound like the “four commandments of enveloping”. These are just the things that we follow that really make a difference for us. When we find ourselves deviating from the plan, it is always our fault, and it has even cost us money.

Envelopes Reborn For The Cool In All Of Us

Yes, it’s true. You can now be “freakishly weird and cool” by swiping your plastic once again. Don’t worry guys, just keep it on the down low when on a date—she’ll never know it was an Outback Steakhouse gift card. If you get caught just tell her it is the shiny new “Double-Triple-Platinum-Express Outback Steakhouse Edition 5-Star Mastered Card“, and she’ll be none the wiser. ๐Ÿ˜‰

Seriously though! I actually love the gift card idea, and I want to thank Kelly Whalen from The Centsible Life, for introducing me to the idea on one of her articles.

Here’s why I like it so much:

  • Built-in Discipline – You cannot spend a $30 Papa John’s card anywhere but Papa John’s.
  • Convenience – You no longer have to worry about carrying lots of cash everywhere you go—just grab the gift card(s).
  • No Risk – There is no debt to bother with, no overage fees from going over your limit, and best of all, you do not have to pay interest on your purchases.
  • Track-a-bility – Some people like using credit cards because of the ease of which you can track your spending. I could be wrong about this but I believe I have heard that you can look up your purchase history online at some of these places—if you still have the gift card handy.
  • It’s Budget Friendly – The envelope system is a great tool to use to help you stick to your budget and I do not see how using gift cards would be any different. Personally I think they could be more beneficial.

I am sure that once I actually give this a try I could give you even more reasons to love it. I will be sure to write a follow-up post to give you some updates.

Gift cards are very popular and you can find a gift card to fit just about any category in your budget—at least the ones that you would normally use the envelope system for.

If you give it a try, be sure to let me know how it went.

Have a great weekend everyone!

About Brad Chaffee

12 Responses to “Gift Cards: The Envelope System Of The 21st Century?”

Read below or add a comment...

  1. Money Funk says:

    I like the “four commandments of enveloping”; simple and easy to follow. ๐Ÿ™‚

    Great post. I often think about going back to using the envelope system. Mainly for grocery shopping, as this is one are we tend to overlap more than necessary.

    And I think it would be perfect for Christmas shopping. List in my hand – which gift & for whom & the envelopes – money runs out and I need more… than its time to bake a tin of russian tea cakes or sugar cookies. ๐Ÿ™‚

  2. Kelly says:

    Glad I inspired you to try something new. ๐Ÿ™‚
    Just be sure to track them and keep them in your wallet otherwise you might become one of the millions of people who doesn’t use their gift card.

  3. Great minds, I developed a system using the Paypal student card and tried that for a bit, it was my first post on Wisebread. It became too much of a hassle for my wife and I, and we’ve since reverted back to standard cash envelope budgeting. I’m also much likely to spend as much with the cold hard greenbacks but I do love the fact that you have built in categories if you go with a store specific gift card.

  4. Ken says:

    My wife and I use the envelope system for grocery and gas money. It works well for us.

  5. Brad Chaffee says:

    I like the way you think Money Funk! ๐Ÿ˜€

    Kelly, I think the gift cad idea is great and I cannot wait to give my report on using it. One of the problems I have found is that using the envelopes sometimes means turning around to go back home and get them. Can’t tell you how many times we have turned around. Personally that is always something that bothered me because I HATE wasting time. With the gift cards, I will have them in my wallet, which is something I always carry with me.

    I will definitely check out your link Paul. I am always interested in checking out other methods. I am going to give this gift card thing a run and try it for 3 months. I am sure, just like with almost anything, it will have it’s ups and downs but I am curious to see which one wins in the end.

    I know that’s right Ken! I stand by the envelope system 100%! ๐Ÿ˜€

  6. I have done this method multiple times. Each time = SUCCESS. Each time I stopped doing it =FAILURE.

    In college and a few years out, I would do this. I had an envelope for food, for electricity, for gas and, most importantly, for BEER. I loved knowing I would have enough money for the long run while still enjoying the short term.

    I am jumping back on this bandwagon. I am trying to save for a move back to PHX. I have, fortunately purchased all of my X-Mas presents (except for Gram’s) so I shouldn’t have any major bills coming up.

    My major bills:
    Health Insurance
    Gas in gf’s car
    …other than nothing big.

    It is tough limiting myself to such when it comes to food. But changes need to be made if I want the lifestyle I want when arriving back in PHX.

    Great idea and post!!!

    David Damron

    • Brad Chaffee says:

      Thanks for stopping by David! You are so right. Whenever you do it, it works fantastically and when you don’t you start the “death by a thousand cuts” way of spending again. It’s amazing how such tiny amounts can add up to so much when you aren’t paying attention.

  7. Ashley says:

    Cool and broke, jk! This system has worked wonders for me. It allows me to go to my favorite places but still make sure I’m not over spending at them. I do it the most with food and I’ll get cards to 3 of 4 places I like to frequent for lunch and dinner. Once the cards are used up, I have to cook my own meals at home. Works like a charm.

  8. Kyle says:

    I’ll give the gift card idea points for creativity, but it seems very cumbersome in practice. I have enough cards in my wallet as it is without a whole mess of giftcards. Plus, I really hate it when I have something like $0.58 left on a giftcard. I’m liable to spend more just to finish the card off.

    I guess I could see the need for this system for some people, but it is not for me.

  9. Tina Fortune says:

    I use the envelope system and my kids do too. I don’t like gift cards unless they’re from Visa or Amex. Even though we’re entering into 2010 I am learning a little more about points on my credit cards too. I managed to earn a free flight this year using and paying one off. I know, credit cards are bad…I am learning the importance of credit because as a single mom with no family, when an emergency arises, the cash is not always available. Nice post.

  10. I use the gift card system for my basic budget items. Each pay I load my budget amount onto my gas gift card, my grocery store gift cards, and my coffee card. That’s the biggest money-saver for me as they only take cash or gift cards at the coffee shop–and not carrying cash saves me a lot of money!

Leave a Comment...


This site uses Akismet to reduce spam. Learn how your comment data is processed.