The Cash Envelope System – Money Saving For Beginners


The cash envelope system is a very well known system for saving money. It’s been around a long time is tried, tested and proven to bring great outcomes. 

If you haven’t heard of the envelope system then you may want to read from the master creator himself, Dave Ramsey, who has already solved many people’s money troubles with his fantastic book. You can grab it here – The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness 
There is so much confusion around the envelope system. Can you do it if all your spending is don’t online? How do I pay the bills? What about when the cash runs out? Mu husband/wife needs cash too – How does that work?

So many questions but such simple answers! The cash envelope system is perfect for anyone. It gives you the freedom to choose your own budget as well as the rigidity to compel you to succeed with it.  

The basics

So let’s assume you get paid once at the end of each month. When that magical payday arrives, you need to head to the bank and take out the money you need for the month. Below is an example of a budget. You can choose whether you have weekly envelopes or monthly envelopes – it’s completely up to you. Personally, I prefer weekly. 

So you can see that the total cash we need to take out is £418. This isn’t including any gifts for the month. So before you head to the bank, you need to check your calendar for any upcoming birthdays or anniversaries and make sure you’ve included them in your budget. Also check your calendar for any planned meals with friends or other social events and be sure to allocate extra cash to your ‘eating out’ envelope. 

So, that’s what goes into your envelopes. It’s that simple! It may take a bit of getting used to if you’re used to shopping with your card, but you’ll soon pick it up. However, if you are finding yourself tempted to use your card, try to keep it out of sight. And the most important rule of all – all cash in the envelope can only be used on the category you’ve allocated it to and once it’s gone, it’s gone!

Your budget will probably look totally different to the example above and that’s fine. What you really need to make sure you’re doing is looking clearly at what you’re spending. If you spend £20 a week on beauty or £60 a month on clothing – make you budget for it. Budget for absolutely everything!

My spouse needs money too!

There’s nothing more frustrating that putting your heart and soul into your envelope budget system, only for your spouse to be doing the shopping on their way back form work and you have the cash envelope! The whole thing just goes to pot!

In this case, you need to figure out the best solution for you. Maybe you could split the envelope cash between you so that you both have a bit. Maybe you need to plan you’re shopping better to make sure you don’t need to nip to the shop on your way home. 

What about bills?

Everyone has those fixed expenses such as rent/ mortgage, gas, electric etc. It would be silly to take out the cash just to put it back to cover the bill. So for these, you just need to allocate the money to them in your budget but not actually withdraw the money. Not everything has to be paid for in cash. As long as you’re keeping track and making sure that you’ve accounted for everything, you’ll stay within your budget. 

So just like the example budget above you would create another one for your fixed expenses. 

These are your fixed expenses and by having them on your budget, you can ensure you’re leaving enough money in your account to cover them. 

What if I spend all the Cash?

One thing I would recommend is to always include a miscellaneous envelope. It’s up to you how much you put in here but sometimes unexpected expenses come up and having a small safety net can be really useful. If you don’t end up needing it, then bonus! You have extra cash to go into your savings or to pay down debt. 

The key is to always keep in mind the reason you’re doing this. You’re reading this post and creating your cash envelope system because you need to battle your finances and have a system in place which doesn’t result in you tearing your hair out at the end of the month. You don’t need to have all that stress, all you need is to be headstrong and have the willpower to follow through with your plans. 

Can I still use this system and do everything online?

Absolutely! Yes, you can do all your spending online and still use this system. It does require a bit more discipline though because the money isn’t there in your envelopes. You have to keep track of how much you allocated and how much of that you have spent.

I recommend still having envelopes but instead of putting money in there, put your receipts inside to help you keep track. Also, write on the outside of the envelope what your starting amount is and each time you spend from that envelope category, write how much you spent and how much is remaining. 

How do I make sure I succeed?

Unfortunately, I can’t wave a magic want and make this system work for you. You have to be motivated and stick with it to make it work. Always keep the end goal in sight. Are you saving for a house, a new car or just to have spare cash for a rainy day? Picture yourself there and how amazing you will feel. Imagine yourself looking at your bank balance and smiling. You can do it. It is possible. You just need to be strong and stick with it. 
If you enjoyed this post please give it a share – it’s really appreciated. 

Do you have any great ways which have helped you to save money? Are you just starting out with the envelope system? Leave a comment and let me know how you’re getting on. 

This post may contain affiliate links. I will be reimbursed for any purchases made. I only promote products and services which I love and use myself. 

4 thoughts on “The Cash Envelope System – Money Saving For Beginners

  1. I use ziplock bags/anything floating about in my backpack (like a snack box lol!) to separate cash for different areas of spending. Last week at the supermarket I had a crack at buying my breakfast food for the week with one note and then separating out that cash, then using another note to buy lunch food. I also have a weekly cash allowance to spend on just fun stuff, period. It makes you feel less guilty for buying unnecessary but awesome things because it’s still ‘within your budget!’. It’s a privelige, I must understand, to be able to have the budget to do fun things.

    And what happens with the loose change? It goes into a savings tin. I’m using one of those that I picked up at an op shop, ’21 party fund’, and I’m turning 21 next month, so it’s a perfect match! If you’re interested, instead of having a party, I’ll be travelling Europe & Scandinavia that month, so it will be like a 21st birthmonth of adventure! The stowed cash is set to be used for travel treats like macarons and chocolat chaud in Paris (yum!).

    Wow. That was an essay…

    1. Wow! That is quite an essay. It’s so good to hear someone being so enthusiastic about budgets though! So many people see them as a restriction rather than a say to spend money how you want to spend it, without the guilt.
      I love your birthday plans! Who needs a party that lasts one day when you can have whole month of travel and celebrations! Happy 21st birthday for next month.

      1. Aw thanks I didn’t think that. I don’t like the word ‘budget’ either, it’s as horrible as ‘diet’. But I think using cash makes money become more real…
        Thanks for the b’day wishes!

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