The Cash Envelope Budget System

cash envelope budget system with fabulesslyfrugal

Cathy’s sister Carolee is guest posting this for us. She will be introducing you to the CASH ENVELOPE BUDGET SYSTEM in 2 parts. This post she covers the pros of using the system and gives you pointers to get started. She also gives you some helpful tips to implement the system and help choosing envelope categories. This is FAB Carolee. Thanks so much!

I am a mostly stay-at-home Mommy of four young children and wife of a school teacher. As my husband has been working on his Master’s Degree, our budget has had to be tighter than ever. So, about 14 months ago, I decided to try out the cash envelope system for all of our “discretionary” and some of our “mandatory” expenses. Soon, I was hooked. Even though it took a little while to adjust and get used to this new system, it has been SO helpful to maintaining the tight budget we need to stick to. Now, I’m going to tell you all about it!

Why I love the cash envelope system:

It’s concrete. None of this opening up my budgeting software, looking up the month, finding the category, and seeing how much $ is left for the month. I never did that anyway. Now, I just have to look in the envelope and I know exactly how much we are allowed to spend on something. If there’s not enough, then it will have to wait. End of story.

Peace of mind. I don’t have to worry or wonder if I’m going to overdraw or exceed my credit limit.

It helps me save up for things. Some months you won’t use everything in your envelope, and that’s great, because you may need more in other months. I notice this especially in the “Holidays and gifts” category. In my family, there is only one birthday in February and March, but there are 8 birthdays between April and May, plus Easter and Mother’s day. So I can just spend a little from that envelope for gifts in February and March, and save up for the busier months. Or, I can plan ahead and buy some gifts for April and May birthdays in February and March (Plan ahead? What’s that?). This also can help you save up for specific things (like a “home decor” envelope to save up for a larger item) instead of putting “extra” money in your savings account which you end up using for something else.

Envelope Budeting System

I spend one day a month on the budget and that’s all. Then, once or twice a week, I check my bank accounts online to keep up to date on my bills and any debit card transactions. But this way, I spend SO much less time working on the checkbook, because now there are fewer transactions to record.

It’s been great for my marriage. My husband and I have a “spending” category for each of us, so we each get our very own spending money every month to do with as we please. I can save mine up for something I really want, or I can go out to lunch with my sisters or buy myself a milkshake (on the way home from the bank!), or whatever, and NO GUILT! As for my man, now he can go to town at the comic book store, but when his spending money is gone, it’s gone! We are both a bit more discretionary with our “own” money now, and we don’t have the “how much did you pay for that?!” conversations anymore! It is awesome.

Getting Started:

  • Use your current budget (if it’s working/balancing) or set up a budget with THESE tips.
  • Write down your cash categories and how much cash you’ll need for each one for a month.
  • You can still pay your monthly bills from your checking account (i.e.: utility bills, rent, debt, insurance, medical bills, piano lessons, etc.).
  • Be sure to budget in some fun (like a family recreation envelope, date night, and/or spending money!). You are much more likely to stick to a budget and this system if there is some money in there for you to do some fun things with.
  • Pull out some plain old regular envelopes, and write a category name on the front of each one.
  • Head to the bank, withdraw the cash for the month, and distribute it into your envelopes.

cash envelope budget systemRead part two!


  • Tara Balcom

    We’ve been on a cash system for 2 years now after doing Dave Ramsey’s Financial Peace University. I LOVE IT! Granted there are some weeks when I “rob peter to pay paul” but I find I am much more relaxed about spending money on discretionary things if I know the money was intended for that in the first place! And neither my husband or I can remember the last time we had a heated “discussion” about finances because it’s the envelope that says yes or no, not one of us!
    It may seem scary at first but I wholeheartedly suggest it! You can do it!!!

  • Rena

    we have been using the envelope system for 15 years . Instead of doing it monthly we do it weekly. What we do is this first take a sheet of paper and make a list of all your bills divide each monthly bill by 4 ( the number of weeks in a month) yeah I know a few months have 5 but that’s ok that just means some extra cash in your envelope. Don’t forget those yearly bills like property taxes and house insurance ( I divide them by 52 ) And then there are those car insurance bills we pay them every 6 months so we divide them by 26 . Then next to the bill ( example water bill 20.00)
    put $5.00 (that’s the amount you put back weekly. That’s it when the bill comes due you have the money to pay it. Before you know it you’ll have so much cash . When doing your envelope system don’t forget to pay yourself make sure your put some money in a savings account every week if you don’t have much start small MAKE IT A HABBITT ! It’s one habit you won’t want to stop.I have two sons and they have watched us do this over the years and it has taught them how to manage their money. As you can tell I am passionate about this that’s because I know it works.

  • Jenn

    We LOVE LOVE LOVE the envelope system. Since we get paid every other Friday there are two months a year that we have three paydays. We still put the same amount of money in each envelope even on the extra months so there is always extra. When the power bill sky rockets, or if there is an unexpected bill that pops up we are prepared.

    This system has also helped us save up for vacations faster than any other method we have tried. There is nothing like going on a vacation and really being able to relax because we know we can afford to go.

  • Debra

    We, too, love this system! We have stuck to the envelope system for just 10 months now, but have been able to pay off close to $5000 in debt by being so consistent with our cash system! This summer we went on vacation to the beach with our three kids and for the first time EVER we were able to pay with cash only and came home with money leftover! It is such an amazing feeling to be in control of where your money goes and knowing that it is making a difference! I, too, highly recommend this for anyone, but especially those paying off debt from college, cars, etc!

  • Sophie

    Love this system and I love Dave Ramsey!! If you are honest with it you can really stick with your budget and get to your goals!

  • Blake Miller

    You should all look into It is the perfect online money management solution that implements Dave Ramsey’s ideology.

  • Vickie

    I dont use the envelope system, but I do pay myself once a month. I deduct a certain amount of money in my checkbook ledger and keep track of it on a separate paper. Its like writing myself a check every month. I was able to save enough money doing this to replace all the windows and sliding glass doors in my house without having to get a loan or refi. Its a nice way to save money and have it handy (via check or ATM) without having the cold cash in your home. Great idea no matter how you do it!!!!!

  • Karen Howell

    I always wanted to use the envelope system but couldn’t get past having to use cash all the time. Finally found EEBA and it is the same concept, just virtual envelopes. It has helped SO much to keep us on track. We also calculated our regular monthly bills (Rent, electric, Auto insurance, etc) that are mostly fixed amounts & non-negotiables and opened a separate checking account to pay these out of. We figured out what we needed to have each month for these and it is auto deducted from my bi-weekly paycheck and goes right into this account. We are a little behind starting out but we will eventually have each of those bills auto debited from that account so we don’t have to worry about them at all. Other money for misc, tolls/gas/auto, childcare, groceries, cable/phone, giving are in another checking account but these are things that the amount can fluctuate or that we have more control over the amount spent. Free app too for the basic version or you can pay a very small amount for more features (I think the most expensive is $8/mth). It has really helped us to see where we are at each week.

  • Heather Johnson

    I hardly ever use cash anymore. We prefer credit cards. We pay off our cards in full each month. Plus we are building credit and earning rewards points that help us pay off our cards.

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