Beginners Guide to the Cash Envelope System

Dang it! We did it again! Oh no, another $30 overdraft fee! Why are we always over spending?

This scenario was recurring way too often in our bank account. We would think we were staying on budget but the reality was, we really had no idea where all our money was going.

Every month, three days before the next pay day, I would send a frantic text to my husband, “Don’t spend another penny! We only have $18 left!” Then some months, it was too little too late.

Pending purchases would push us over the edge and we would end up paying overdraft fees. Getting us ever further behind on the next pay periods spending! Ugh!

I am so sorry if this dramatic reenactment sounds all too familiar for you.

The good news is that we eventually figured it out! In fact, we are actually an entire month ahead of our bills now! We haven’t had overdrafted our bank account in over a year!

Can you imagine how wonderful that feels? How completely freeing it is to have your spending under control! Looking at our budget no longer provokes tense conversations or anxiety driven swipes of our debit card.

Who wants a taste of this financial freedom!?Start a budget today fast and easy without complicated paperwork. Use this simple guide to the cash envelope system and find your financial freedom today!

I thought you might be interested! Starting and sticking with a cash envelope system has been the game changer for our family! This is the number one thing that has helped us stay on budget every single month!

What is a cash envelope system?

Quickly, a cash envelope system is a simple way to divide your spending into small categories or budgets. All spending with this system is done in cash. Each category has it’s own envelope to help keep the spending separated and organized.

The major benefit to using this system is that once you have spent the cash within a specific category (eating out for example), you have no other options for spending and as a result you stay in budget every month!

If you have never heard of the cash envelope system before you might be interested in reading from an amazing man named Dave Ramsey! Here is the book we first read to get us on track to debt freedom!

Let’s dive into this, but first…

There is one thing you will need to do before you are ready to completely jump into the cash envelope system.

What you need to do first is get a solid budget set in place. We used to feel the same way you probably do right this minute when you see the word budget. B-ugh-dget!

Take my word for it. Once you get your budget all set up, you won’t feel that worry any longer.

Here is a link on how you can easily get your budget started today!

Alrighty, are you ready to get say adios to the stress of spending? Let’s get your cash envelope system started!

Related Articles: 

How to Start a Cash Envelope System

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1. Half Cash and Half Digital Budget

One key to having a successful financial budget is to find something that works for your specific needs. For our family, a completely cash budget didn’t make sense.

The first thing you need to do after creating your budget is to decide what you are going to pay for with cash and what you are going to pay for with your debit card. NOT CREDIT! I calculate my estimated expenses for my cash envelopes.

I will make a side note and say that I understand that there are benefits to using rewards cards for digital purchases or payments. BUT you HAVE to have extreme self-discipline to stay in budget and pay off that card every single month before it accrues interest!

For most of us it’s best to stick with your debit card until you have mastered the art of self-discipline. One day our family will take advantage of the rewards, but for the next while, this is where we are safe!

Back to the cash.

Paying bills with cash would have been a huge headache and mailing in the money doesn’t feel safe. So we decided that we would continue to pay our monthly bills online with our debit card. 

Items that we pay for with cash are pretty much anything and everything that we physically walk into a store to buy. With the exception of gas for our cars. We have a set budget for gas and pay very close attention to how much we are spending in this category.

So figure out what will actually work for your family. Decide now what categories your family will be using cash to purchase. Then make a list of each cash category with exactly how much cash is going into that category each month. I talked about how I organize my cash envelopes on my Instagram Story the other day, Make sure you follow me there

Total all those categories together and this is the total amount of cash you will be withdrawing from your bank account each month.

Start a budget today fast and easy without complicated paperwork. Use this simple guide to the cash envelope system and find your financial freedom today!

2. Get Organized

We are talking about a lot of cash here! Being organized is going to help ensure that you don’t lose it.

Can you imagine loosing all that cash??? Just the thought of loosing half makes me dizzy! Excuse me for a minute… Ugh!!!

Now is the time to think about how you are going to handle and store your cash. You need some sort of container to keep all your cash envelopes, one envelope for each category. Let’s call this your cash box.

Start a budget today fast and easy without complicated paperwork. Use this simple guide to the cash envelope system and find your financial freedom today!

