Cash Envelope System: 9-Simple Steps To Do Envelope Budgeting

Last updated on February 5th, 2024 at 06:38 am

In this post, you’ll learn how to budget with a cash envelope system to track expenses and save more money. 

To stay on top of your money it’s essential to do an audit of your expenses. 

When you know the money outflow from your pocket, you can implement strategies to differentiate between essential and non-essential expenses. 

After that, you can cut down expenses to save more money and get more out of your monthly income. 

But the problem is which budgeting method you use. 

So one method that binds you to not only follow your budget but avoid debit and credit cards is budgeting with a cash envelope system. 

Let’s jump into it.

What is a Cash Envelope System?

It’s a traditional budgeting system being used for decades. It’s also called Dave Ramsey’s cash envelope system because he is one of the proponents of this amazing budgeting method. 

Here you take some envelopes and write the name of each variable expense category on it. After that, you put cash inside as per your spending goal. 

For example, $400 for groceries, $300 for utility bills, $150 for entertainment, and $200 for gifts. I explain this detail in the below section. 

Note: fixed payments like mortgage, credit card, auto loan, insurance, and personal loan installments are not included. You can pay them through a bank account like normally you do. 

After that, you spend that money throughout the whole month. 

And when the money in any cash envelope ends you no more spend on that expense. 

At the end of the month, you see how much money you spent and how much is left over. 

The purpose is to control your spending and help you avoid using credit or debit cards. 

This way you don’t overspend money and stay accountable for the purchases. 

Instead of putting cash you can also use fake paper cash and spend according to the amount limit. 

There are cash envelope wallets available in which you can either put cash or have cards with the name of the expense written on them. It helps you avoid paper envelopes. 

There are digital envelopes online that you can use with software like Googbudget and Mvelopes. 

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How do you start a cash envelope system budgeting?

Here are 9 simple steps for doing a successful envelope budget:

1. Add up all of your monthly income

Sum up all the income sources and calculate your total income for the month. It’s the first step because you have to set a budget for expense categories for the next month. 

The possible income sources can be:

  • Income from a full-time job
  • Salary from a part-time job
  • Dividend income from stock investment
  • Interest income from a saving account
  • Interest income from bonds 
  • Freelance income from selling service
  • Business income if any
  • Any other income source you have

Add up all the income and calculate your total income. This gives you an overview of how much you’re bringing to your pocket for spending on necessities, paying debt, and saving. 

For example, your monthly income totals $5,000. It’s after-tax or disposable income. 

Let’s jump to the second step in cash envelope system budgeting.

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2. Write down expense categories

The second step in cash envelops system budgeting is deciding different expense categories to name the envelopes or pockets of the wallet. 

These categories don’t include car payments, credit card loan payments, mortgages, or any other debt payment. 

It only includes your household expenses. 

The common envelope budget categories you can include are: 

  • Groceries and food
  • Utility bills
  • Rent
  • Entertainment
  • Car/auto
  • Kids
  • Toiletries
  • Dating
  • Home maintenance
  • Makeup, hair & skincare
  • Personal spendings
  • Holidays and Gifts 
  • Pet care
  • Shopping (clothes&shoes)
  • Dining out/restaurants
  • Treatment/medicine
  • Vacations
  • Hobbies
  • Miscellaneous

Here I have listed 19 different categories and you can analyze your spending to choose ones that are relevant. It makes it easy for you to pick categories and avoid forcing your brain to remember where your money goes each month. 

Let’s jump to the next step.

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3. Decide on a budget amount for each category

The third most important step is making a cash envelope system budget.

This part is a little bit tricky and you’ve to be careful because no you decide how much of your money gets spent on each of the expenses. So from the previous month’s data or your personal knowledge, you can associate different amounts to each expense. 

Another trick is to take the average of the previous three months’ spending on each of the categories and a lot of that amount. For example, you spent on groceries $450 in October, $400 in November, and $470 in December. The average becomes $440 in the past three months. So you can lot that amount to Groceries expense. 

