Marvelous Money: Tracking your budget with the envelope system

11 April 2013

Friends! Have any of y’all experimented with our Google Doc budget? I would love to hear if you have! If you haven’t, though, or never intend to, that’s okay, too — I know it’s not for everyone! The key to sticking to a budget is finding a system that works for you, and so, as promised, I’m presenting another option today. Or rather, my dear friend Nancy Ray is presenting another option — the one she uses. Take it away, Nancy!


Hello friends! I’m excited to share, in my opinion, the most important key to our budgeting success. It’s called the Envelope System, and if you haven’t heard of it, just ask your grandma. She can probably explain it to you! Before the days of credit and debit cards (which really wasn’t too long ago), this was the most common and effective way to budget your money and give limits to your spending habits, and it’s the method recommended by Dave Ramsey, whom we’ve learned so much from. It works like this:

After making your monthly budget, you fill your labeled envelopes with the cash allotted for each specific category. When the money runs out, it runs out! This creates a physical limit on your spending, and it helps pace yourself throughout the month.

nancy ray envelope system

To better explain, here is an example of our current monthly Envelope System:

Food: $400
The food envelope is the amount allotted for all of our grocery shopping and eating out. Some couples like to separate the two categories into two different envelopes – that is completely up to you. (I like to challenge myself each month: If I have leftover money in the envelope, then we get to eat out!)

Household: $100
Household expenses include laundry detergent, lightbulbs, home repairs, paper towels, and other recurring household needs. We let this money “roll over” from month to month when we do not use it all, to cover the unexpected, more expensive repairs and needs that inevitably arise.

Auto Care: $60
The auto care envelope covers auto repairs, oil changes, tire replacements, car washes, etc. We allow this envelope to “roll over” as well, to build up cash for more expensive repairs.

Clothing: $60
The clothing envelope is only for clothes that are needed, not my fun shopping I-want-a-cute-new-dress money. For example: I can use the clothing envelope to purchase a new pair of running shoes because mine are worn out.

Blow Money: $160
We divide this money down the middle: Will gets $80, I get $80. This is our monthly “fun money” that we get to spend on whatever we want (i.e. my cute new dress.)

Gifts: $60
The gift envelope amount changes regularly, depending on what holidays and birthdays are on the calendar. Nothing is a surprise! We budget for Valentine’s Day, our families’ birthdays, and we start budgeting for Christmas in September!

Hair: $25
I don’t need a haircut monthly, but Will does. We allow the extras in this envelope to roll over and build up for my haircuts, while Will regularly takes out what is needed for his.

Date Night: $40
This is our newest envelope (and perhaps my favorite!). Setting aside time for us to simply be together, the date night envelope can be applied to a movie night, a restaurant, or maybe two date nights: pizza at home, and a casual dinner out.

envelope system wallet

Other Envelope System Category Ideas:
– Restaurant/Eating Out Envelope
– Entertainment Envelope
– Social/Friends Envelope (for coffee/lunch dates)
– Furniture Envelope (if saving for a new piece of furniture)
– Vacation Envelope (if you want to keep it separate from your bank account)

Side note: When we were saving to pay off our house, we only got $40 each of blow money monthly. Also, there was only $240 in our food envelope, which is quite different from our current $400. The point is this: YOU decide what is fair in your household, according to your income, budget, and financial goals. Don’t get caught up in comparing my budget to yours. Do what works for you.

A few things to note before moving forward: This is not a picture of our entire budget – only the cash items within our budget. Notice that none of our bills (electricity, internet, etc.) show up in the Envelope System. That’s because we pay our bills online, electronically. So while they are still a part of our budget, they are not withdrawn in cash. Same with our gas money – we always use our debit card when filling up, and we keep track of our receipts and budget for it. Also, keep in mind that these amounts change on a monthly basis. For example: we hosted a dinner party for friends last month, so we allotted extra money in our Food envelope to cover that additional expense. The Envelope System exists to help you stick to your budget when spending can become all too easy, but it does not represent your entire monthly budget.

envelope system

5 tips to make the Envelope System work for you:

1. Use cash-only categories: As I mentioned before, only use the envelope system for items you can pay for in cash.
2. Personalize it: When we first started using the Envelope System, we had a bajillion envelopes. I even made sub-categories for my blow money envelopes: my iPhone envelope, my curtains envelope. Just get to a system that is agreed upon in your household.
3. Fill the envelopes once or twice a month: I fill all of my envelopes in the beginning of the month to the max, but you might feel uncomfortable carrying around that much cash. You can fill them twice a month if needed – just choose something consistent and make sure you make a note in your budget.
4. Communicate with your spouse: This goes for your budget and your finances as a whole, but it’s good to talk through the envelopes and the remaining balances as you spend throughout the month.
5. Trash your receipts: I love this part of the envelope system. Because we can simply glance down and look at how much is left in each envelope, there isn’t a real need for keeping track of our receipts. It’s a good idea to keep track of them for the first few months, but once you get the hang of it, the envelopes eliminate your need to keep receipts.

using the envelope system

So why is this system SO important to us? Why can’t you simply use your debit card and keep good records? I’m so glad you asked!

