How to Budget With the Cash Envelope System (2024)

Want to keep more of your hard-earned money each month? Try budgeting with cash envelopes!

Ramsey's cash envelope system is nothing new—it’s been around for decades. But some people still don’t know exactly how or why it works. Let me show you! (And if you hang with me until the end, I’ll tell you how to make using cash envelopes more fashionable than ever.)

What Is the CashEnvelope System?

The cash envelope system is a way to track exactly how much money you have in each budget line for the month by keeping your cash tucked away in labeled envelopes.Throughout the month, you can just peek inside an envelope to see what’s left to spend—because you’ll see the literal amount in cash. Right there. How easy is that?

If you’re constantly going overboard in a certain area of your budget (hello, food!), then take out the exact amount of cash you’ve budgeted for that category and stick it in an envelope. When you shop, use what’s in your cash envelope. Nothing more. Once the money is gone, it’s gone—so this will force you to stop overspending and help you achieve your money goals faster.

How the Cash Envelope System Works

One of the reasons we overspend is because there’s nothing telling us when to stop. That’s where your cash envelopes come in. They’re a great tool that’ll help you stick to your budget. Here’s how to use them:

1. Make a budget.

First things first, you need to make a budget. List out your income (everything coming in for the month), and then list out all your expenses. You’re aiming for a zero-based budget—meaning income minus expenses equals zero . . . meaning you’re giving every dollar a job to do. If you want to keep up with this part in an on-the-go budgeting app, check out EveryDollar. It’s free!

2. Think of the budget lines that need a cash envelope.

When you’re making your budget, think hard about those lines that tend to become budget busters. You know, the ones you tend to overspend in month after month. These are the perfect spots to use the envelope system. Here are a few I find most helpful to make envelopes for:

  • Groceries
  • Restaurants
  • Gas
  • Medicine/pharmacy
  • Hair care/makeup
  • Car maintenance
  • Personal
  • Entertainment
  • Gifts

3. Create and fill cash envelopes for those budget lines.

Let’s say you’ve budgeted $700 a month for groceries and you get paid twice a month. When you get your first paycheck of the month, take out $350 from your bank account and put the cash in an envelope. On that envelope, write out“Groceries.” When you get your second paycheck, do the same thing again and put that $350 in the envelope. That’s your $700 food budget for the month.

Take the envelope with you when you go to the grocery store. And remember, if you shop every week and you spend $300 that first week, well, you’ve just got $50 left until your next paycheck. I know, I know—it’s hard. But it’s better than constantly overspending.

And on the flip side, if you get really thrifty all month by meal planning, shopping sales and couponing—and you don’t spend all of the money from the groceries envelope that month—that’s awesome! Put that extra money to work on your current Baby Step (aka the proven way to save money, pay off debt, and build wealth). I’ll talk more about this at the end.

Start budgeting with EveryDollar today!

Here’s the key to making the cash envelope system actually work: During the month, no money—and I meanzero money—comes out of that groceriesenvelopeexceptto pay for food at the grocery store. And if you go food shopping and leave the envelope at home by mistake, turn your car back around. You can’t just sort of use the envelopes and expect them to work.

4. Spend only what you’ve put in each cash envelope.

Don’t forget: When your money’s gone, it’s gone!If you want to go to the store but don’t have enough money, raid the fridge for leftovers. Or do a pantry challenge by digging through your pantry to see what you can find to make dinner without having to hit the grocery store. Using the cash envelope system is a great way to really get intentional about yourspending habits.

Advantages of Using the Cash Envelope System

  • It keeps you on track.
  • It enforces discipline.
  • It holds you accountable.
  • It makes it pretty hard to overspend.

Disadvantages of Using the Cash Envelope System

  • You have to get cash out of your bank account.
  • You have to juggle cash.
  • You have to spend only what you have.
  • Wait—that last one just seems like a challenging advantage.

Is the Envelope System the Same as Cash Stuffing?

If you’re on TikTok or Instagram, you might have seen a trend calledcash stuffing. Cash stuffing is a process of splitting up your cash each month into envelopes assigned to a line of your budget. Does that sound familiar? Yep! Cash stuffing is the same thing as the cash envelope system.

Maybe social media thought cash stuffing was a more exciting way to describe it all, but cash stuffing works the same way as the envelope system: At the beginning of the month, you’re taking out cash from your paycheck to fill your labeled envelopes. For example, if you’ve budgeted $35 toward your“Beauty”budget line, you’d stuff $35 of cash into that cash envelope.

