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Need A Financial Reset? This Foolproof System Makes It Simple

woman pulling envelopes out of her wallet and holding cash

Cash Envelopes Are (Still) The Best Budget System

In today’s card-swiping culture, it’s easy to lose track of where exactly your hard-earned money is going every month. Believe me, I know from personal experience! Budgeting and keeping track of money have never been my strong suits.

So every once in a while, I have to make a concerted effort to get my spending and budgeting back on track. And when I do, there’s one system I always go back to—both because it’s simple and because it just plain works!

Related: 11 Practical Ways To Save Money When Times Are Tough

woman holding up envelopes for the cash envelope budget system with various categories on the envelopes

The budgeting system I want to share with you today is not new—not by any means! You might know about it because of Dave Ramsey and his Total Money Makeover plan, but people have been using “envelope budgeting” to keep track of their money since the days of the Great Depression.

This system still works just as well now as it did back then, and today we’ll explore how this low-tech cash envelope system can help you regain control over your financial state quickly and easily! :-)

How To Use The Envelope Budget System In 4 Easy Steps

Step 1: Determine Your Fixed And Flexible Spending and write category titles on your envelopes

1. Determine Your Fixed And Flexible Spending

The words “budget” and “budgeting” are both kind of a bummer to hear, but outlining a budget is the first step toward figuring out your finances! Start by making a list of your fixed monthly expenditures, like your rent/mortgage, car payments, loan payments, utility bills, etc.

woman's hand holding cash

Since those expenses are fixed, you won’t be factoring them into your envelope system. Those can come out of your checking account every month on auto-pay, or however you prefer to pay for them.

Everything that isn’t fixed is considered flexible spending, and using the envelope system, you’ll be paying for those purchases in cash. (It “hurts” more to fork over cash than it does to swipe your debit card, so dealing with cash can make it easier to stick to your budget!)

Step 2: Figure Out Your Budget For Flexible Spending and write it on your envelopes

2. Figure Out Your Budget For Flexible Spending

Once you know how much you spend on fixed expenses every month, you can start figuring out your budget for your cash envelope system. Subtract your monthly fixed expenses from your total monthly income. And if you save a certain amount of money each month (which everyone should), subtract that amount from your income as well.

  • Total monthly income – Fixed expenses – Monthly savings = Cash for your envelopes!
Step 3: Label your envelopes and put cash in them

3. Label And Fund Your Envelopes

Now that you know how much cash you have to work with, you’ll want to determine how much of it you’ll set aside for each spending category. These cash envelope ideas can help you come up with your own useful categories:

  • Food
  • Gasoline
  • Clothing
  • Entertainment
  • Hobbies
  • Beauty
  • Transportation
  • Medical
  • Gifts
woman's hands putting cash into an envelope

Write the name of each category on a separate envelope, then set a reasonable spending limit for each category based on your budget or financial goals. Finally, fill each envelope with the money allotted. (For example, if you set a $100 spending limit for clothing, put $100 in cash in your clothing envelope for the month.)

Step 4: spend your cash

4. Go Forth And Spend (Within Reason!)

Go about your routine and use the money from the appropriate envelopes to cover your cash purchases. And once you’ve spent all the money in a given envelope, you’re done spending for the month! (You can “borrow” money from another envelope/category if there’s some leftover, but no extra trips to the ATM!)

And it might take a few months to really get the hang of your envelope budget system. Be patient with yourself, and don’t give up! You’ll fine tune it in time, and the results will be SO worth it! :-)

Download The Cash Envelope Printable

Cash Envelope Printable

Download this printable cash-sized envelope, print as many as you need, then cut and assemble them to use for budgeting!

An effective blank envelope template with a number on it for easy fix of finances.

Download The Cash Envelope PDF

Looking For More Money-Saving Ideas?

Have you tried the envelope system, or any other method of budgeting? Which one is your favorite?

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Bright Ideas

  • What kind of paper do you use to print them out? I noticed that yours is different colors.
    And what is the “to” for?
    You have the “For” and “Amount”. Please explain.