First of all, in my experience, it’s much more difficult emotionally to spend cash. It is often much easier to simply swipe your card and justify your purchase.

Second, this system sets a hard limit on your spending. You simply cannot purchase anything else when there is no more cash in the envelope! For visual people like me, this aspect is very helpful.

Lastly (and most importantly in my opinion), the Envelope System allows you to spend your money GUILT FREE! When you and your spouse have agreed on the amount of cash ahead of time, you can spend it responsibly, without worry. I used to have major guilt when spending any of my money, knowing that it could have or should have been spent on something else. But with a budget and an envelope system in place, you can freely spend what you’ve allotted with no guilt, knowing you are being responsible with your money.

Keep in mind it takes about three months to get the hang of this or any system, so don’t give up if it doesn’t work right away. But it is worth it, I promise. No matter my income or age, I will always use this system. I dare you to give it a try, and let me know what you think!

Thank you, Nancy!! Be sure to check out Mrs. Ray’s inspiring blog and beautiful images here!

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April 11, 2013 9:27 am

I am a huge fan of the envelope system. In January I started using cash only and have found that by doing so, I track my money more carefully and truly stick to my budget. It’s also fun to see envelopes for special events/things (such as a friend’s wedding weekend) get bigger while my anxiety over affording it dissipates!

April 11, 2013 10:57 am

Thank you both, Emily and Nancy for sharing your budgeting strategies! I like using the envelope budgeting app, EEBA, on my phone. That way no matter how I pay, I know where all the envelopes stand at one time. We’re working hard to pay off student loans in our house and you both are such an inspiration! Thanks again.

April 11, 2013 12:21 pm

I love this idea but I’d be so worried about carrying around cash. Do you suggest keeping the envelopes with you at all times or leaving them at home? And does your husband get his own envelopes? What if y’all aren’t together when you need to make a purchase and the other has the proper envelope?? Love both your blogs!! Thanks nancy and Emily!

April 11, 2013 2:48 pm

@Stacey Us, too! Feels so good to chip away at it every month!!

April 11, 2013 5:59 pm

I love this post! I’m trying to implement this system in my house! This is very, very helpful information! Thank you Emily and Nancy!!!

April 12, 2013 11:01 am

@Lindy Great question! I keep careful track of where the envelopes are at all times. They can always be found either in my purse, or in a special place at home for safe keeping. We are always in communication as to where the envelopes are! If Will needs to take the car in for repair, he lets me know before disappearing with them, in case I need to go to the grocery store. The only cash my husband gets personally is his blow money, and he puts that directly into his wallet (as do I). Otherwise, we just simply share the envelope system wallet (pictured above).

Hope that helps!

April 12, 2013 11:03 am

Thanks everyone for your sweet comments! I had a great time writing this post :) Thanks to the Marvelous Em for inviting me! xoxo

April 24, 2013 12:25 pm

I love this idea! It seems like such a no-brainer! Thanks for sharing, I’m going to try it out for May. @Nancy, where is that envelope wallet from? I’ve never seen anything like it.

April 29, 2013 12:20 pm

Where did you get the envelope wallet you have shown?

April 29, 2013 2:12 pm

@Jennifer It’s from Dave Ramsey’s website!

June 28, 2013 4:46 pm

[…] have read multiple things on cash budgeting over the years, but this post really inspired me to actually get on it, and I found it extremely helpful, especially in the way […]

Mary Kate
July 12, 2013 11:36 am

LOVE the envelope system! My husband and I are currently going through Dave Ramsey’s Financial Peace University and it has made all the difference to make sure we are on the same page with money and really sticking to our goals! I have the exact same wallet (and pen haha), they keep me honest :)

August 27, 2013 8:12 pm

Love this!!
-about the safety issue. I heard about one lady using prepaid, rechargeable Visa cards. She used it kinda like the cash system. Some can be replaced if stolen. Maybe that would help some of our non-cash lovers.

Love the blog.

September 16, 2013 2:35 pm

I am about to start the envelope system, but am I now supposed to carry around all of this cash in case I want to buy something out of one of my cash categories?

September 24, 2014 11:27 am

Good day. I know this is a late question; I would like to know where you got the above envelope wallet pictured in your blog. I’ve used the envelope system in the past and found myself totally off track once I stopped, so I’m going back to this tried and true system. Thank you..

Bria Lawson
November 11, 2014 2:23 pm

Hi Carol, The envelope wallet came from the Dave Ramsey’s website.

December 17, 2015 11:46 pm

Hi, I found this post extremely helpful, however, I found it shocking that you didn’t cite Dave Ramsey at all until the comments section where someone asked about the envelope wallet. I believe that could be a copyright infringement since you didn’t credit him at all and borrowed heavily from his ideas, especially a tool that he widely markets. Not trying to be Negative Nancy.

Loved the post and will definitely use the techniques you suggested. I’m glad you found success and are sharing it with others. Budgeting can be so difficult.