Cash Envelope Ideas: Unlocking the Power of Cash Envelope Budgeting

If you’re looking to get your finances in order this year, consider trying out the cash envelope budgeting method. This system can be a great way to help you stick to your budget and save money.

In this blog post, we will introduce you to the basics of the cash envelope system and provide some ideas on what types of envelopes you might want to create to fit your needs best.

cash envelopes for budgeting on a table

Cash Envelope System: What is it?

The Cash Envelope Budgeting System is a method that helps you budget your finances, made popular by followers of finance guru, Dave Ramsey.

The concept is simple: you allocate a certain amount of cash to each budget category and store it in different envelopes designated to specific categories.

This tactic is particularly useful for those who struggle with bad spending habits, sticking to spending limits, or have trouble keeping track of their expenses.

By using physical cash instead of credit cards or digital payments, you become more aware of your spending and are less likely to overspend.

Additionally, the Cash Envelope System is flexible and adaptable to any financial situation, making it an effective tool for anyone looking to take control of their finances.

    How the Cash Envelope System Works

    Understanding the basics of how the cash envelope system works is vital when you want to start using it yourself. There are four basic steps involved with it.

    1. Choose your cash envelope categories

    One of the key steps in implementing the cash envelope system is to determine the categories in which you want to use cash. This involves taking a look at your regular fixed expenses and variable expenses, then deciding which ones you can pay for with cash. Common categories include dining out, trips to the grocery store, entertainment, and personal care.

    2. Create a spending plan for your cash envelope categories.

    By knowing which categories you want to use cash for, you can create separate envelopes for each and allocate enough money for your budget categories. This will help you better manage your spending and avoid overspending in these areas.

    3. Go to the bank and pull out money

    Once you have determined the categories for which you want to use cash, the next step is to go to the bank and pull out the necessary funds. This involves withdrawing cash equal to your budgeted amount for each category. It’s essential to stick to the budgeted amounts and refrain from withdrawing extra cash, as this defeats the purpose of the cash envelope system.

    4. Organize your money into cash envelopes

    Organizing your money into cash envelopes is a crucial step in the cash envelope system. Once you have withdrawn the necessary cash for each category, the next step is cash stuffing the appropriate envelope with the appropriate cash amount. You can use a separate envelope for each category, such as groceries, dining out, and entertainment.

    Some people choose to use a budget binder with pre-made envelopes for each category, a cash wallet, or some prefer to use individual physical envelopes. Whatever method you choose, make sure that each envelope is clearly labeled with the name of the category and the budgeted amount.

    By organizing your cash into envelopes, you can easily track your spending and gain control of your money.

    5. Use your cash envelopes when you need them

    Once you have sorted your cash into envelopes and labeled them accordingly, you can start using the cash envelopes.

    Be sure to include a spending tracker like the one below to track your purchases made. This allows you to easily track how much money you are spending in each category and how much money is left.

    cash envelope inserts

    When an envelope runs out of cash, you have no more money for that category. Using cash envelopes helps ensure you stick to your budget and avoid overspending or impulse buys.

    Cash Envelope Category Ideas

    One of the critical parts of setting up the cash envelope method is to decide what envelopes you would use. Here are some of the most common budget category ideas to get started:


    • Groceries
    • Dining out
    • Take out (with delivery costs)
    • Restaurant costs
    • School lunches
    • Work lunches


    • Gas for your car
    • Public transport costs
    • Taxi rides
    • Car maintenance (such as new tires or an oil change)
    • Car insurance
    • Tolls
    • Parking fees


    • Gas
    • Electricity
    • Water
    • Landline phone
    • Mobile phone
    • Internet 


    • Rent or mortgage payment
    • Home repairs
    • Home maintenance 
    • Yard maintenance
    • Tools

    Health Care 

    • Doctor’s appointments
    • Prescriptions
    • Health insurance
    • Out-of-pocket medical expenses
    • Dental health costs
    • First aid supplies
    • Medical supplies


    • Home Insurance
    • Life insurance
    • Insurance for valuable electrical items (such as a fridge-freezer or computer)


    • Childcare costs
    • School supplies
    • School clothing
    • Other clothing
    • Books
    • Sports fees
    • School excursion fees
    • Toys and games

    Pet Care

    • Pet food
    • Pet treats
    • Pet insurance
    • Accessories and toys
    • Vet fees
    • Grooming
    • Vitamins and minerals
    • Boarding and kennel fees (if used)


    • Books
    • Craft or hobby supplies
    • Outdoor equipment
    • Fitness activity fees and equipment
    • Gym supplies
    • Gardening supplies
    • Subscriptions 


    • Movies
    • Family activities
    • Date night activities
    • Moms’ or Dads’ night out
    • Sporting events
    • Theatre tickets
    • Recreational travel


    • Short term savings
    • Long term savings
    • Emergency funds


    • Charitable donations
    • Financial gifts


    • Adult clothing and shoes
    • Haircuts
    • Dry cleaning or laundry (if used)
    • Toiletries


    • Other costs not already covered
    • Special birthdays or other occasions
    • Co-worker gifts
    • Christmas
    • Other holidays

      Free Cash for Your Envelopes

      A great way to boost your cash in the envelopes is to utilize apps that offer cashback on your spending. Always check the terms and conditions and how they pay out, but you can make money back for your regular spending.