    • Sheri, you can use this paper or card stock available on Amazon… or find something similar at an office supply store.
      Colored print paper

      Colored card stock

      The “To” would be the place that you spend your money at. The “For” is the category. The “Amount” is how much you spent.
      Example: For: Eating out/ Amount: $22/ To: Chili’s Restaurant.

      • But I bought construction paper at the $1.00 tree. It’s not thick . It’s perfect.
        I printed out your printed envelope and I cut the outside of it and then I measured the inside lines. It came out perfect. Thank you!

  • May I add. I was able to find a purse size book that was nothing but little pockets/envelopes that were dollar bill size. .
    This article has piqued my interest and I’m on a hunt to put this method in place again.
    Handing out plastic you think you are in control because you can pull up your accounts. Dealing with the green stuff, you know immediately you do not need to make a purchase that has caught your eye.
    Or, go ahead! Your financial health is good.

  • The envelope system absolutely works! I was able to have money for every must-have such as house payment, utilities and food. I added a small ‘what if’ to each months envelope because…….What if? .
    Using this method, there were some months the utilities were lower. I either retained money there for a rough month ahead or put the overage as extra amount to a credit card. Eventually I paid off the credit card and became debt free.

  • I implemented the envelope budget when first married in 1970. Hubster would “borrow” so had to have an I.O.U. requirement. Still use this method today……. I just use the bank envelopes. I find when I have annual costs such as HOA Dues, etc. I divide the annual cost by 12 (months) and each month the envelope gets funded and when the amount is due I have the money.

  • some extra mini tips: never shop with an empty stomach, don’t take a huge cart but take a small basket. (4555555555555my cat helping with the typing haha55555555555555555555) = 30% less impulsive buying!)

  • We did this years ago when we had a young family. If we had money left over at the end of the month in one envelope we did NOT use it for something else, especially in the case of auto maintenance, appliances etc. We let those build up so if we had a major expense we could cover it easily.

  • We use the envelope system and I found a wallet on amazon that has dividers like you would use for couponing but it is much nicer and zips closed. I “fund” the envelopes and keep track on a paper in each divider section then lock it in the glove box. My cash is ready when we need it and we have been so much better about limiting unnecessary spending!

  • I’ve been doing this method for years with a twist. My credit union allows members to have multiple share or savings accounts. I have 12 named “sub accounts” such as: savings, vacation, medical, home improvement, car, etc. Instead of putting cash into envelopes, I fund each account and watch it grow with a set goal amount in mind. Once an account is fully funded, I then use that amount to beef up another account. I use my Amazon rewards Visa for purchases then transfer from the designated accounts(s) into checking to make the payment. Because I can make multiple payments a month to Visa, I stay on top of things to keep the balance at zero. Then I have reward points which roll over to spend at my favorite store, Amazon.
    I do keep cash on hand for groceries, hair cuts, and “play money”. This system over the years has allowed me to achieve my goal of being debt free.
    Yours is the only blog I subscribe to because it’s useful in almost all aspects of my life. Thanks for all your hard work for us.

  • I have 3 envelopes in my wallet: groceries, other, and personal. On payday, my husband and I each get a personal amount that we don’t have to be accountable for to each other,then a set amount goes to groceries and ditto for other. ‘Other’ includes everything other than groceries that isn’t a regular bill. (We do have a house fund in the bank, as well as an emergency fund we can draw from for unexpected expenses.) When we started back to this system, I was horrified at how I had previously spent on groceries to ‘stock up’ or whatever. I’ve gotten to the point now that I usually have some left at the end of the week despite giving ourselves only 1/2 the amount we used to spend. When we have leftover ‘other’ we love to treat ourselves to a meal out… though with cash, we have discovered that we don’t favor expensive restaurants anymore.

  • I did envelopes for years as I was a casino dealer. My income were tips. I still do mental envelopes now that I’m retired. It’s a way of life.

