How To Make a Cash Envelope System – with cute printables!

Pink gold cash envelopes

For anyone who is struggling with their money, I always recommend switching to a cash-only budget.

If you’re currently using your cards for everything, there may be a bit of resistance there. Maybe in the form of “pfft that doesn’t sound like it would make any difference at all?!”.

Well, here’s the deal:

Using a cash budgeting system will save you a ton of money, quickly. You’ll be amazed by how much of a difference it makes!

A quick disclaimer though – it’s all about finding out which method works best for you. I would say anyone who is struggling with managing their money definitely needs to start out with a cash only budget, because it will help you more than any other method in the beginning.

What is the envelope money saving method?

In case you aren’t quite sure what I’m talking about, don’t worry – I always try and explain things as much as I can, in order to make things as easy as possible for you.

The cash envelope system is where you pay your bills online as you would usually, but any variable spending will be done using cash.

Once you get paid, you will be withdrawing the cash out and using that during that pay period.

Why it will work for you

There are 2 main reasons why the cash envelope method works so well:

  1. Psychologically, you can see the money going out and you can see what you are left with. This will help you to keep on top of your money and see how much you are left with
  2. Mathematically, you can keep track of your money a lot better as you can subtract your expenses and work out how much you are left with

The power of visualisation – sometimes we just need to see something in front of us for it to connect with our brains, and understand the process of spending money.

How To Start Cash Envelope System

Before we get to actually using the cash envelope system there is a bit of groundwork to be done beforehand, so that you can see how much money you have to work with.

Be sure to work through all of the steps within this article, and you’ll be straight on your way to a happier place with your money and working towards your goals!

Cash envelopes and budget real example

Starting a Budget

I don’t know about you but I LOVE budgeting. Budgeting my money has helped me pay off debt, save for my goals, buy my dream house and so much more, without feeling deprived.

It doesn’t have to be perfect, you just need to do your best and you’ll see that taking action helps move you closer to your goals.

Make a Big Goal

When it comes to pretty much anything in life, it’s a good idea to have a goal to work towards.

You won’t always feel motivated. You need to practice discipline.

As motivated and eager to get started as you may be now, it’s hard to change things – and there are days when we will be tired and can’t be bothered.

This is normal, and it doesn’t mean that you are doing anything bad, but it does mean that you will have to think of a way to keep you motivated in these times.

The best way of doing that? Having a goal.

But not any kind of goal – a goal that will light a fire within you, and keep you going through the hard times. Common goals include wanting to buy a house, or doing it for your kids. Your goal is personal though, and it’s worth the time to sit down and figure it out.

Tracking Expenses

Before you do anything, I would always recommend to start with tracking your spending. This goes back to putting in a bit of groundwork before diving right in.

It doesn’t sound like a ton of fun I know, but I promise that it will become easier over time and it will just become second nature to you to track your expenses.

So, when I am talking about tracking expenses, I am talking about the money that you are spending outside of your bill payments.

Your bill payments will be part of your main budget, and we don’t need to worry about tracking them, because we know when they are coming out and the exact amount of money that they are going to be every time.

The expenses that you will be tracking are your variable expenses – the expenses that change from month to month, and are influenced by how you are feeling and what is going on in your life.

You’re going to write down every single transaction that you are making.

I know, that sounds like a lot of writing and a pain, but the longer you do this for, the less that you will have to write down, and the clearer it will become to see the importance of tracking your expenses.

The reason that this is important is because you will be able to make a realistic budget from this. We can guess how much we are spending sure, but this tends to be incorrect.

Not only that, but it will keep you accountable and aware of how much you are spending.

I also love to analyse why I have been spending money on certain things – was I tired that day etc?

Cash Envelope Breakdown

Now that you’ve seen how much you are spending on your variable expenses, it’s time to work out how you are going to split them up into your cash envelopes.

Examples could be:

  • Health
  • Beauty
  • Food
  • Fuel (car)
  • Pets
  • Kids
  • Date night
  • Entertainment/fun
  • Household items (e.g. cleaning supplies)
  • Miscellaneous

What you are spending on is personal to you, so the categories that you create for your envelopes will be personal to you. Whatever makes sense to you and works best for you – do that.

The next step that you need to do is determine how much money goes on each category – this is where tracking your expenses will help you out.

Make Your Cash Envelopes

The next part has got to be the most fun of all – making your cash envelopes!

I have a really pretty set of cash envelopes that you can download here – they are made to fit both UK and US notes.

When you download your cash envelopes, you will need to cut them out and fold them along the lines. You will then need to stick them down using glue or tape – tape will look quite messy though! This is the glue that I use for mine here*.

Pink gold cash envelopes

Once you are paid, go to the bank (or cash machine) and withdraw the full amount that you need for all of the envelopes. And get stuffing them!

Questions About The Cash Envelope System

There are some common questions that come up about using the cash envelope system, so I will try and cover them all for you – but please let me know if you have any other questions and I can help you out with those too!

What If I Am Spending Online?

If you are spending online, it’s going to be a little bit trickier, but there’s no reason why this can’t still work.

First of all, I’d ask why are you spending online, and what are you buying exactly?

If it is a planned expense, then this can go on your budget, and you can keep the money in your online account for this expense.

For monthly expenses that you are making online every time, this doesn’t need to be taken out as a category for a cash envelope, but can instead be treated like an online bill.

You may want to do a cash envelope specifically for your online spending, and then when it comes time to make your purchase, put the cash back into your bank out of the envelope and carry out the transaction.

What If I Run Out Of Money In My Cash Envelope?

If you run out of money in your cash envelope, it will be really tempting to take money out of your other envelopes, but this is something that you want to try and avoid.

The reason that you will want to try and avoid this, is because it will have a knock-on effect on the category that you are taking the money from.

If you are consistently having to ‘borrow’ money from other envelopes, this could be an indicator that your expenses aren’t realistic enough. Have a look through your expense tracker and see how much you are spending – and increase the amount if needed.

What To Do With The Change?

If you get change back, you’re probably not going to want to put the coins back into the envelope, so it’s up to you to decide what to do with them!

You may want to save them in a piggy bank and then cash them in at the bank to add to your account or savings, or keep them and make a contribution to a savings account.

Or – keep it in a jar for an emergency – whatever works best for you.

Where To Keep The Cash Envelopes?

It’s not the best idea to take all of your cash out for the month out with you when you are out and about for safety, so you’re going to want to keep them somewhere safe, and only take out the envelopes that you need that day.

A good place to keep the envelopes at home could be in a fireproof safe*.

What If There’s No Money In My Account?

I do recommend to work to the zero-sum budget method, which is where you allocate all of your money a ‘job’ each pay period, so that you are left with a balance of zero.

I know that this may be a bit of a worry, and leaving your actual bank balance at zero is not something that I recommend, in case of charges that you have forgotten about. The last thing that we want is for you to go into an unplanned overdraft!

I’m so excited for you to get started with your cash envelope and budgeting journey! Here are the links to download your cash envelopes and budget planner.

Do you use this system? How do you find it? Or do you want to give it a go? Let me know in the comments below!

cash envelope system