      Ibotta is an app that helps you save money. You can watch videos or take polls to get cash back on your purchases. Add offers to your shopping list and buy the things you need. 

      Take a photo of your receipt and upload it to the app after you buy something. Ibotta works with different stores, so you can get cash back on many products. The cash-back goes into your Paypal account or is turned into a gift card. It’s easy and fast – perfect for saving money without extra work.


      Rakuten is a money-saving app and I use it all the time. It works with stores to give you coupons, codes, and cash back for shopping. To get the cashback, you sign up for an account and use their browser extension or shop thru their site to ensure you earn your cash back.

      When you finish your purchase, Rakuten will add the cash back to your account. A browser extension also automatically adds coupons and codes at checkout so you can save more money. With Rakuten, people can save money when they shop and get paid for it too!

      If you sign up through my link you’ll get *$30 cashback when you spend $30.

      *promotion current as of the time of writing.


      Dosh is a cash-back app that helps you save money. When you download it, the app links to your credit or debit card. That way, when you make purchases at certain stores, you get money back automatically. You can use Dosh to get cash back on lots of different things like eating out, shopping and traveling. 

      Once you have earned cash back, you can move it into your bank account or give it away for charity. What’s special about Dosh is that some deals do not need any coupons – just use your linked card at the store and get rewards.

        Using the Cash Envelope System

        Once you have chosen your cash envelopes, you are ready to start using them. But you may have a few questions regarding the day-to-day use of the system.

        What if I Have Expenses that Need to be Paid Online?

        The cash envelope system is excellent for managing expenses paid with cash, but what happens when you need to pay for something online? This can be a common concern for individuals who use the cash envelope system.

        One solution is setting aside a portion of your income to pay online expenses. This amount can be set aside in a separate checking account just for online expenses or you can create an envelope JUST for online spending.

        When you make your online purchase, whatever category that expense would have been you can move money into the online purchase envelope and deposit the cash from the “Online Spending” envelope into that account so that the spending is still accounted for.

        Another solution is using a prepaid or gift card to make online purchases. You can easily track your spending and avoid overspending in this area by designating a specific amount of money for online purchases.

        The important thing is to make a plan and stick to it to ensure that all of your expenses are accounted for and that you stay on track with your budget.

        What Size Envelope is Best for Cash?

        Regarding the size of envelopes for cash, the most crucial factor is that the envelope is big enough to hold the cash for each category and is small enough to fit comfortably in your wallet or purse.

        The most commonly used size for cash envelopes is a standard #6 envelope, which measures approximately 3.5 inches by 6 inches. This size is small enough to fit in a wallet or purse while also being large enough to hold several bills of different denominations.

        Some people prefer smaller or larger envelopes, depending on their personal preference or the size of their wallets, but ultimately any size envelope that can comfortably hold the cash for each category will work.

        Can You Use a Cashless Envelope System Instead?

        Yes, it is possible to use a cashless envelope system as an alternative to a traditional cash envelope system. A cashless envelope system involves tracking your spending with envelopes, but instead of using physical cash, you use a debit or credit card to pay for purchases.

        To implement this system, you still determine the categories you want to budget and create an envelope for each. Instead of filling the envelopes with cash, you would track your spending in each category on paper or through budgeting software.

        You can still use the same budgeted amount for each category and allocate the funds accordingly. This approach requires more discipline and careful tracking to ensure you don’t overspend, but it can be a good option for someone who prefers to use a card for all transactions.

        Can I Move Money Around from Other Categories?

        Personal finance is personal. Which means you’ll need to do what fits you and your money situation best. With that being said the goal of this system is to fund a specific spending category with a pre-determined budgeted amount and stick to that budget to avoid overspending. When you move money around you are defeating the purpose of this idea.

        With that being said, moving money between envelopes is far better than taking on debt to cover an expense.

        Also, if you find yourself having to play wack-a-mole with your cash frequently, it may be a sign you need to evaluate how realistic your budget is for certain categories.

        What Should You Do With Leftover Month When the Month Ends?

        If you have cash in cash envelopes when the budget period finishes, you should consider rolling it over to the next period, helping to fund your emergency fund, or putting it toward specific goals.

        For example, if you have $20 leftover in your groceries envelope, you can use this money to buy more groceries next week or add it to your dining-out envelope for a special dinner. By rolling over leftover money to the next period or allocating it to another category, you effectively maximize your budget and avoid waste.

        Alternatively, you can put the leftover money in a savings account or use it to pay off debt. The key is to make a plan for the leftover money and not let it go to waste.

          Using Cash Envelope Ideas in Life

          The cash envelope system is an effective way to manage your spending and stay on budget. By assigning a specific category to each envelope, you can ensure that all of your expenses are accounted for and that you stay on track with your budget.

          Overall, this system requires discipline and careful planning to maximize its effectiveness – but when done correctly, it can help keep finances organized and well-managed!

          Photo of author


          Kristen is the founder and content creator at Mom Managing Chaos where she teaches busy moms how to simplify and organize their life and finances. She writes about frugal living, budgeting, productivity and organization.