After deciding on the amount of money you’re going to spend on a given expense, you can jump to the next step.

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4. Get cash envelopes or a wallet in your hand

Get cash envelopes or a cash envelope wallet to put cash inside and write the category’s names and amounts. You can make envelopes from paper yourself with the help of a stapler. 

If you don’t want to do the whole work then purchasing envelopes from the market or ordering them online is a time-saving way. You can get a cash envelope wallet from Amazon. I’ll discuss it later in the below sections. 

You will assign a wallet to each individual wallet and write the name and amount on it.

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5. Put cash inside each envelope

Calculate the total amount of cash you put inside all the wallets. Now withdraw cash from your bank account through a debit card and put the relevant amounts inside each wallet. 

For example, $440 in your groceries wallet, $200 in entertainment, $300 inside utility bills, and so on until the last wallet o your expenses. 

Let’s jump to the sixth step in cash envelope system budgeting.

6. Start spending what you’ve in the cash envelope

Now comes the 6th step which is spending your money. Take money out of a specific wallet for spending on that specific expense. Deposit the remaining change inside the wallet for accounting accuracy. 

Do this for the whole month and when the cash inside ends stop spending on that expense. That way you can help yourself stop overspending and impulse spending. 

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7. Adjust envelopes amounts during the month

In the first month of following the cash envelope system budget you may face a need for money to spend on specific expenses. And it’s normal to spend a little more on an expense category. 

Because these are variable expenses so they can go up and down. So you can adjust by devoting money to that specific expense. Don’t put too many restrictions on the spending instead stay flexible to some extent. 

It’s normal to go $20 to $50 up or down. 

8. Check out the envelopes at the end of the month

When the month ends then recheck your wallets or envelopes and see how much money you’re left. You can devote that money to next month’s budget or do a little fun for staying successful with your envelope budget. 

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9. Reset the envelopes to budget for next month

Continue the process for the next month. Make all the wallets empty and reset amounts and categories for next month’s cash envelope budget. You may have to add or delete any budgeting categories or expenses. You may also have to adjust the amount spent on the prices of products and inflation. 

Now you have a clear understanding of how to use the cash envelope system for budgeting.

Let’s jump to the next section…

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How to be successful with the cash envelope budget?

Here are some important tips to help you stay successful with envelope budget:

  • Prioritize your categories according to assigning budget. For example food, utility bills, and medicines. Keep entertainment, vacation, and fun secondary becasue they do want not basic necessities. 
  • Don’t do impulse purchasing or overspending during the budgeting period. Try to go closely with what you have budgeted. 
  • Avoid using credit card or debit card because it incurs interest and charges. You also overspend with the card by swiping it everywhere from coffee shops to big branded stores. 
  • Start from zero each month and make adjustments during the time frame
  • Each month is different so don’t hesitate to include and exclude expenses
  • Pay with cash everywhere for buying products
  • Pay off debt faster to lower your interest expense
  • If you can’t hold cash envelopes then go for a digital envelope budget using apps like Goodbudget and Mvelopes. 
  • Stay patient and consistent

If you follow these tips then it will be easy for you to achieve the end target and save more money while cutting expenses. 

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What are the pros and cons of the cash envelope system?

Here are the advantages and disadvantages of envelope budgeting: 


  • Avoid impulse buying and overspending
  • Helps you avoid credit card
  • The saving fund will grow 
  • Your financial wisdom will grow
  • You stay accountable for your spending habits


  • You have to hold cash which may feel difficult for every purchase
  • A time-consuming process
  • Money management is too much
  • Cash isn’t accepted everywhere and you have to use a debit or credit card
  • You can’t satisfy your spending appetite because it’s to some extent tight

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What is a cash envelope binder?

It’s a file or folder in which you place all of your cash envelope budgets in one place. It includes the envelope with cash, your budgeting goals, budgeting tracker, expense tracker, and debt tracker. 