Different name. Same technique. Honestly, I’m just glad there’s a social media trend that helps people keep from overspending. Just know that if you jumped on the cash-stuffing bandwagon, you’re using the cash envelope system. (It’s all envelope budgeting!) And you’re working on being intentional with your spending. Bravo!

What if I Pay Some of My Expenses Online?

Here’s the thing with the envelope budgeting system: It works better when you’re actually physically walking into a store to make a purchase. Shopping at the grocery store, going out to eat, getting a haircut or oil change—these are all times when using the cash envelope system works really well.

You can still use cash envelopes for online purchases, but it does get a little trickier. Write the amount you’ve budgeted for on the outside of the envelope, and don’t spend more online than the amount you’ve jotted down. Keep track of how much you’ve spent, and write it on the back of the envelope, just like if you were balancing a checkbook.

What if I Run Out of Money in My Cash Envelope?

Be careful not to borrow from the other cash envelopes. When it comes to the envelope system, it can be really tempting to shuffle cash from one line item to fund another.

Let’s say you used up all the money in your restaurants envelope—don’t be surprised if some inner voice tells you to grab your clothing envelope.

Remember, the whole purpose of using cash envelopes is to control your spending and help you stick to your budget.

If you run out of restaurant money, eat leftovers instead of going out. If you see your gas money slipping away faster than you planned, it’s time to use some gas saving tips—like limiting your trips or carpooling to work. Find creative ways to make your money stretch when the envelopes are getting low.

And don’t just spend, spend, spend until your cash envelope is empty. Pay attention to how much is left! This will help you spread out your spending and keep you from getting to the end of the envelope before the end of the month.

What About Emergencies?

If you have a crisis come up in the middle of the month or something happens and you have absolutely no choice but to shift your cash envelopes around, figure out how to adjust your budget.

If you’re married, talk with your spouse and decide together on the best course of action. Both of you need to be involved—it’s a joint decision. Or if you’re single, run the amounts by your accountability partner to get their input.Don’t jump into pulling from your emergency fund immediately, and don’t drain other envelopes for every surprise expense.

What if I Have Money Left in My Cash Envelope at the End of the Month?

I mentioned this super briefly before. But if you’ve got money left in an envelope at the end of the month, congratulations! You came in under budget. That’s the best feeling in the world. And it’s okay to celebrate too . . . with a budget-friendly reward. You should totally celebrate those little wins along the way!

Then, put that extra money to work. If you don’t have Baby Step 1 set up (a starter emergency fund of $1,000), get on it! And if you’re onBaby Step 2 and paying off your debt, take that extra cash and put it toward yourdebt snowball. Every little bit helps.

Remember,cash envelopes are powerful weapons in the fight against overspending. They can help you manage your money better than you ever have. Put the cash envelope system to work for you, and get intentional about how you’re spending your money.

Take Your Cash Envelopes to the Next Level

Okay, guys, since we’re talking about the cash envelope system, I want to tell you about the wallet I created! It’s beautifully designed and will empower you to use your cash envelopes and budget the way you want to.

Here are some of my favorite things about the wallet:

  • Four interior envelopes for cash
  • Ten slots for debit cards and gift cards
  • A zippered pouch for coins, coupons or receipts
  • A high-quality genuine leather exterior (aka it looks good and it’s built to last)
  • Wristlet with zip-top closure
  • Multiple colors (black, camel, metallic blush and more!)

And honestly, my most favorite part is the partnership with JOYN that makes these wallets. JOYN provides fair-trade jobs to vulnerable locals in India so they can have dignity, livelihood and a future.

So, while you’re saving money and working to change your family tree, so is each person handmaking this wallet. As much as I believe using these wallets can change your life for the better, I know it will do that for the people making them as well.Get yours today!

And remember: Whether you call it the cash envelope system or cash stuffing, this method is all about being intentional with your spending so you can start creating a life you love. It’s totally worth it, and you can totally do it!

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About the author

Rachel Cruze

Rachel Cruze is a #1New York Timesbestselling author, financial expert, and host ofThe Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simpleand Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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How to Budget With the Cash Envelope System (2024)


How to Budget With the Cash Envelope System? ›

The concept is simple: Take a few envelopes, write a specific expense category on each one — like groceries, rent or student loans — and then put the money you plan to spend on those things into the envelopes. Traditionally, people have used the envelope system on a monthly basis, using actual cash and envelopes.

