The Ultimate Guide To The Cash Envelope Budgeting

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If you want to get your budget under control (or if you’re a Dave Ramsey fan), you may want to give cash envelopes a try.

Cash envelopes can help you stay organized and can help you manage your money better.

If you’re interested in learning more about envelopes including how to set it up, what categories there are, and what cash envelope to get, this is the article for you.

What is the cash envelope system?

The cash envelope system is a way to budget and categorize your money using envelopes.

Before you start filling up your envelopes you decide what categories you’re going to have and how much you will put in each envelope (category).

Because you use cash, when the envelope is empty for a certain category you have to either stop spending, or take it from a different envelope – this means you won’t overdraft and you can only spend the money that you have.

It forces you to stick to a budget.

Benefits of Using a Cash Envelope System

The thought of using a cash envelope may sound a bit strange and even daunting, but the benefits can outweigh the cons.

Here are some of the benefits:

Easier To Track Spending

Since you pick your categories / envelopes, fill them, and THEN start using them, you will always know exactly where you’re spending money, and using envelopes makes things super easy to track.

No Interest

This might be my favorite reason to use cash envelopes! Think about it, when you use cash, you don’t need to use credit cards so that means no interest!

And no need to remember to pay a credit card bill at the end of the month.

No Overdraft Fees

Okay.. Maybe this is actually my favorite reason..


Since you can only spend what you have in your envelopes it’s impossible to overdraft! Goodbye $36 fees.

Psychological Benefits

I’d say for most people using cash makes it a bit more difficult to spend, lots of people don’t really want to part with cash or “break up” a bill.

You can use this feeling to your advantage and use it to save more money when you start using the cash envelope system.

How to Start A Cash Envelope System

Okay now that I’ve sold you on trying out the cash envelope system, it’s time to start!

First thing you need is your regular budget. If you haven’t made a budget yet, read our How To Budget post first, then I’ll meet you back here.

We good to go? Great!

Once you have your budget handy it’s time to figure out which categories you’ll use for cash. Here are some great options:

Cash Envelope Categories

Here are some of the categories you may have when using cash envelopes:

  • Groceries
  • Dining Out / Restaurants
  • Gas
  • Entertainment
  • Doctor / Dentist / Healthcare
  • Clothing
  • Gifts
  • Pets
  • Household Goods

Example Budget

Here’s the example cash categories we’ll use:

  • Groceries – $400
  • Fun – $100
  • Gifts – $50

We’ll fill our envelopes with $550 each month.

Figure Out How Much Cash You Need

Think about how you often you get paid. Is it monthly? Bi-weekly? Weekly? This is how often you should fill your envelopes.

Using this information, you’ll find out how much cash you need.

If you get paid every two weeks, and your monthly envelope budget is $550, we know that you’ll need $275 every two weeks!

Example Bi-Weekly Cash Budget

  • Groceries – $200
  • Fun – $50
  • Gifts – $25
    Total needed per pay period: $275

If you want to break it down even more, you can figure out how many bills you will want for each category.

  • Groceries – $200 – You can get four $500 bills, ten $20 bills.
  • Fun – $50 – You can get one $50 bill, or two $20 bills and one $10 bill
  • Gifts – $25 – You can get one $20 bill and one $5 bill, or two $10 bills and one $5 bill.

It’s really up to you!

Withdraw Your Cash

Once you have your budget figured out, and you know how much cash you want to withdraw, it’s time to actually go to the bank and take out your cash.

Once you have your cash you can fill your envelopes and start spending!

Where To Keep Your Cash

For places to keep you cash, you have a ton of options, from budget-friendly to a bit more spendy, and there’s also digital options too!

Budget-Friendly DIY Options

If you’re just starting out using cash envelopes or if you just aren’t ready to spend money on an entire cash envelope wallet yet, here are some great DIY options!

  • Regular Mailing Envelopes – You can just mailing envelopes that you’d use for your normal mail. You can keep track of the balance inside the envelope by writing on the front.
  • Bank Envelope – You can use the envelopes that you get from the bank when you withdraw cash.
  • Binder Clips – I’ve seen some people on instagram and on youtube use binder clips for their cash. They use a separate clip for each category.
  • Coupon Organizer – You can use a cheap organizer! Just use a different slot for each category.

Printable Cash Envelopes

If you want something a bit prettier (but still budget-friendly) you can use printable cash envelopes! Here’s where you can find some printable cash envelopes:

Cash Envelope Wallet Systems

If you’re looking for something that can actually function as a wallet, check out our post on the best cash envelope wallets!

There are options ranging in price from $20-$50, so these options are also budget-friendly.

Digital Cash Envelopes

If you don’t use cash at all, there’s actually digital cash envelope apps you can use! Here are a few you can try:

How Others Use The Cash Envelope Wallet System

If you’re interested in seeing the cash envelope in action, here are three people who regularly use the cash envelope system.

They share info like their exact wallets and what categories they have. Enjoy!

Cash Envelope FAQs

How do you make a money wallet system?

You can make a money wallet system by using dividers in your regular wallet to help separate the cash or cash envelopes. Check out this video from Budget With Becky

What cash envelopes do you have?

Here are some of the categories you may have when using cash envelopes:
Dining Out / Restaurants
Doctor / Dentist / Healthcare
Household Goods

What can I do with leftover cash from cash envelopes?

You can roll the money over to your next month’s budget, you can add it to a savings goal, or you can treat it as spending money.

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