It keeps all the documents in one place so you can easily make any changes if you want and adjust the budget. You can make the budget binder yourself or buy it from a stationary or online from Amazon or Walmart. 

To make a cash envelope system binder and get free budget binder templates here is a good article from CleverGirlFinance: How to Create a Budget Binder

What are the best cash envelope templates?

There are two ways you can get envelope budget templates. One is to download free envelope templates available online and the second is to buy them from websites and Etsy. You can get two main types of templates one is a vertical template in which you put cash from the upper side while the second is horizontal where you put cash from the side. 

As a beginner, I recommend avoiding spending money on paid budget templates. Instead, go for free templates and use them to see whether you’re comfortable with the budgeting method or not. When you become habitual to a budgeting system then buying a customized template isn’t a bad deal.

Here are some of the websites to help you download cash envelope templates for free: 

First is, 8 Free Printable Cash Envelope Templates from

The Second is Free Cash Envelope Templates

Here is the third article link from which enlists 24 Free Printable Cash Envelope Templates.

Is there any free printable cash envelope tracker?

A budget tracker is simply a four-column paper including date, description, amount, and remaining balance. It helps you track how much money you spent from a specific wallet. You can print out multiple copies to insert into each individual cash envelope. 

Here are links to websites to help you download printable cash envelope trackers for free: 

The Incremental Mama free budget tracking templates

Free cash envelope templates and trackers from Vertex42

Simply visit the link and download them and take out multiple prints to put into each individual cash envelope. During the month update the amount and balance to help you know how much money outflow happened on a specific date from a specific category.

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What are the best cash envelope wallets?

With a cash envelope wallet, you don’t need to hold individual envelopes for placing cash. Instead, these wallets are divided into different categories with names and you can place cash inside to spend.

There are dozens of cash envelopes available online. Here are the two articles for the best envelope budget wallets: 

21 Best Cash Envelope Wallets (Budget Friendly)

12 Best Cash Envelope Wallets To Help You Budget Better

Best cash envelope budget apps & software (free and paid)

You can do cash envelope budgeting not only using physical envelopes and wallets but digitally as well. There are some cash envelope budgeting apps and software you can use to avoid the headache of maintaining physical envelopes and sticking cash. 

Here is famous envelope budgeting software: 

  • Goodbudget
  • Qube Money
  • Simple Budget Envelopes
  • Real budget – Envelope Budgets
  • Budget Envelopes
  • Envy
  • Best envelope budget app
  • Mvelopes

I recommend you to go with Goodbudget or Mvelopes. They are easy to use on desktop and mobile. 

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Cash envelope budget planner

A budget planner is a template that helps you plan and decide your expense and assign different budgeting amounts. It includes your income, expenses (household, debt payment, and insurance), and savings. 

The budget planners are available in different time frames including weekly, biweekly, monthly, and yearly. But the most used planner is on a monthly basis. 

Here are the two digital budget planners to calculate your need wants, and savings based on the 50-30-20 budget rule. Fill in the values of your income, expenses, and savings then you get an automatic answer to how much you’re spending on needs, wants, and saving. 

First is Nerdwallet’s free budget planner worksheet and the second is Schwab MoneyWise, a monthly budget planner. 

How to DIY cash envelopes?

To make a simple cash envelope you need three things: 

  • White papers of printers
  • Stapler 
  • Scissor

Cut the A4 size paper into half and fold each piece like an envelope. After that steeple, the sides of the envelope or use glue to stick its corners sides. Then place it for some time to dry the glue and your cash envelope is ready. 

You can make as much as according to your categories. 

If you want to go a little fancy you can visit this article on making cash envelopes by Making Cents Matters: How to Make Cash Envelopes

Here you’ve to use a laminator, laminating sheets, scrapbook papers, paper trimmer, dollar bill, bone folder, and pen + sharpener. 

What is cash envelope stuffing?

