Tuesday, July 10, 2012

The Envelope System

Three years ago, before the car wreck, I had a regular envelope system which I used to keep track of my money and save for big things like car repairs, a laptop, etc. I love this system. It is simple and practical and easy.

Using an envelope system requires planning ahead and keeping track of what you have in a way that a bank account can't. When you have the actual cash in hand you will be far less likely to spend more money because you are seeing it literally flying out of your hand. This is a great way to help save money for things you need: a new car, a trampoline for the kids, a vacation to see the family, etc.

We use the envelope system in addition to a checking and savings account. The checking account is like the emergency fund. It has anywhere from a hundred to three hundred which is almost never used since the envelopes are where the cash is organized. The savings account is used in place of a savings envelope. Savings accounts draw interest and if you have a lot of cash in them that makes more sense than keeping the money in an envelope at home.

What You Will Need
Money (in $20, $10, $5)
Sticky Notes
A sharpie
A pen

1. Make a list of what things you spend money on each month. Examples: insurance, gas, groceries, movie rentals, date nights, drinks at sonic or a coffee shop on the way to work, hygiene products, clothes/shoes/socks/undergarments, electric, water, house payment/rent, savings etc.
2. Make an envelope for each category you are going to be putting money in. Place a sticky note on the front of each envelope and write the month (aka July for this month). If you will be putting money from separate checks number each check by when it comes in (#1 check of month, #2 check of month, etc.)
3. Next decide how much money each category needs. Some things, like drinks may only need $10 a month, while others, like gas, need much more than that.
4. When you have the money figured out put it in the labeled envelope.
5. On the front sticky note next to the month and check number write the amount you put in the envelope. This is so you can easily keep track of how much money you put in the envelope. Doing this also helps you see if you are putting enough, too much, or too little money in the envelope at the end of the month. Adjust accordingly.
6. When you get ready to go out for a date just grab the cash from the designated envelope and have fun! If there is anything left, put it back in the envelope for another date later on. Same for grocery shopping, and paying the bills. Some envelopes may have just enough in them for the month like rent or electric. Generally you will already know how much you need for those kinds of things.

This Post Was Shared!


  1. Helen, this is a really handy tip! I always slog through receipts at the end of the month, entering them into a spreadsheet, but it would be easier to just divide things up (of course, we'd have to get ourselves organized!!). Thanks for sharing it on Waste Not Want Not, I've pinned it and hope to see you next week :)

    1. I'm glad I could help insipre you! I know that I've kept my reciepts organized in different envelopes before and it really did help me a lot! Yes, organizing your money is hard, but SO worth it!!

      Blue Eyed Beauty Blog

  2. Great idea!!! It's keeping the budget on track for sure. I haven't blanced a checkbook in 3 years but I use my debit card on a daily bases. I know what comes out of each check and how much I have to spend. However, I tend to spend ALOT more on the months I don't use cash. If I have the cash in hand I can keep a visual check on it- each time I use it. I may actually start using this method for my 'weekly lunch money' because working near the beach it's an easy $15 a day for lunch alone. Hmmm, add all my Tom Thumb coffees and then the occasional treat it can add up quick. I think I may give this one a try! Thanks for sharing.

    1. It's a great system. We use it on and off. I have a few envelopes being used right now. I really need to update this post tho lol.


  3. I really want to try this out. But what about the bills I have that are automatically withdrawn from my checking account?

    1. I would suggest leaving the money for those specific bills in the bank account and just put your debit/credit cards up so you won't end up spending that money. This is especially easy for bills which are the same cost every month, for other bills that range in amounts just add the money to the account when you get the bill and have it waiting there for the auto withdraw.



Thanks for stopping and leaving a comment! I LOVE reading comments! {They also help me know what you are interested in reading on my blog!}

Comments on posts older than 14 days are moderated. Other comments may be removed if they are inappropriate or spam. I do read all comments but can't always respond to each one because I don't get online very often.

My email can be found on my 'about me' page if you would like to contact me or you have a question.