How to Use Cash Envelopes for Cash or Card

You’ve probably heard about cash envelopes but if you prefer to use a card you might have skipped over this very useful budgeting tool.

Today I am excited to share with you how cash envelopes aren’t only for those who budget on a cash-based system. Rather these envelopes are an incredible tool that can be used by every person looking to stay on budget.

Cash envelopes to show how to use a cash-based envelope system

What are Cash Envelopes?

Cash envelopes are a tool of budgeting that involves creating a budget for a specific variable expense such as groceries, entertainment, or eating out and then tracking the related expenses throughout the month.

Related: Understanding Fixed and Variable Expenses

How Do Cash Envelopes Work?

Cash envelopes work by being an on-the-go tracker for our variable expenses each month.

While you are out shopping, you can keep track of the money you have spent, as you spend it. As an added bonus, with a cash-based system, you use the envelopes to store your money for that particular expense each month.

Each expense is assigned an envelope for the month. On the front of the envelope will be where you label the expense (examples include: groceries, eating out, entertainment). On the back, you will keep track of your expenses as they occur.

Cash envelopes sitting with a wallet. Using cash envelopes for cash or card based budgeting system

These envelopes are a great way to stay up to date on your spending, thus preventing unexpected overages in the month.

If you are interested in using these to help you stay on top of your budget but prefer to use a debit or credit card, keep scrolling! I share at the bottom how these tools are just for a cash-based system.

Here is How to Use Cash Envelopes

Step 1: Get Cash Envelopes

The great thing about this system is you can literally use any blank envelope but you can also purchase envelopes with patterns that fit the month or your mood.

If you are looking for options on purchasable options there are options available through Well Planned Paper – click HERE to take a look.

Step 2: Establish Your Variable Expenses

When you are talking about budgeting there are two specific categories of expenses: Fixed and variable expenses. Cash envelopes are generally used for your variable expenses.

Related: Fixed vs Variable Expenses

Common variable expenses that are tended to with cash envelopes include groceries, entertainment, eating out, personal spending, and miscellaneous.

You don’t have to create an envelope for each but I do recommend choosing at least a couple to start with.

Step 3: Create a Budget for Your Variable Expenses

The key to making cash envelopes work is to have a budget for your personal expenses. Take some time to look at your budget and decide your monthly budget for the variable expenses you are choosing to use the envelopes for.

Budgeting is a very personal thing so pay no attention to what you see others putting as their amounts for certain expenses. You need to choose amounts that work for your specific situation.

If you are new to creating a budget, click HERE to get a step-by-step guide on how to create a budget for yourself.

Tip: Don’t be discouraged if you find that you overspend or underspend in the first 1-2 months on this system. Often times we have an expectation of how much something will cost when in reality we are wrong. Be sure that you are spending mindfully in that first month and adjust your budgeted amounts accordingly later if needed.

Step 4: Withdraw the Cash You Need to Fulfill Your Monthly Envelope Funds

It is helpful to do this at set intervals throughout the month. For some families taking money out once a month is best. For others, it is best to take money out each payday.

Step 5: When you Shop, Keep Your Budget In Mind & Record Spending When You’re Finished

Each time you shop or use money in that category be mindful of what money you have remaining. Be sure to spend only within the money you have remaining in your budget.

After you are finished shopping, take a few minutes to record what you spent on the tracking portion of the envelope. You can do this immediately after your shopping/spending is through or when you get home using your receipts.

Tip: Always check what your remaining balance is before heading into the store or spending money. This will help you to know exactly how much you have available to spend.

Step 6: Assess Your Spending at the End of the Month

As the month comes to a close take some time to look over the tracker on the front of your envelopes. If you find that you are overspending, it might be time to consider increasing that budget OR making changes in your life to better adhere to the set budget. If you find that you are underspending you have a couple of options

  1. You can forward that money to the next month for that same category. For instance, if you have $50 left in your grocery budget, you can roll it to the next month and add it to the grocery budget for the following month.
  2. You can move that extra money into savings. If you have sinking funds or other savings accounts you can add that extra to any of those accounts.
  3. You can pay down debt faster by applying that extra money towards an outstanding debt.

Related: What are sinking funds and why do you need them?

How Can I Use Cash Envelopes with Credit or Debit Cards?

Using cash envelopes with cards might seem strange but it is easy to do and quite helpful in a financial journey. Let’s take a minute to go over how you can use these envelopes with cards.

Step 1: The same as with a cash-based system, you’ll need to first get your envelopes. Reminder you can use any envelope you want but if you want something with the tracker already printed and pretty colors, check out our collection HERE.

Step 2: Just like above, determine your variable expenses and decide what your budget or monthly spending limit will be for each variable expense.

Step 3: When you go shopping or spend from that category, be sure to check ahead of time what your remaining budget is for that particular expense. Because you will not have cash on hand as a reminder of your funds remaining, it is CRUCIAL that you do not swipe for more than what you have remaining in your budgeted funds. Checking the tracker on the back of the envelope will help you keep your spending in order.

Step 4: After you’ve completed your spending, save your receipts in your envelope. Be sure to also track your spending on the backside of the envelope.

Cash (or Card) Expense Envelopes are an incredible tool for keeping track of your spending in the moment. They are great at helping you to stay on track with your budgeting goals. If you are ready to get your own set of envelopes click HERE and scoop up your favorite pattern.

Are you ready to take control of your finances but aren’t sure where to start? Join my FREE budget email course today! I will walk you through every step of the budgeting process and help you to create your very own, personalized budget.



Visit the Well Planned Paper Shop to purchase your very own Expense Tracking Envelopes


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