Envelope System Budgeting

by Merissa on April 1, 2013

in Budgeting, Featured, Frugal Living Tips

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One of our main goals with moving into an rv was to pay off debt. That simply cannot be done without a good budgeting system in place. To plan where our paycheck is going to go we use  our Irregular Income Budgeting Chart that we created. All bills get paid first and then anything left over gets divided up among various categories so we are constantly paying off things and putting money aside to reach goals.

One of the great budgeting systems that goes along nicely with our budgeting plan is the envelope system budgeting. When I was younger and in school and still learning about budgeting, I started reading books by Larry Burkett and using the envelope system. This worked especially well when I started working and wanting to put away money for bigger things. Since my life was much more simplified back then and I didn't have bills to pay (this was in the day before cell phones!) and I owned my car, I simply put half my money in a "Spending" envelope and the other half in a "Savings" envelope that got deposited in the bank each time I went to town. I'm so glad I followed this method because not only did I pay outright for almost my entire first year of school, I was also able to buy the very nice camera that I still use today and pay for some deposits on rental properties when I was first married.


During middle school and high school when I used this method I actually used physical envelopes to store my hard earned money in. Today I've got a little bit more sophisticated method that I will explain a little later in this article.

Back to that budgeting chart that I mentioned above... if you follow that chart you should be saving each month towards things like, clothing, auto repairs, home repairs, ect. This is where the envelope budgeting system steps right in! Those categories that you created on the right side of your budgeting chart page ARE your envelopes. And each month you *hopefully* are able to put money into them.

Now as convenient as it may be, it's not safe to be storing large amounts of cash in your home. You may think they are protected and secure but what if a fire or tornado would come along and destroy all that you have? An insurance policy will not cover cash in your home if it's stolen or lost so it's best to keep it safe in a bank or a safety deposit box. (Although I do believe you should have certain categories in cash like food, or maybe even clothing so when you go to spend that money you don't spend over what you have. Of course that all depend on where you are purchasing your food and clothing from. I buy most of our food online through my coop so I need our food budget to be in our bank account so I can use my debit card!)


So keep that hard earned money in your bank account to keep it safe and use either a notebook to keep track of what should been in each "envelope" or, even better, use something like Dave Ramsey's Envelope Booklet that has registers for you to keep track of what is in each electronic envelope.

Now with this system you will still have to exercise the same amount of caution as you would with a completely cashed based system, probably even more so since it would be easier to overspend since you will have more money on your debit card as you would have in cash. But the same rule applies...no stealing from other categories.

Have you ever tried envelope system budgeting? Does it work for you?


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{ 6 comments… read them below or add one }

1 April April 1, 2013 at 10:47 am

So I have to ask…do you listen to Dave Ramsey’s radio program? If so, let us know once you plan to do your Debt Free Scream!! I don’t use the envelope system but my sister uses an oversized coupon organizer for her envelope system.


2 Merissa April 1, 2013 at 12:24 pm

I don’t but I would love to be able to call in when we are debt free! Going to be a while yet though… 🙂


3 Heather @ My Kansas Life April 4, 2013 at 9:00 am

We use the cash evenlope system even now that we’re debt free. We have goals to save enough to buy some land, and I just didn’t want to start spending willy-nilly again once we became debt free.
Here’s our system: http://kansaslife.wordpress.com/2013/02/18/spend-it-wisely-our-cash-budgeting-system/
Hang in there — it’s worth it!!


4 Emily January 11, 2014 at 5:44 pm

I do not necessarily use the envelope system as much as if I do not have the cash on me to buy something I will not get it. I think that is a great way to stay out of debt.


5 Melanie April 1, 2014 at 12:01 pm

Great article… There are some good iPhone apps out there now too for envelope budgeting. We’ve been using iEnvelopes, which is Dave Ramsey based. For us it has been a great way to keep my money separated without using physical envelopes. Trick for us has been to keep is simple and not over complicate the envelopes…


6 Marco Warm June 19, 2014 at 7:12 am

I did some little Android APP for myself… maybe someone likes it (a bit similar to iEnvelopes)


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