MONEY ENVELOPE SYSTEM

In a time when so many of Americans have unsurmountable amounts of debt, it is of upmost importance to be cognizant of spending habits and understand where your money is really going.

When Chandler and I got married, he taught me about his cash envelope system, which is something I quickly fell in love with. I heard about Dave Ramsey’s method, but never followed through with implementing it for myself. Each person has their own method which works for them, and that is totally okay. However you choose to go about it, make it your own and stick to the task. For all of you crafty people, now is your time to shine. Make this something you are proud of and that will keep you coming back.

What is a cash envelope system, exactly?

cash envelope system simply put is a method for monthly budgeting. Cash is placed in different envelopes assigned by major categories. It is a visual way of budgeting and is also a simple way to keep track of your categorized savings by saving obtainable goals made set yourself. Instead of keeping heaps of cash in your wallet and being more careless, it is a way to regulate those more frivolous habits and being more diligent in saving for other major expenses.

For us personally, we have a house and vacation fund that are our two main “focuses” right now. Any time we have extra cash or get any for birthdays/Christmas, we put that aside for those categories.

How does a Cash Envelope System work?

How does this system work? Make a goal for each category and do not over that amount for that amount for the month. For instance, if you have $250 in the grocery envelope, that means you can only spend this amount for the current month you’re on. It basically avoids you from overspending or spending on unnecessary wants rather than needs. Studies have shown, that those who budget based on a cash envelope system save by 15% – 20% monthly.

Why should I start using a Cash Envelope System?

  • It forms a good habit. It makes you disciplined handling money.
  • It allows freedom to spend from all the savings accumulated in the near future.
  • It makes it much harder for overspending, since its restricted to a certain amount in each envelope.
  • It helps with less worries over budgeting. Deposit money into your monthly essential envelopes first.
  • It is a system that is proven successful.

Budget Categories

These are more or less the categories that your expenses might pertain to. You get to directly decide what you’re budgeting for upfront. Start assigning your most important expenses into envelopes. These are in no particular order.

  • Groceries
  • Rent/Mortgage
  • Healthcare
  • Gas
  • Household/Cleaning Supplies
  • Hair/Skincare & Makeup
  • Vehicle Maintenance
  • Savings
  • Dining & Entertainment
  • Personal Use
  • Vacation Traveling
  • Gifts (Birthday/Christmas/etc.)

Starting Your Budget

Set you spending limit and ensure you’re on the same page with yourself or your significant other. Pick your categories, start micromanaging and stick to the budget. Some of us go way overboard! We see a fancy shirt/dress and we pick it up! We have cooked food at home yet still purchase fast food same day! We don’t thing to look in our pantry and overspend in groceries by picking up stuff we already have x3 at home! The plan is simple. Needs > wants. Do I need this? Don’t I have it already? Will it cross my budget? Is there something more important I should buy instead of this? Can I buy this next month instead? Should I go with a more affordable yet decent quality brand? All of these questions should be answered by yourself before spending.

What if I Run out of Money in an Envelope?

This is a really good question. There is a possibility of this happening, so don’t beat yourself up if this happens. If it does happen to be a higher tier then read “What About an Emergency?” below. If it’s not one of those however, then do not give into temptation of moving cash around carelessly. Do not start taking out money from envelope Y or your wallet to put in envelope Z. ” I’ve got $500 in savings, so I can to transfer funds to my clothing envelope” is a careless idea unless you really need new clothes.

What About an Emergency?

Let’s say an emergency situation arises and leaves you with having to touch that trusty envelope. Rather than using money from your “higher importance” envelopes, I recommend using funds from the lower tiers instead for this situation. From there, realign or readjust your budget and make a note on it. Accountability is key here.

Extra Money At Month End

If you realize there’s extra money at month’s end, give yourself a small pat on the back. That just goes to show that you have budgeted correctly, so enjoy a little celebration and reward yourself! Grab some snacks or grab a coffee! If that’s not something you want to do, then simply roll over the money to next month’s budget or keep it in your savings. For those in debt, avoid the lavish celebrations and try clearing up some with the extra cash.

A Cash Envelope System is a powerful ally in a fight against overspending.

It teaches you better money management skills and principles that make you wonder why you didn’t implement it any sooner. Give it a try and see why millions of others are currently switching to it. It has really been an eye opener for me. Save now. Reap and benefit later.


I’m not perfect by any means, but this allows me this to be more diligent in understanding my spending habits and where I can cut back.

Happy saving,
Alex in Asheville