Smart Money Mom

How to use the cash envelope system without cash

The cash envelope budget system is one of the simplest forms of budgeting you can do, but if you don’t use cash, you might think you’re not able to use it. That isn’t necessarily true, but it does take a little bit of moving things around and some self-control to use the envelope system budget without cash, but once you get the hang of it, you’ll find it’s actually quite easy to do.

I talked about how much I LOVE the Cash envelope system a couple of years ago. However, you know what? Times change! At the time cash was the best way for us… however, I have upgraded just a little 🙂

The basic premise behind this budgeting system is that you create an envelope for each of your budgeted expenses. You then write the amount you are budgeted onto the envelope and spend only from that envelope for that budget category. Take your grocery budget, for instance, if you are normally spending $100 each month on groceries, your grocery envelope would only be funded with $100.00. As you are spending on groceries throughout the month, you’ll only spend from that envelope. Once the budgeted money is gone, you’re done buying food for the month.

Pretty simple to do monthly budgeting, huh?

The issue with this system is that it pretty much leaves anyone paying with a debit card for a lot of things out of the loop unless we get creative.

To use the envelope system when you pay primarily with your debit card or with checks, sit down and create your envelopes as you normally would. Make sure to account for every expense that you spend money on, both personal and any business expenses. On each envelope, leave room on the front (and possibly the back too depending on how often you spend money in that area) for you to write down expenses. Now, “fund” your envelope categories with the respective amounts of money. In other words, write the amount that you have budgeted for that budget category on the envelope somewhere. That amount just became the only money you can pay on that budget category.

As you spend money throughout the month, write what you spent and why you spent it on the front of your envelope. Since you’re not dealing with physical cash, you’ll also need to subtract the cost of the expense from the amount you started with to create a running budget. Once you exhaust budgeting for that category, stop spending money on it.

Just like when you budget this way using cash, make sure you don’t fall into the trap of moving money from one budget to another to accommodate overspending when using this system. That only leads to finding yourself in a budget hole that can be very hard to dig out of.

If you don’t want to use an actual envelope system without cash, set up a mock system with a spreadsheet. Give each budgeted category a separate sheet and have one column be the total amount budgeted and keep a general running tally of when you spend money for that category. Formulate the cell categories to auto subtract money from your total and it will automatically update your remaining budget left. (If you aren’t sure how to formulate a cell, a quick Google search will provide plenty of very easy to follow walkthroughs.)

No matter how you choose to make a payment, you absolutely can use the cash envelope system without cash. If you’ve been wanting to try it, but haven’t yet, go on and give it a try using one of the methods in this post. You really have nothing to lose by doing so!

I’d love to hear if you already do this! How does the envelope system work for you?


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  • Josie, thanks for this great post. I think you may convince me to use this envelope system next month. I had to laugh when I saw the “husband allowance” envelope and imagined how that would work in my house. But, on the bright side, he’s picked up a lot of my frugal ways over the years 🙂 And also the first groceries envelope reads “including any toiletries…then the envelope down the page reads… “and beer” so funny.! The beer budget has to go somewhere, right?

  • I use this same method but instead of actual paper envelopes, I found an excellent smartphone app called goodbudget that functions the same way. You can create up to 10 virtual envelopes with the free version, which was plenty for me. There is a paid version (not sure of the fee, but don’t think it’s much) if you need more envelopes or want some other added features. The free version does everything I need and I love it, because I can check my envelope balances on my phone BEFORE I make a purchase. I always try to immediately record an expense. Lol, I’m one of those ladies that sits at the gas pump too long because I’m entering my gas expense into my envelope system… But hey, it keeps me on budget!

    Check it out here and see what you think!

  • I use an app called good budget. Everything is logged in at time of purchase and keeps track of what’s left in envelopes. But you don’t have to use actual envelopes. Great app! You get 10 envelopes for free. There is a fee for more envelopes but we’ll worth the money if needed.

