How To Create A Cash Envelope System

I work full-time and my boyfriend works while going to school full-time. In our household we’ve adapted to the “Cash Envelope System.” When we started it was a little difficult, and things were tight, but as the weeks flew by we quickly realized that we had a lot more money than we thought to work with.

There are many methods of creating a cash envelope system but we do ours a little different. In theory, you’d take out all of the cash you need for the month and put the money into separate envelopes, and only spend what’s in them for what you need without overspending. I’m going to show you how we created our cash envelope system.

First of all we get paid bi-weekly. So, we fill our envelopes every two weeks. We sat down and wrote down all of our expenses and the dates our bills are due. We also called the electric company to see what our average amount for the year was (we set aside that amount regardless if the bill is lesser, and we continue to do that all year {it really helps during the hot summers and cold winters when the bill is a little higher}).

We set up a separate checkings account for the bills, and every paycheck we transfer money into that account from our main accounts. We like to pay some of our bills electronically and pay them with the “bills” account. For example, we always pay our phone bills, electric bill, and internet bill electronically (we don’t allow auto payments though). We always write checks for our rent (so we can have proof, lol I’m old school).

We then pull money from the bank for the items that we’ll use cash for.
It’s mostly our groceries, laundry, entertainment/eating out, and gas money for the car. I add envelopes for other categories as they come along, for example, I have my nieces and nephew birthday gift money, and an envelope for my upcoming travels spending money.

I write the name of the category on the outside of the envelope, and on the other side of the envelope I write my contact information (just in case I lose it and a good samaritan decides to do a good deed and return it).

We then divide the cash needed into each envelope. To maximize the grocery budget I search my pantry first to see what I already have and meal plan. Then I shop the sales ad and match sales with coupons. We have a pretty decent sized stockpile so I only go coupon crazy on amazing, can’t miss, stock up deals. I usually put the coupons I’m going to use in the “groceries” envelope so I don’t forget them.

We try to go out at least once a week, sometimes we go out more, sometimes it’s for dinner or movies, or trying new things out around town. If we are going out to eat we always try to find a deal or go to a restaurant that has daily specials, bogo deals, coupons, etc. Sometimes we just want an experience and will splurge. Once that envelope is empty we won’t go out until we refill it (we haven’t had that issue yet though).

Every week we take $20, cash it into change at the laundromat, and put it in a jar. We usually don’t spend $20 on laundry weekly but I like having a lot of quarters around just in case. Plus if I ever get low on cash I’ll at least have clean laundry, lol.

I know a lot of people keep their loose change in their envelopes, but I take all of my loose change and put it in a jar. The nickels, dimes, and pennies multiply quickly and eventually you have a lot of extra cash. I put all quarters in the laundry “quarters” jar.

The key to the cash envelope system is staying strict and committed. If the envelope is empty it’s empty. No borrowing cash from the other envelopes. Once you have this mind frame, it helps you stay on budget and work with what you have. You might not buy that magazine when you know you might have to use that $5 to help purchase groceries. The system helps keep you on your toes and helps you become very selective about the items you purchase.

When I shop using the system I sometimes trick myself into believing that the money in the envelope is the only money I have. I in return look for even more ways to cut costs. Recently I was able to look up a flight ticket and make the purchase without even thinking about a dent being made in my account. I’ve gotten so used to the system I barely realize that I have money in the bank.

Using the cash envelope system has helped out our household tremendously. We’ve been able to save more money. We have more wiggle room in our budget. We’ve been able to see what we really need in order to survive. Plus, using the system has taken a lot of financial stress off of my shoulders.

Sometimes people aren’t able to switch careers or make more money. It’s an amazing feeling when you start to take control of, and budget what you already have and see how far that money stretches.

Have you tried the Cash Envelope System? How has it worked in your household?

Do you want to know more about saving or have particular request? What money saving advice do you want to know? We’ll also be sharing readers success stories, so feel free to submit your story. Let me know at 

*Note: I am not a financial advisor. I’m only sharing what I’ve tried, and what works well in my household.*



  1. Katie
    November 2, 2016 / 10:07 am

    This is very helpful. I like that you have online bill you pay but cash for everyday things. This is what I want to start doing with my husband for our family budget. Very helpful tips to get me started.

  2. Patty
    September 9, 2016 / 10:39 am

    We had no debt except for our mortgage when we started the envelope system, but we wanted to pay down our mortgage faster, and boy has this helped.

  3. June 25, 2016 / 6:45 pm


  4. christopher
    June 24, 2016 / 12:21 pm

    So the money you pull from the bank to put into the envelopes is what turned around and you get money order to pay the bill not all bills can be paid in cash.. unless you are using it for only cash purchases, groceries, gas and entertainment

  5. Deborah
    May 11, 2016 / 10:51 pm

    When I went through credit counseling, not because I was in debt but because I was living paycheck to paycheck, he had me keep a record on the outside of the envelope just as I would my check book.
    Date/Deposit Amount/ Balance.
    Date/Amount Spent/ Balance.

  6. May 8, 2016 / 8:15 am

    You’re welcome!

  7. May 8, 2016 / 8:14 am

    You’re welcome!

  8. May 8, 2016 / 8:13 am

    Hi Hayley,

    When I first started my budget was extremely tight. I just wrote out a list of my basic bills to survive, the amounts, and the dates the bills were due. I used to get paid bi-weekly (now I’m irregular which is a whole different story) so I took that amount and divided by two and each check I put the amount I needed in my “bills” checkings account, then took the cash out for the envelopes. So for example if my monthly food budget is $100 then I’ll take $50 from each check and put it in the envelope. You have to do what works best for your living situation. I hope this helps.

  9. Hayley
    May 8, 2016 / 8:04 am

    Hi there! We have been having trouble getting our envelope system off the ground. My husband is paid weekly and I’m bi-weekly. Should we do it at a specific time of the month or how do we get our budget going for the whole month without having a month’s worth of expenses saved? Does that make sense? 🙂

  10. Miriam. Bonine
    May 6, 2016 / 10:06 pm

    Miriam Bonine, we done the Dave Ramsey a while we gave up it wasn’t, working for us we may try this the envelope system, Thank for coming up with that!

  11. Alicia J
    May 6, 2016 / 3:09 pm

    Great article. I myself use the envelope system as well but never thought to put my info on the back of the envelope in case it gets lost. Great tip. Thanks for sharing

  12. March 6, 2016 / 11:07 am

    This is a very good article explaining how it works. We listened to Dave Ramsey for about 2 years before we switched to cash. We always paid off our credit cards and our only debt was our mortage so I thought that it didn’t apply to us. Switching to the cash system has made all of the difference for us financially and really in our marriage as well. We didn’t fight a lot about money but we have so much peace now, and we are very close to paying off our mortage!!!

    I even started making pretty cash envelopes and selling them on Etsy. If you have time, check out my store and let me know what you think.

    I am shamelessly trying to get the word out to other Dave Ramsey fans. I wanted something like this and couldn’t find it so I made it myself.

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