When it comes to spending cash, you will be using a wallet specifically made for this system.

You are now going to be living on last month’s income! No more living paycheck to paycheck! No more waiting for payday to make a trip to the store.

3. Get One Month Ahead of Your Bills

Doesn’t it sound SO nice to be ahead of your bills?! By the time you even get the email notification that your bill is ready, it’s paid!

We have found that being one month ahead of our bills has made our cash envelope system super simple. When you follow this plan, setting cash aside every paycheck won’t disrupt your lifestyle one little bit!

There are a few ways you can get ahead of your bills, but the way our family did it was by doing a no spend month. I have made it super easy for you in this article on about simple steps to get one month ahead of your bills.

You can read right here all about a few more strategies on how you can have a successful no spend month and save hundreds and even thousands of dollars in just 30 days!

4. Cash Envelope Wallet

This is a really fun part of the entire process! You get to go shopping! You get to go pick out your cash envelope wallet! Does this sound a little counter productive? Going out to spend money to hold money?

It’s important!

Again, making sure that your cash is very well organized is key to running a successful cash envelope system! If your cash gets all mixed together, your budget is going to fail.

When I very first started I made this couponing wallet that I found on Amazon work. It got the job done but wasn’t my favorite. The sections for coupons aren’t quiet wide enough for cash. So I ended up having to fold the cash in half.

I decided to make it work while I saved up some money to buy a real wallet that was designed specific for the cash envelope system. Keeping your cash organized is worth the investment!

Ta-da! Take a look at this beauty!

Start a budget today fast and easy without complicated paperwork. Use this simple guide to the cash envelope system and find your financial freedom today!

You can see a full review in this video on why I love this wallet so much, but in a nutshell, its durable, super cute, and works perfectly with this system!

I got this wallet from a seriously cute Etsy shop called Daisy Lane Design. You definitely should go check out here shop and make sure to tell her I say Hi!!!

5. Payday

Now make sure you are paying close attention here. This is key to being sure your cash envelope system is a success! Pull the cash out of your bank account the very day that you get paid!

PLEASE trust me on this one! Things get complicated the longer you wait. Even just one day and a quick trip to the store with your debit card can throw off your envelopes for the entire month. So just don’t do it!

The next step is to evaluate how often you get paid? If you get paid once a month then you will be taking the entire amount of monthly cash out on that day.

If you get paid bi-weekly or on two specific days each month, you will divide your total monthly cash amount by two. This new number is how much money you need to take out of your bank account each payday.

As soon as you get home, distribute the cash into the envelopes inside your cash box. This money is the money you are going to be using on next month’s spending.

So let that money hang out in a safe spot until next month when you are ready to move the money from your cash box to your wallet.

We have found that because we have so many different categories in our cash envelope system, it isn’t realistic to carry all that cash in my wallet at all times.

So I keep a lot of the envelopes in an index card box thingy. Super high tech here people! But for all the other categories that I use on a regular basis, I keep those in my wallet.

When I know that I am going to be making a purchase with a category that is usually kept at home, before I head out to the store I simply go grab that envelope from the box and move it to my wallet.

Examples of cash categories I keep in my wallet would be monthly groceries, weekly groceries, household miscellaneous, diapers, clothes, and fun.

Some of the categories that I keep at home most of the time would be things like yearly expenses, medical, formula, and gifts.

6. Spend Your Cash

You are now all set and ready to start using your cash but be sure and stick to your budget! Once the cash in one of your envelopes is gone, you are done spending in that category for the month!

If you are new to using this system it might be a challenge at fist to stick to your designated cash categories. BUT you will be surprised how quickly your spending habits will change!

Our family has dropped our grocery budget from over $900 a month for a family of 5 to under $400 a month!

Paying attention to where you are spending your money can have a huge impact on your budget!

Do you feel ready to conquer your budget? Ready to save some money! I truly truly truly believe that if you are someone who has a hard time sticking to your budget, this cash envelope system is what can save you!

Please! Let me know if you have any questions down in the comments below and I would love to help you get your finances on track so you can spend your money where you want and Live Your Dream Life on Less!

Last but not least, here are 2 books that have helped us get a handle on our cash envelope systems:

Thanks for stopping in! Talk to you soon! xoxo


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    Thank you,

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