  • This is a great idea.
    I have wanted to try the envelope system but our ridiculous bank (need to find a new one, huh?) charges us a fee if we don’t use our debit cards xx amount of times a month.

    I would rather use cash but this envelope system seems like it would definitely work using a debit card.

    Thanks for sharing!

  • The way I handle my envelope system and use debit card eliminates excess envelopes. I just simply pay out all my budgeted bills from my account using debit card because I pay everything online and I pull out my budgeted “house $$$$” which includes groceries , car fund, clothing and divy. that out to the envelopes for areas I would use cash. It is a lot easier for me now and I feel better when I balance it all out and pay bills on payday. There’s my tip 🙂 have a great one

  • What do I do if I go to Walmart and I buy groceries but then I decide I want to buy a candle or boxes to organize something with? Do I take that out of my allowance because it’s something I want?

  • I have taken Dave Ramsey’s Finacial Peace University course, and while I loved the principal of the envelope system, I was not comfortable carrying that amount of cash around, or flashing it at the register. Thank you for this simple alternative.

  • We also liked the envelope system idea, but found it wasn’t practical for us in 3 categories: groceries, gas and eating out (which is really usually a grab-a-pizza-when-we’re-in-a-hurry budget). For us, those are the budgets both of us need access to and can’t always plan ahead when we might need to have that cash. We’re starting to look at apps for our phones now, but for the last several years, we’ve reserved a small corner of a white board on our fridge to these. Payday we start over with the full budgeted amount in each category and as we spend each person comes home and updates the white board. Works for us.

  • Interesting post. I am a firm believer in the cash system. So much so that I actually started making pretty envelopes and selling them on Etsy.

    Do you think this worked for you because you did cash first? I feel like if you are having a lot of trouble with credit cards this wouldn’t be a big enough change to change your behaviors like cash does… Either way if it is working for you and you are saving money keep it up!

  • I get paid on the 1st and 25th with all but two bills due on the 1st. Do you still think this is something I can do?

  • This is timely as I just started using the goodbudget app again yesterday. It is based on the envelope system. It Has a free version that allows you to have ten monthly envelopes and ten long term planning envelopes.

  • Two years ago when I first started budgeting this envelope system was hard because I travel internationally and a) carrying that much cash around is not safe and b) you can’t use American money everywhere. So i started to use different cards for each of my categories. It works out great and I’m more mindful of my budget because I don’t want to pull from one card to cover the other.

  • I love this post! The envelope system works so well for me but I get anxious having reasonable large sums of money laying around in cash. It seems a little dangerous and doesn’t collect interest! Thanks for the great idea!

  • I love the envelope system it works very well. I use an appt call simple budget is free on Google and you can use as many envelopes as you want with out a charge. It contains ads but you can buy one without the adds it works just the same. I used the free and can’t complain…

  • It seems to me that the envelop system was created to see where your money actually goes. Its harder to spend real cash vs. a swipe of a debit or credit card. Therefore… if you use and envelop to add what you have purchased with your card your really not doing the system justice. Its easy to say oh…. Its just an xtra $ 5.00. Vs. having cash and saying…Hmmmm … do I really need this? I have been doing Dave Ramsey’s envelop system for the past year and have already paid off $ 58,000 in bills I had.

  • Try YNAB (you need a budget), you can use your phone to see and mark off what you buy (as well as budget, categorize, etc on your laptop)…I love it

  • I am a firm believer in the envelope system because of the guilt of actually seeing spending habits. I have done the whole cash thing in the past, but similar to what one other person commented, I am not comfortable with the risk of losing that amount of cash. So as an alternative, I bought fake money in order to still give the visual representation of cash going in to/coming out of the envelopes. I simply use my debit card for purchases/bills and when I get home I pull the exact amount of fake money out of each envelope that I spent from and log the expense. When I get paid, I deposit the amount of fake money that I budgeted for into each envelope. Adding the balance from all envelopes at any given time should align with what I have in my checking account, with the exception of pending debits.

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