What is the downside to cash envelope system? ›

You may also feel unsafe carrying cash, as it's harder to track it when it's lost or stolen. It can be cumbersome to get started: Getting all the envelopes ready and allocating money into categories can take some time to set it all up, especially if you haven't created a budget before.

Is envelope budgeting a good method? ›

And if you regularly overspend, you might not reach those financial goals you've set. The envelope budgeting system is one way to track your money each month, and it may help you curb overspending because it limits what you have available.

What is the 50 20 30 budget rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

Does cash stuffing really work? ›

Bottom line. Cash stuffing might appeal to consumers who prefer simplicity or have problems with impulse control. But the risk of having all that cash around — not to mention missing out on interest and card rewards — should make you think twice before labeling all those envelopes.

What is one potential downside of using a cash envelope budget? ›

One potential downside of using a cash envelope budget is the inconvenience of having to physically carry and manage cash. This can be especially cumbersome for those who prefer to use credit or debit cards for their purchases. Additionally, carrying a significant amount of cash can be a security risk.

What can I do with leftover cash from cash envelopes? ›

Money left over in cash envelopes means you're doing a great job with your budget. You can use this to treat yourself or add to your personal spending money envelope the next month. You may also want to use this extra money to make extra debt payments or put it in your savings account.

How to save $5000 in 3 months with 100 envelopes? ›

The 100-envelope challenge is pretty straightforward: You take 100 envelopes, number each of them and then save the corresponding dollar amount in each envelope. For instance, you put $1 in “Envelope 1,” $2 in “Envelope 2,” and so on. By the end of 100 days, you'll have saved $5,050.

What is the #1 rule of budgeting? ›

Oh My Dollar! From the radio vaults, we bring you a short episode about the #1 most important thing in your budget: your values. You can't avoid looking at your budget without considering your values – no one else's budget will work for you.

What is Dave Ramsey's envelope system? ›

The envelope system is a way to track exactly how much money you have in each budget category for the month by keeping your cash tucked away in envelopes. At the end of the month, you can see how much cash is left by taking a quick peek in your envelope.

How much money should you have left over after bills? ›

Key Takeaways. The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

How much do I need to save a month to get 20000? ›

“Saving $20,000 per year is about $1,667 per month or about $385 per week,” she said. “Thinking about it in smaller terms makes it less daunting of a goal.”

How much money should I have left over at the end of the month? ›

The 20% rule is a good general guide, but it isn't the right fit for everyone. Some people can save above that rate, while others merely struggle to make ends meet. “Some people pay their rent and they have nothing left.

How do I start a cash envelope system? ›

You just take the exact amount of cash you've budgeted for each category and stick it in individual envelopes. Then throughout the month, you check your envelopes to see what's left to spend—because you'll see the literal amount in cash. Right there. How easy is that?

What is an alternative to cash stuffing? ›

Instead of stuffing your spending envelopes with cash, use gift cards. At the beginning of the month, purchase gift cards that correspond with your various spending categories. For example, you might get one card for groceries, another for gas and another to use for entertainment purchases.

What is cash stashing? ›

Put cash in envelopes. Tape an envelope to the back of a wall decoration, the bottom of a toy box, the inside of a Christmas decoration box or to the bottom of a kitchen shelf. Almost any container or package can be used for hiding.

What are the disadvantages of cash based payment? ›

The disadvantages of cash:
  • Hygiene concerns. Coins and banknotes exchange hands often. ...
  • Risk of loss. Cash can be lost or stolen fairly easily. ...
  • Less convenience. ...
  • More complicated currency exchanges. ...
  • Undeclared money and counterfeiting.
Mar 14, 2024

What are the pros and cons of cash stuffing? ›

Cash Stuffing Pros and Cons
  • Makes budgeting feel real. You can make a budget that is immaculate, breaking down how much you should spend down to the penny; it doesn't matter if you don't follow it. ...
  • Limits debt. If you're always spending with a credit card, your debt can get out of hand quickly. ...
  • Simplicity.
Mar 2, 2023

Why do building envelope systems fail? ›

Building envelopes can fail when materials don't achieve the published performance levels, often as a result of errors in the manufacturing, storing, or handling of the materials or components within the product. Contractors must inspect all building products before using to prevent envelope failure.

What are the disadvantages of cash budget? ›

One of the main drawbacks of using a cash-only budgeting system is that it can be inconvenient and risky. You have to withdraw cash frequently, which may incur fees or limit your access to your money. You also have to carry cash around, which can make you vulnerable to theft or loss.

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