We Re-Invented the Envelope Budgeting Method By Accident


For many people, including myself, the temptation to overspend is high when a debit or credit card is the primary method used to pay for purchases. For that very reason I believe that Cash Is King. While my monthly expenses are paid online using an account number, my day to day purchases are done the old fashioned way. I use green pieces of paper straight out of my wallet. Yes, cash is indeed king.

Unfortunately, paying with cash isn’t a perfect system either. I like paying with cash because it has built in, immediate accountability because the bills have to be physically removed from my wallet, and I can easily see what the purchase does to my remaining spending power. But it doesn’t necessarily completely remove the temptation to overspend.

I like to withdraw the budgeted amount of spending money for the week on Friday on my way home from work. This usually includes the funds for gasoline, groceries, and our discretionary spending. This results in my wallet initially being rather fat with cash. With each purchase I can see the amount of money being reduced, but it’s also easy to overlook everything that cash has to buy. Many times I’ve reached a point where after filling up the van with gas and buying groceries I was shocked to see how little we had left.

Carrying a lot of cash in my wallet kept me within the confines of our overall budget, but didn’t prevent me from spending our discretionary spending too quickly. After this happened a few times, a slight change needed to be made to how we handled our weekly cash spending:

  • Discuss weekly spending wants with wife prior to weekend
  • Withdraw budgeted spending cash from ATM on way home from work on Friday
  • REMOVE cash for any discussed items (groceries, gasoline, birthday presents, spa visits, dining out, etc) and put into a single (or multiple) envelopes.
  • Put all remaining cash into a “General Fund” envelope

After this is done, the cash for a given purchase is only put back into the wallet when needed. The grocery money is taken along when it’s time to go grocery shopping, the budgeted amount for a salon visit is removed and taken with to the salon. The more money that is in my wallet, or my wife’s purse, the greater the temptation to spend it.

After verbally discussing this change, I laughed and pointed out that we basically just re-invented the envelope method of budgeting. We had tried it once, and it worked really well. But we got lazy, and just started lumping all our cash together. While it still worked better for us to stay financially on track overall than using a debit/credit card it did cause us to not think as carefully about, or plan our spending as much as we need to.

We rediscovered the envelope method by accident, and are happy to be back on track with a tried and true system we know works.

How about you, Clever Friends, have you ever used the envelope system for budgeting?

P.s. just a quick up date – if you don’t want to mess around with actual physical envelopes, you can always go with a computerized option. My buddy David over at Young Adult Money has a great review of a lesser known app called Tiller.  Give it a read if you get a chance.

Brought to you courtesy of Brock


About the author

Brock Kernin


  • This is great! It truly is a great system! Because the envelopes were such a hassle, I stopped doing those and just started giving myself an allowance for “fun” things. It works, but I’m sure the envelope system in its true form would be even better.

  • Hi Brock,

    I think all of us are guilty of over-spending at some point in our lives, credit cards just make it too easy.

    I was actually just out with a friend of mine who insists on leaving his cards at home on a Friday, as he tends to “overspend” when out with work-mates – Now he brings cash only!

  • The issue with cash in envelopes is that it isn’t convenient for many purchases (such as gas) and you need to go to the bank a lot or carry a lot of cash. I’m waiting for someone to make an app connected to your debit card where you can setup amounts for different categories each month and then it keeps track when you buy things and let’s you know when you’re out for a certain category. You do lose the pain of spending cash with using a debit card, however.

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