Cash Envelope System

Use a Cash Envelope System for easy budgeting and help in taking control of your spending.

Over 25 years ago I took a class on budgeting and one of the things we talked about in class were Cash Envelopes. I thought it would help us take control of our money and spending and so we tried it. It is a great system and it works beautifully. Then we started making a lot more money and gradually stopped the system.

We have had many years of not really knowing where our money was going monthly, weekly or even daily. I decided to start the Cash Envelope System again and wanted to share with you how we do it. You can make it as simple or detailed as you want. I chose to keep it simple so we will continue to do it.

Cash Envelope System

Step 1 is to start with a budget. Create a spread sheet of your income and debt for the month. We just use excel spreadsheet. We get paid every 2 weeks with myself also getting paid consistently and sporadically from blogging opportunities. I’ll share with you how we treat that sporadic income later. Since we get 2 main paychecks a month the bills are divided between them depending on due dates.

All of our debt is paid on line then we use cash for things like groceries, date nights, family activities, gifts, etc. We have a gas envelope but actually use our bank card for purchases. I keep track of our 2 week budget for gas and any money that wasn’t used goes into the envelope to carry over to the next pay period. When we take a road trip we already have the extra money available. It’s just much easier to use a credit card than cash for gas.

Step 2 is to budget the cash you need for each envelope. For example we budget $400 for food every 2 weeks, $200 for gas, $100 for medical, $140 for date nights. You get the idea. These amounts are just an example of what works for our family, your family will be different.

I go to the credit union the day we get paid and take cash out for each envelope. That’s the money we have to work with and when it’s gone, it’s gone. We usually have quite a bit left over in the miscellaneous envelope.  Since using cash we actually seem to have more money and we know exactly where it’s going. I’m much more intentional in my spending now.

Step 3 is record keeping. We are strict on keeping track of debt on the spread sheet and there are slight adjustments almost every month. I’m not strict with keeping tract of every penny in the envelopes though. If the grocery money is getting low I know it has been spent on groceries so I don’t feel the need to record every time I run to the store for milk. I plan 2 weeks of meals and shop accordingly. The majority of the grocery budget is spent during that first shopping trip.

I keep track of gas closely so the extra money can be put in the envelope. The miscellaneous envelope spending is kept track of closely also. That money can be used for anything from school supplies to birthday gifts to travel souvenirs. I want to know where it’s all going.

A few more things. When there is money left over in an envelope from the previous pay period I write that at the top of the paper then add the new amount so I know where I started. Having extra money isn’t bad but it might also mean that adjustments could be made in the budget. If you continuously have extra money I would add that amount to savings.

When I purchase something on line I use a credit card and subtract that amount from the envelope, then I deposit it into the bank. It’s an easy but necessary process so the money is accounted for in the right place.

I don’t carry the envelopes with me at all. I take out the money I need and return what isn’t used. With that being said I take out more than I think I will need. If there’s an emergency you can always use a card and take the money out when you get home.

Make envelopes that fit your personal needs. You might need to budget for Christmas, which brings me to what I do with my sporadic or extra income. Depending on your situation you can use it for many things: pay off debt, save for Christmas, emergency fund, vacation fund, etc. Right now mine is going towards paying off debt, medical bills and building our emergency fund.

I love these Cash Envelopes! They’re really sturdy and they were easy to stitch. Let me know any tips you have.

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