In cash stuffing, you take different envelopes based on your categories’ names and put cash inside from your monthly income. The purpose is to spend no more than the amount in that envelope. Cash envelope stuffing is also called envelope budgeting or cash envelope system budget. 

The drawback of cash stuffing is time consumption. Also, you don’t earn a profit on that money and you have to place envelopes in a secure place. 

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What are cash envelope labels?

There are two ways to name a certain table. One is to write a name of a category and put a certain amount inside. The second is to take small rectangular pieces of paper and write the name of the category to stick on the envelope. These are called cash envelope labels. You can buy them online as well. 

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How does the cash envelope savings challenge work?

The challenge is so simple. You take 100 envelopes and write names starting from 1 to 100. Then you shuffle them and put them into a basket. Here is how it looks: 

After that, you take a random envelope each day and put cash inside according to the figure written on it. For example, you picked an envelope with the number 50, put $50 inside, and place it anywhere else in your house. The next day you picked number 25 then put $25 and set it aside. 

You do this for 100 days until all the envelopes are filled. If you did it successfully at the end of 100 days you’ve $5050 saved. That is a big amount. 

This process is called 100 days envelope challenge. 

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What is a petty cash envelope?

In a petty cash envelope, you put a small amount of cash to use for small discretionary expenses. It’s normally used by companies and small businesses. An individual may not need to have a petty cash envelope in their budget. 

How much money do you save with the envelope system?

If you’re using the 100 envelope challenge then you save $5050 in 100 days. But in cash envelope budgeting the saving amount can vary. It depends on how much money you spend, cut expenses, and your income obviously. 

What are the 3 main essentials when it comes to budgeting?

The basic necessities want, and savings are the three main items of a budget. Necessities include food, groceries, utilities, rent, and Medicare, while wants include vacation, entertainment, car, and dining out. And third, is savings which include emergency funds and investments.  

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What are cash envelopes made of?

They are made of paper either simple or laminated. The envelopes inside the wallet are made of plastic. 

What do you do with leftover money in cash envelopes?

If there is money left in the envelopes at the end of the month there are some ways to efficiently spend it. They include paying off debt either student loans, credit cards, personal loans, or mortgages. 

You can pay child fees or save them for the emergency fund. In case all of these requirements are already fulfilled then spend on dining out or outing for staying successful with the budget. 

Can you do the envelope system without cash?

Yes, you can do cash envelope system budgeting without physical cash. it’s possible if you use a digital envelope using apps like Goodbudget and Mvelopes. If you don’t like to use these apps then write the amount on each envelope and spend money using a debit card. 

Each time you go for purchasing then withdraw cash from the ATM and spend it. After that write the amount figures on the budgeting tracker inside the envelope. For example, you spent $50 on groceries then write $50 on the budget tracker and put it inside the groceries envelope. 

What if you run out of money in my cash envelope?

In the cash envelope system if you run out of money, don’t go for shuffling cash from one envelope to another. For example, if you run out of money in groceries envelope then don’t take cash from utilities to put in groceries. Because the main purpose of the envelope budgeting system is to control your spending. 

The solution is to either cut down the expense. For example, if your fuel expense is eating out your money then limit car trips. If dining out or your entertainment budget is drowning then limit alcohol and dinners at restaurants. 

Another way is to adjust take some portion out of the remaining savings and put it in an envelope with a low budget. Because it’s possible that you inaccurately estimate the budget for the category at the start of a month. But don’t go overboard just transfer a small amount of money. 

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Cash envelope budgeting is the best way to control spending and save more money. 

Not only you can avoid credit cards and taking debt but also helps you become frugal. 

You use cash for the majority of purchases like groceries, food items, rent, and other wants. So bearing interest expense can be avoided. 

But remember if you don’t use digital envelope budgeting and do cash stuffing in envelopes then put envelopes in a secure place. 

Start each new month with a zero and reset the envelopes with new adjusted amounts becaue every month is different. 

If you like this post and find it helpful then share on with your social friends to spread the word to a maximum number of people. 


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