How to Set Up Cash Envelope System

cash envelope system

Handing your credit card over to the store clerk and just charging it is quick and easy. There’s no waiting and you get that new item right then and there. THEN, the BILL arrives at home in the mail. That is when it is not fun anymore. The newness of the item we bought is gone or we’ve forgotten how good the food was at the restaurant. By switching to a cash system for certain items, the possibilities to save more increases.

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Studies have shown that when cash is used versus a credit card, that we think harder about if we really need that item. It makes purchasing items more intentional instead of “just put it on this credit card” and trying to figure out where the money will come from to pay the bill when the statement comes in.

I’ll be honest, the transition between credit cards to cash will be difficult as one month you’ll be using cash for this month’s expenses AND paying the credit card bill for basically last month’s expenses.

It can be done and is very rewarding.

Start with budgeting how much you want to spend on each item. Refer to the post on budget for more details.

Types of Cash Expenses

Groceries – this one can really impact the amount spent.

  • Decide how much you can spend.
    • Look at your credit card bills or receipts to see how much you’ve been spending.
  • Figure out how many meals you need – if you shop weekly, then look at the 7 days and determine how many breakfasts, lunches, and dinners you need. If you’ve been invited to your parents’ house for dinner, then that is one less dinner to plan for.
  • Meal plan to decide what ingredients will be needed and make your grocery list.
  • At the grocery store, as you put items in your basket, check them off the list and keep a running total of the cost.
  • When you’ve reached your total (and always leave some extra to cover any sales tax and things missed when calculating the total), that is all you can spend. You may need to swap some things out to get the meal items versus snacks or soda drinks.

Restaurants – enjoy eating out, but do not spend more than your budget can absorb.

  • This was an eye opener for my family. When I was putting the meals on the credit card, I had no idea how quickly this added up.
  • While I don’t get to eat out as much since our family decided to save money by cutting this back, it is a treat and I don’t have to see it on the credit card statement.
  • If you have $150 for the month, you can decide if it is spent on fewer more expensive meals or more, less expensive meals.

Clothing – set aside money each month to buy clothes as needed for you and your family.

  • There may be no expenses some months, but by accumulating the money, you’ll be ready when you do need something.

Pocket Money – my husband and I decided together how much we would each get per week. Some call it allowance, but it sounds like we’re kids, so I changed the name!!

  • This covers the little things that come up during the week.
  • Examples – lunches, gadgets and other things we want

Gifts – birthday, holidays, and other special occasion gifts.

  • Work on a gift list for the year.
  • Include special occasions like Mother’s Day, Father’s Day, and others
  • Put a dollar amount by each gift to come up with a yearly amount.
  • Divide the yearly amount by 12 months to get the amount needed to budget for.
  • If the monthly budget does not allow for this amount, decide where you can cut back and adjust it.

Household expenses – filters for air conditioners, ink for home printer, paper, buying items to support schools and organizations that are selling things like popcorn, cookies, wrapping papers, poboys, etc.

There may be other categories you want to use cash for. Every budget is different, so adjust as needed.

Other Important Information

You can get your cash weekly, every other week, monthly, etc.  It is whatever works with your pay days and needs.

I prefer to use every other week for our family. When the money is spent, the envelope remains empty until it is replenished the next scheduled time.

The less money you have with you, the less tempting it is to spend it.

With that said, there is some planning involved to know when you are going to buy groceries, clothes, etc. to have the cash with you.

Sometimes I’ll use what I have and “reimburse” that fund when I get home.

Items to Keep Cash Organized

There are various types of envelopes used to keep each cash category organized.

These envelopes allow you to track all of the expenses on the outside of the envelope.

Here is another example of preprinted cash envelopes.

I use the old fashion cheap paper envelopes.  I can seal them up, write on the outside what expense category it is and the dollar amount. It is also an inexpensive option when I need to make a new one. You can get these anywhere. I don’t track the expenses on the envelopes, but you can.

I prefer to be able to seal the envelope as I’m less tempted to pull money out for different reasons other than what it was intended for.

The envelopes can be kept in any organizer like a 13 tab plastic accordion folder.

I love my  wallet like this when I’m out shopping. I can keep each expense category separate. There are dividers to have the category labeled. This looks nicer than pulling out the old fashion envelopes we use at home.

Generally, less money is spent when cash is used versus a credit card. These are common categories that cash works well with – groceries, clothes, pocket-money, restaurants, and more. Once the money is gone, the envelope will not be replenished until the next scheduled time. It is both challenging and rewarding to stay within the budget.

Cash envelope system




Discover ways to use the cash envelope system to budget money. Generally, less money is spent when using cash versus a credit card.