Envelopes: The Glue That Holds Your Budget Together

by Joe Plemon on April 3, 2013

a red envelope.
Creative Commons License photo credit: piermario

  • “I get worn out trying to track every dollar.”
  • “It just didn’t work.”
  • “I’m not a numbers cruncher.”
  • “Budgets are just too complicated.”

Sound familiar? These are just some of the reasons why Janice and I have struggled with budgeting over the years. We would diligently write the numbers on a yellow lined pad, but we just couldn’t make them work in real life. Our budget attempts were more theory than reality. But five years ago, we tried using the envelope system and we instantly felt like we were in control of our money. At the risk of sounding like a cheesy infomercial, we are so sold on using our envelopes that we cannot imagine ever giving them up.

“OK”, you say, “I’ll bite. What is the envelope system?”

We will get to the envelopes in a moment, but first let’s define the problem.

The Problem

Your budgeted expenses could be broken down into two categories: monthly payments that stay essentially the same (house payment, car payment, telephone, cable TV, etc.) and ongoing expenses which fluctuate (groceries, eating out, gasoline, clothing, etc.). It is those fluctuating expenses that cause your budget to come unglued. Why? As you purchase these items throughout the month, you simply don’t have a good way to know if you are overspending your budget. At best, you will tabulate all of your expenditures at the end of the month, but even then, the month is over before you know how much you spent. At that point, when you discover that your budget didn’t work, you feel like giving up. Don’t! There is a better way.

The Fix

Start by trying one of these fluctuating expenses. I recommend “Groceries” because it is the largest of these expenditures for most people. Write GROCERIES on an envelope and place your monthly budgeted amount of cash into that envelope at the first of the month. Always buy groceries with cash from that envelope; never with a check or plastic or any digital currency. As the month progresses you will always know how much you have spent to date on the groceries – just count the money left in the envelope. And here is the best part: you can never “accidentally” overspend because you are limited to the cash you put in the envelope.

Realistically, your first month probably won’t work because, if you are like most people, you really don’t have a handle on how much you currently spend. No problem. Adjust your budget and try again next month. Keep at it and eventually you will get it right. If you don’t have the full month’s cash available at the first of the month, fill your envelope twice a month or even weekly. But don’t cop out by saying you can’t afford it. You are already buying groceries anyway; this is just a different way of doing it.

Once you have mastered the grocery envelope, try another, such as “eating out.” Eventually you will find the number of envelopes that work for you. And hey . . . if you try it and don’t like it, you can always go back to the way you used to do things. (But I don’t think you will.)

The Glue

Exactly how does the envelope system become the glue for your budget? By making it both simple and functional. When you feel the empowerment of knowing you are actually in control of your money, you will stick with your budget. That is some great glue.

What Do the Plemons Use Envelopes For?

The envelope system has worked so well for Janice and I that we use it for every fluctuating expense we can think of: groceries, gasoline, eating out, clothing and entertainment.

A couple of years ago, we decided to create a “Bless” envelope so that we will always have cash available for others when special needs arise. Having this ready resource at our fingertips not only allows us to bless others, but simultaneously removes financial strain from our own lives when those needs occur. Would we be able to do this without our envelope system? Probably not.

I don’t want to find out.

Have you used the envelope system? What do you think about it? Leave a comment!

This article was originally published at Personal Finance By The Book on November 23, 2009.


{ 2 comments… read them below or add one }

Cherleen @ My Personal Finance Journey April 11, 2013 at 3:31 am

We used the envelope system when we were starting out to raise our family. It was fun and easier for us to track our expenses since we put cash on each envelope. However, it was difficult for us to save because every centavo left in the envelope at the end of the month is spent on other stuff, such as dining out, movie, and other non-essentials.


Joe Plemon April 11, 2013 at 7:17 am


Your problem with saving was not the fault of the envelope system. If you consistently have money left in the envelopes, you should be putting less in (thus giving you money to save). Or…simply save (not spend) any money left at the end of the month.


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