The holiday shopping season is here along with the ease (and danger) of swiping a debit/credit card. It can get difficult to remember all those purchases. Believe me. Budgeting will always be something I have to work at. A soda here, a latte there, new earrings….where has all my money gone?

Following my dad’s example, I recently switched to the “envelope” system to stay on track financially. My dad owns one credit card (for emergencies) and uses only cash. No money in his wallet means no spending until payday.

You may have heard money guru Dave Ramsey explain this method as part of his Total Money Makeover plan. The concept is simple and time tested. Consumers set aside money for specific purposes in envelopes as a way to track spending.

Create a Budget

The key to success. Calculate income, debts, household expenses, gas, etc. Determine the categories to include and keep in mind the whole household budget won’t fit in one envelope. Utilities, insurance and other recurring monthly bills can be paid online, via snail mail or with auto withdrawal. The real spending categories are discretionary-related (groceries, gas, etc.).


This system requires envelopes, so designate several small envelopes that can easily fit into a wallet whole or folded.

Categorize weekly expenses with gas, groceries, household, clothing, entertainment, and perhaps “just for me.” Just like a diet cheat day, my "just for me" means I can still have fun and stay on budget.

Create tracking sheets. One option is to write spending on envelope fronts.

Fund the Envelopes

After determining a budget and categories, fund each envelope with the appropriate cash and include a tracking sheet.

Track Expenses

Write down every penny spent. When purchasing multiple items on one receipt, track them and round up for each category. Scenario: $38.80 at Target ($25 on groceries, $10 on clothing, and $3.80 on cleaning supplies). Round up to $39 and break down transactions into each appropriate category. After spending all the money in a given envelope, you are done with that category until the next week. No trips to the ATM for an emergency refill or transfer from another envelope. We’re learning discipline here!







Don't Give Up

It takes several months to adjust, but it pays off. At month’s end, review spending, and determine where to trim and what could use more cash. Where possible, scale back and use the extra cash to pay off debt and add to savings. Set up a fund for purchases that come in waves with seasons, such as back-to-school, sports or Christmas.

Set An Example

Show your kids where the money goes. If you stop at a drive-through, let them remove money from the envelope. Explain that when the money is gone, it's gone. The visual demonstrations help teach a valuable lesson about cash management.


  • It works! There is no possible way to overspend with a cash-only policy and a halt to spending when envelopes are bare.
  • Drive home the difference between “need” and “want.”
  • Learn to visualize a budget and reinforce discretionary vs. non-discretionary income.
  • Spend less by avoiding interest rates and fees that come with plastic.
  • Build an emergency fund for when the car breaks down or natural disaster strikes.
  • No overdraft charges.
  • Less wasteful spending. Reviewing every household expense on a spreadsheet offers serious surprises at the end of the month. Learn to avoid wasteful spending and credit card traps.
  • Better credit through no missed payments. Pay yourself up front and have nothing to track (or repent for) at month’s end.


  • Expect a learning curve.
  • Family members may resist. Get everyone on board.
  • Weekly trips to the bank are necessary.
  • No credit card rewards. Bye bye free airline miles.

Pro Tips

  • Only take with you what you need. Don’t take your entire budget on shopping trips.
  • Budget by pay period. Plan your budget according to the timing of paydays and bills.
  • Be flexible.
  • Decide the rules beforehand. For example, will you borrow from other envelopes if you run out of cash in one?
  • Use the extra money to achieve financial independence. Pay debt and save.
  • This isn’t old-fashioned! It is just plain smart!

DIY Budget Envelopes and Wallet:

You Need:

  • 3 sheets 12" x 12" scrapbooking paper
  • Scissors
  • Tape
  • 7" ribbon (optional)
  • 1 bead (optional)
  • 1 button (optional)
  • White return labels ½" x 1 ¾" (Optional)


  • Cut 2 sheets of scrapbook paper into eight 6" x 6" squares.
  • Fold squares in half to form a 6" x 3" envelope. Tape up each side and cut excess tape from edges.
  • Write category on label and affix to envelope.


  • Cut last sheet of scrapbooking paper 9 ½" L x 6 ½" W. Fold at 3 ½" and 7" to form a wallet.
  • Tape the bottom sides of the wallet, leaving the fold-over edge free.
  • Add bead to ribbon end and double knot to secure.
  • Cut a small slit in the top of the wallet where it folds over and pull ribbon through.
  • Tape ribbon inside wallet.
  • Hot glue button to wallet front an inch from the bottom edge to secure ribbon.
Sealed and Delivered: A Primer on Using Envelopes to Budget