Every once in a while something comes along in your life that makes you reevaluate things: how you spend your time, how you keep your house, your transportation, your budget….

After Sean was born we went through a honeymoon period where we seemed to have tons of extra cash. With a newborn in the house we didn’t go out to eat much, we didn’t go to the movies, we didn’t even go to the mall. On top of that, we got a hand-me-down car seat and a lot of gifts from family and friends.

But eventually, life started up again. We realized that neither of our cars was big enough for anything more than a trip to the drugstore once we put the stroller in the back. Whereas our priorities as DINKs (Double Income No Kids) were practicality and fuel economy, our priorities as parents are safety, comfort, and, of course, trunk space. So we traded in both of our cars for one new vehicle to share, which is all we need at this point in our lives.

Then we promptly took it on a road trip across four states (and one province of Canada) to visit the grandparents.

Then we bought a new stroller.

Then we bought plane tickets to attend a wedding.

It didn’t take long for me to realize the ‘extra cash’ was just a fluke and that we badly needed a revised budget. This seemed like the perfect opportunity to move to the envelope system (click to visit Dave Ramsey’s page about using envelopes to budget your expenses).

Using cash is the best way to combat the temptation to use plastic. But you also need to manage how you spend that cash.

So I looked at where we’d been using the debit card over the past month and worked out these basic categories: Groceries, Household Items, Entertainment, Pets, and Travel. Then I figured out average weekly expenditures in those categories. On payday, I got the cash to cover those expenses for one pay period, and filed it away in one of those expandable folders with multiple tabs from the office supply store.

Over the next month or two, we’ll track our expenses to see if the budget needs adjusting. This is easy, too: just file your receipts under the appropriate category. If you run out of money in one category — groceries for example — take some cash from another category, like entertainment, and make a note of the change.

I’ll post updates to share any insights I learn along the way.