  • For those who want a high tech way to do the same thing, I started using the Goodbudget app six months ago. You also use digital envelopes, but you can track money without cash. Whenever I go to a store or restaurant, I just add the amount I paid into the corresponding envelope. I don’t like carrying cash, and this way I get my credit card rewards. This, of course, depends on if you’re a person who pays off your credit card every month, which I do.

  • We do something very similar, and have been for most of the past 35 years. However, every month when our Social Security and other pension funds come in, I transfer the money out of our checking account to our savings and keep a spreadsheet of how much money is going towards insurance, taxes, gasoline (I use a credit card that gives rewards and pay it off every month), auto registration, Amazon Prime, AAA, etc. These auto deposits also cover such bills as mortgage, electric, Internet, water, heat, etc. I also put cash from our paychecks in envelopes to cover other expenses that come due periodically (along with an amount for savings – it’s amazing how quickly that can add up, and you don’t miss it if it’s taken out up front). Putting the majority in our savings and using our bank’s online transferring feature, or transfer at the ATM, keeps the money safe and not so easy for it to disappear. I do keep a few budget envelopes for monthly bills after we cash our checks. I know, most everyone uses direct deposit for their paychecks, but having paper paychecks works for us for our budget envelopes. We are not wealthy (in the world’s eyes) by any means, but we have peace of mind all year long that when a periodic bill comes due, no matter how small, the money is there to pay for it.

  • My mom has been using this system since I was little. I use it too for certain expenses . I also every so often take my change jar to a coins to cash machine. They have at my work. I use this fund for trips and Christmas gifts.i

    • Those machines charge 12% to use so for every $100 you lose $12. Why not buy one of the little machines that stacks individual coins until you have enough to full a coin tube. The tubes are free at the bank. My hubby just has 4 little jars on his dresser that he sorts the coins into and every so often will fill the wrappers and takes them to the bank for the grandkids accounts. Why not put that money to use for yourself?

      • Many national banks and credit unions now offer free coin counting machines up to $125.00 in coin, per trip, for account holders. You may receive paper cash for your coins or directly deposit into your account. We find that o be less time consuming than rolling coins.

      • Our coin machine doesn’t charge anything if you use it for a gift card so I use mine for Amazon which I use for many stock purchases in subscribe and save each month. If there’s a gift card you use a lot it may be worth that instead. I consider the coins my little treat.

      • If you want to stretch those Amazon gift cards even further, just use them to pay off your card balance, If you are a Prime member,by using those gift cards to purchase more stuff from Amazon causes you to lose the 5% back you get when using the Amazon Visa or store card. Better you should have that 5% than them, am I right? And the same applies when you get your rebate money back each month. Apply it to your card balance as well, or once again you are losing that 5% rebate if you just spend it on Amazon.

    • Interesting about the coin counting machines.,The ones I’ve used just charge about $1.00 for the service fee. I did this because most of the banks near me want you to put the money in the paper tubes first. Too much work for me.

    • We save all of our change. When we take a big trip, like Disney World in 2015 we had saved $3000 just in change, and we are saving again for Disney World 2020. This time I don’t use any one dollar bills I have left after my envelope budget every two weeks. The ones go straight into the change jars.

      • I try to save my spare change when I can. It can really add up . I’ve used for buying presents for Christmas and spending money for trips. I’ve had to learn different ways to save money when money is tight.

    • This is to my above comment. On the envelopes we don’t even bother with the fancy ones.,Just the regular envelopes from the store. We label them. My moms keeps her in a drawer in their bedroom., I keep mine in a budget notebook with different slots . I keep it a small filing cabinet in my room. I kept it locked up until
      the handles started to break. Also another great idea for keeping track of the envelopes inside my purse is I use these cute little ziplock storage bags with fancy designs on them. They come in 2 sizes and are a Walmart exclusive brand. They are available in the beauty department next to the tiny travel size cosmetic bags. My family has been using the envelope system for years before Dave Ramsey recommended it.

  • I love your blog and follow it daily. Do you b y any chance have a printable template for those envelopes? That would be very handy to have when starting this method of budgeting!

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