The Envelope Money System: A Beginners Guide


About a year ago I changed the way I was spending money.  I decided to quit using my debit card for purchases and try only using cash.  I’ll be honest, I did not think this change would make much of a difference.  I am a little bit prideful and a lot of stubborn and I really felt that I was strong enough to spend smartly with my debit card.

It only took one month of paying with cash to realize that I was so so wrong!  I couldn’t believe how quickly my wad of cash depleted.  It was a huge wake up call as I watched my cash fly out of the envelope in what felt like an instant.

Today, I am sharing exactly how I use the envelope system and a few of the tricks I have learned a long the way.

Some items I buy with cash and other things I buy using my Discover Card.  I rarely use my debit card.  Using my credit card on some purchases, actually EARNS me money!  Read all about it here: The one idea I disagree with Dave Ramsey on.

Budget Meeting

My husband and I have a budget meeting on the last Friday of every month.  We use these budget meetings to discuss how we did on our budget throughout the month, make a new budget for the next month and decide things we could do better or different.

This is also the perfect time to decide how much spending money we will both need over the month for our daily spending.  These categories change monthly, the most common categories are:  clothing, house expenses, pet food, children’s extra curricular activities, groceries, fun and other.

We also have an “other” category for any extra expenses that come up throughout the month.  We have NEVER had a month go by without something coming up that we forgot to budget for.  Always make sure you have an “other” envelope.


Once we have our budgeted amount, I go to the bank, withdraw the amount of money we will need and start stuffing my envelopes.  You do not need anything fancy for your envelopes.  We use boring cheap white envelopes and just write the names of each category on them.  Put your budgeted cash in the correct envelope, and you’re done!


Making It Work

This money has to last me all month.  Once it’s gone, it’s gone.  I leave the envelopes at home for two reasons.  First, because my husband doesn’t like the idea of me walking around with a lot cash; and lastly because I am always tempted to spend the cash if it’s with me.

When I know I am going to the store to buy something I need, I simply take out the correct amount of cash from the envelope, no more and no less and go to the store.

Many times I even leave home all debit and credit cards.  This is my way to get rid of all temptation and to prevent any impulse shopping.  The amount of cash I put in my wallet is ALL I have to spend for that shopping trip so I have to really pay extra close attention to what I’m putting in my shopping cart (this is so hard sometimes!).

I am fairly loose with the envelopes and will occasionally switch some of the cash around in the envelopes mid-month.  It’s hard to always know exactly how much we will need for each category.  I never spend over the amount of monthly budgeted cash.  That large sum is non negotiable and we have to spend carefully throughout the month to make sure it lasts us all four weeks.

Cash Envelopes will save you big bucks

I highly recommend everyone at least TRYING doing most of their spending with cash each month and see how much less you spend.  It truly opened my eyes to my spending habits!

You might also be interested in these related articles:

How to Recover your Budget From a day of Impulse Shopping

Budgeting for Beginners: FAQ

Overspending Triggers and Solutions


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