Did you miss Part One? Head HERE first!

Cathy’s sister Carolee is guest posting again this week with the second half of the CASH ENVELOPE BUDGET SYSTEM. Carolee is a  mother of four and wife of a school teacher. Because her husband has returned to school to obtain his Master’s Degree, they are living on a limited budget. She began using the cash envelope system 14 months ago to budget their discretionary” and some of their  “mandatory” expenses. We LOVE this system. Thanks again for sharing Carolee!

Some tips:

  • Give the person who doesn’t usually do the grocery shopping a little grocery money each month. Then they can help you out when you call and ask them to grab a gallon of milk on the way home, etc.
  • Figure out how many of each denomination you will need. For instance, I like to have plenty of 1 and 5 dollar bills for the “date night” envelope, so I’ll have exactly what I need for the babysitter or the tip at the restaurant. So I will make columns on scratch paper, and figure out how many 50’s, 20’s, 10’s, 5’s, and 1’s I want.  Then when I go to the bank, I tell them (or have it written down for them) exactly what bills I want.  I used to feel self conscious about withdrawing so much cash and asking for “13 one’s” but, I got over it, and the bank teller’s don’t usually give me weird looks, either.
  • Start out with actual envelopes. Try it out for at least 3 months.  Keep the envelopes in your purse, and just replace them if they get ragged.  Then if you decide you love this system, you can get yourself something a bit sturdier to keep your cash in.  Some websites like Dave Ramsey’s have “cash envelope system” wallets you can buy, and on Amazon, you can find some coupon organizers (that you can use for cash instead) that fit in your purse.  Make sure whatever you buy has enough compartments for each of your categories.  After using the envelopes for over a year, I just finally got an accordion style coupon organizer that I like so far!
  • Make a Christmas envelope. Determine an amount you think will be reasonable to spend on Christmas—shopping, baking, parties, decorations, etc.  Divide that number by 12 (or if you are starting in June, divide that number by 7, etc.) and make a Christmas envelope that you put that amount in each month.  (And of course, decide if you can afford this amount each month.  If you can’t, how will you be able to afford a large amount all at once at Christmas time?  If your monthly budget can’t take it, then it’s time to trim down on Christmas.)  Then when you are ready to start your Christmas shopping and decorating, you shouldn’t have to use your credit cards at all-just keep that Christmas cash envelope with you.

Envelope Categories:

Here are some ideas to get you started with your envelopes:

  • Children (clothes, school expenses/fees, etc) I still pay for their piano lessons, swim lessons, preschool, and other such activities from the checking account and this is a separate budget category
  • Personal Care (haircuts, etc!)
  • Diapers
  • House and Yard Maintenance and repair
  • Groceries
  • Family eat out This is for those nights when we just have to buy a pizza (although, if you have some freezer meals, you can pull one of those out instead of buying pizza on those crazy days) or for saving up and taking the whole family out to dinner every once in a while
  • Date Night
  • Clothing This one is for my husband and I—and it’s for clothing NEEDS, not wants.  This is so we don’t have to use our own spending when we need new underwear or a new pair of athletic shoes, etc.  It is NOT for those new stilettos you can’t live without.
  • Pets
  • Holidays/birthdays/gifts
  • Spending
  • Misc

You may be thinking:

  • “I don’t want to carry that much cash around—what if I get mugged?” Ok, I suppose that is a possibility, but no more a possibility than when you carried 10 credit cards, right?  Unless you go around with a big sign on your purse that you have a whole bunch of cash in there, no one will know that you aren’t just carrying around plastic like everyone else.  Just be smart with your purse, like you should be anyway!
  • “If I have cash, I just spend it.” If you know that’s all you get for the whole month, don’t you think you’ll be a little more discretionary with it?  If it’s a consistent problem, it might also be that you just didn’t give that budget category enough $ and maybe it’s time to adjust some things in your budget.
  • “I just can’t imagine not using my credit card.” Sounds like it’s time for you to read Dave Ramsey’s Total Money Makeover
    .  He will help you get over the social expectations to use plastic.

This may sound hard, but trust me, it’s great!  You’ve just got to commit to trying it for at least 3 months to give it a fair chance.  It will be a big adjustment and take some time to work out the kinks, but you can do it!  If you feel like you need to get a better handle on the money that seems to keep leaving your bank account without your permission, this is the way to go.  Good luck!

cash envelope budget system If you missed part one check out Cash Envelope System Part 1.


