A Beginner’s Guide to Using Cash Envelopes


The other day, a friend of mine asked about how to use cash envelopes.  That was a question I once asked, too, so I thought I’d share my answer about how and why I use them with you.

What we pay for IN CASH:

  • Groceries – I lump my groceries, toiletries, cleaning supplies, and paper goods in this envelope.  Some people keep them separate.  Your choice.
  • Restaurants – Appetizers, entrees, desserts, beverages, tips, and all.  This really shifts your perspective when you pay for your meals in cash.
  • Entertainment – Date night, a trip to the zoo, coffee with friends, etc.
  • Gifts (excluding Christmas) – Birthdays, weddings, showers, etc.  Click here to find out how we save for Christmas.
  • Miscellaneous – Anything from batteries to stamps to light bulbs.
  • Fun Money – Each spouse has an allotted amount of cash to blow on anything he or she wants.  Basically, this keeps the fun in living on a budget.

We used to have more envelopes, but discovered it was too tempting to spend that cash, so we opted for what we call our “digital envelopes.”  We opened separate checking accounts just for expenses like clothing, baby, Christmas, and non-monthly expenses (auto insurance, repairs, vacation, etc.).

I’ll go into more detail about the benefits of using digital envelopes next week.  This week, I want to direct your attention toward the green stuff:  Cash.

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Now let’s back up a step and discuss briefly WHY we use cash envelopes.

Did you know that consumers spend 12%-18% more when they use credit cards instead of cash?  When I first heard that statistic, I wondered if it was true.  To test it, I started carrying a set amount of cash in envelopes according to each spending category.  It was hard!  Once the money disappeared, I just wanted to grab my debit card and cover the difference.  Many times I did.

That tells me that the statistic is true.  At least in my case.

We’ve been using cash envelopes over these last four years to try and establish some boundaries.  It’s not to prevent us from having fun or to punish ourselves.  By learning to say “No” today, it enables us to say “Yes” tomorrow.  As my mother always says:

[Tweet “”Don’t give up what you really want for what you want right now.””]


Just to eliminate any confusion, here’s a list of things we DON’T use cash for:

Rent/Mortgage payment, utilities, doctor visits, tithing, charitable donations, Netflix, auto repairs, hotels, rental cars, fuel.

These are not areas where we typically overspend or splurge, so we just pay them online, via debit card, HSA card or check.  The whole idea is to live within your means.  Think of things that tempt you to impulse buy.  Cash in certain categories will, statistically, help you control your dollars.


What cash envelope system should you use?

I learned about and received my first cash envelope system in Financial Peace University.  Since then, I discovered a much more efficient system that I love and use every day.

It’s called the Deluxe Executive Envelope System.

Here’s a video walk-through of my own (with a special guest helping me):

*The only feature NOT pictured here is my checkbook.  Moment of transparency: I forgot to cover up the sensitive data on my checks before filming and had to trim it out.  Sorry!  🙂


  • Several durable cash envelopes and replacements
  • Coin pouch
  • Card holding area
  • Notepad for shopping lists
  • Checkbook and register holder
  • Coupon storage
  • Pen holder


Get your cash envelope system here.

A lot of people are worried about carrying so much cash.  If that’s you, then leave most of it at home, except what you’ll need that day.  You can also split your monthly cash into two installments.  This works well if you get paid biweekly.

Start 2016 on the right foot.  Try out cash envelopes.  Any questions?  Leave ’em in the comments below!


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6 thoughts on “A Beginner’s Guide to Using Cash Envelopes

  1. What’s the saying cash is king? and it hurts a little more when you spent it versus using plastic. Thanks for the overview.

  2. This is something we haven’t tried – despite 3.5 years following Ramsey’s steps. I might be teaching Financial Peace University soon – so who knows?

    • You might like trying the digital envelope approach, if you haven’t already. That’s cool to hear that you might be teaching FPU soon. I’m teaching another class in January! 🙂

    • We create the budget on a separate doc, then transfer the allotted amounts into the envelopes. We do a budget for the whole month and used to take out all the cash at the beginning of the month, but now we do it every two weeks. Either is fine, but that helped us rein in our spending and not carry around so much cash. Hope that helps, Colter. Thank you for asking!