  • Sophie

    Ok, when I started this awhile back, after a couple of weeks, I wanted some pretty envelopes. After searching online, I found a FREE template to download. You can print the template on any pretty scrapbook paper and then you have nice sturdy envelopes!! Here is the link.


    She also has a tutorial on how to make the envelopes fit in your wallet. I love it!!!


    Just a fun thing to make it more exciting to do the system!!

  • Sarah H

    We have used the system in the past, abandoned it, and are now coming back to it. I just can’t do the gas in cash as he recommends, though, because taking 3 tiny pre-schoolers in to pay for gas is just not wise. I know, I know, it used to be the only option other than making the hubby get all the gas, but it’s not happening. Anyone have any great ideas for how to budget gas well? Anyone use a reloadable card, or just know what you’ve spent and only gas up partially at the end?

    • Ingard

      I have a friend that she pre-loads a Walmart card (that is where she gets her gas) with her gas budget for herself and one for her husband. She keeps track of the balance using an app on her phone. This way if she is under budget for the month it pours into next month and they have $ for ‘vacation’ gas or when gas goes up (again).
      Another idea is why not deposit your gas $ into your account that you use for gas and stay within the budget. If this is the only obstacle to overcome with using this method then it seems an easy hurtle to outwit.

    • Debra

      I, too, agree with you about dragging kids into the gas station! We just put our monthly money for gas into our checking and use our debit for gas. We keep close track online with our bank account and refer to the receipts to ONLY spend what we budgeted. I have been known to check how much we have left in the month and then put that exact amount in the tank to get by until the next paycheck! 🙂 It takes a little more discipline and “awareness”, but in my opinion, it’s well worth it to avoid taking my kids into the gas station!!

    • Carolee

      You can also try setting up another checking account just for auto expenses, and use separate debit cards from that account for fuel, as well as insurance and car payments, if you have any. Transfer a set amount into that account each month that is more than your monthly needs–that way, you can be saving up for your less often car maintenance expenses and registration, as well as unforeseen auto needs (like new tires or brake repair, etc.). I also have a medical savings account that I use with this same idea for medical needs as well.

      • Sheryl

        If you have a stop and shop near you you could purchase stop and shop gift cards to purchase the gas at stop and shop …. when purchasing the gas card you get points towards saving on your gas: buy $400 gift card for the month, get .40/ga back ….

  • Jenn

    *******“I don’t want to carry that much cash around—what if I get mugged?” Ok, I suppose that is a possibility, but no more a possibility than when you carried 10 credit cards, right? Unless you go around with a big sign on your purse that you have a whole bunch of cash in there, no one will know that you aren’t just carrying around plastic like everyone else. Just be smart with your purse, like you should be anyway!*******

    As a banker and also a user of the envelope system, (which I LOVE) I implore everyone, please, please, please don’t carry all that cash around with you. True carrying cards in your purse is risky, however they ARE replacable, VISA and banks won’t hold you responsible for charges against your accounts that you didn’t make (this goes for Debit card and Credit Cards). Cash can not be replaced, ever, no matter what. Invest in a small, fireproof safe, keep your envelopes in there. Most people don’t get mugged they just simply lose their purse, wallet, etc. doing every day things.

  • Al

    I’ve been looking for about 20 minutes online for a template that I can use to print out cells and rows on our envelop system. I started just printing the amounts in and amounts spent with dates but it got messy fast and hard to keep track of.

    Does anyone know of a site that has a template for cash envelopes (just to keep track of the cash, not an envelop template to make an envelop)?

  • teepetals

    All of these are some great advice.

    I just got a cash money budget system from jennsway.etsy.com and it is so nifty and useful. I have cash for my personal , eatout, and others. But for the gas and groceries i have opened up a free checking account and opt out of the debit card protection so that if the money is not in there it will decline my check card. Now so this wont happen i had a wonderful seller indodesigns.etsy.com to create me some expense lists to keep a running balance of how much i should have in my envelope. Every once in a while i will count my cash to be sure that the balance on my expense list ledger and actual cash in my envelope is the same. The envelope for gas and groceries i just keep the debit card in that envelope and record it on my list.

    oh and this is a wonderful blog! glad i found it. Lots of brilliant information!


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