How to Use Cash Envelopes in 2023

Have you heard the buzz over the last few years? Cash is making a comeback! Look, I know we’ve been talking about having a cashless society for the last twenty years (not that I’m dating myself or anything), but we just aren’t there yet. Not only that, but the average household’s debt is climbing. There’s inflation and talks of recession. On top of that, a recent survey showed that half of those making $100k or more per year live paycheck to paycheck.


Allow me to get a little transparent here, but our household knew that pain, too. We are making “good” money and living from one paycheck to the next. That just didn’t make sense! Where was all the money going?

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It wasn’t going to fund a lavish lifestyle or anything. Just your typical expenses with a military family. Like many military families, we were living at one duty station and still maintaining a home in another state. But that didn’t seem to account for all of the hemorrhaging from the budget.

It wasn’t until a few months after my husband retired from the Navy that I rediscovered cash budgeting. Sure, I knew about it from the time we took that course from he who shall not be named. But it was tough to get my husband on board at the time.

You know the saying about the pain of change being less than the pain of staying in the same place? That’s where we were in July 2022. Fed up with not knowing where our money was going and wanting to get out of debt, I started handling the budget and put us, slowly but surely, on the cash envelope system.

As you see in my YouTube videos, I have binders, a cash envelope wallet, and many envelopes. But I didn’t start out that way. I started with one envelope – a groceries envelope – and one binder I had left over from the last time I wanted to start cash budgeting.

I went to YouTube and discovered a whole new world of cash budgeters and soon retooled my existing YouTube channel into one about cash budgeting. One of the reasons I did that was to hold myself accountable. Another reason was that I figured more people needed to know how awesome this system was. 

How do cash envelopes work?

Cash envelope budgeting works on the premise that you’ll only spend the cash you have in the designated envelopes. Put away your debit card because you won’t need it. Whether you have 1 or 10 envelopes, each is its own category of a sinking fund, bill, savings, or other expense you have in your budget.

Some budgeters go all in and put everything into envelopes. You do NOT have to start that way. Like I said, I started with one envelope. Expand over time and see what works for you.

How do I know how much cash I need?

To determine your cash needs you’re going to have to do a budget. There’s no way around it. It’s so important to the process that I wrote a whole book about budgeting. Check it out if you like, but I also have a video breaking down the basics of budgeting on YouTube. 

Once you’ve figured out your income and expenses, you’ll take the expenses and look at what you can pay with cash. Those become your envelopes. We tend to overspend on food the most so I would start with envelopes for groceries and eating out. (Yes, we pay cash when we eat out.) 

Depending on how often you get paid will determine how much money you put in the envelopes and how often. That’s why I’m a big believer in budgeting by paycheck, not monthly. While you should know what is going on with your bills during the month, budgeting by paycheck frequency allows you to see which paychecks are needed to cover what bills. 

For example, your mortgage may be due on the second of the month but the paycheck you get at the end of the month doesn’t cover the full amount. Or maybe it does but wouldn’t leave you money for anything else. Instead of relying on that one check to cover the mortgage, you would take half of your mortgage out of two paychecks. So if you have a $2400 mortgage, take $1200 out of one paycheck and $1200 out of the next to cover your bill. Our grocery budget is $400 per month but we only get paid twice in a month. So I budget $200 from each paycheck to cover the groceries – or $100 per week.

Either way, you would put that money in the envelope and have it ready by the time the bill is due. Since this is most likely a bill that gets automatically drafted from your bank account, you will need to deposit the money before your due date.

Should I use the ATM to get the cash?

You could, but you’ll get a bit frustrated trying to match your budget amounts to the fact that most ATMs only dispense twenty-dollar bills. I recommend going into the bank and making the withdrawal. I use a cash request slip that goes along with my Cash Breakdown sheet. I simply give the completed slip to the teller and she knows exactly what to give me. You can see how I do that in my video on my Paycheck Budget System. Although my Etsy shop is now closed, I will be adding new printables and downloadables to the shop on this site. You can click the Shop link above to see what’s new.

Time to stuff the envelopes!

When you get back home, simply stuff your envelopes according to your budget and make sure you only spend what’s in the envelopes! This works because it is more painful to part with your money when you have to physically spend it than if you were to simply swipe a debit or credit card.

How often should you withdraw cash?

I only withdraw cash after I’ve received a paycheck and done the budget. So I am only at the bank two or three times per month. You can certainly go more often but who really wants to do that?

What to do when you pay bills online

Like I said, you don’t have to have envelopes for your bills. You likely aren’t overspending there. But for some people, having everything on hand is useful. But if you want to keep the money for your bills in the bank, that is entirely up to you!

What to do when you’re shopping online

This can shake out in many different ways depending on how comfortable you are with online shopping.

I’m not anti-credit card here so if you are someone who has trouble paying off their balance every month, take this next bit of advice and apply it to your debit card.

When shopping online, you’ll likely have the most fraud protection from your credit card. Plus with rewards and cashback perks, I can see why you may want to use your credit card online. 

What I would do is have a separate envelope labeled “online shopping” or “credit card.” When you spend on your credit card, log the amount you spent somewhere and put that money in the designated envelope to pay your bill at the end of your credit card’s billing period. This way you avoid interest charges and know you are only spending money you already have.

What to do with your coins

I keep a coin-counting jar on my kitchen counter. I’m not sure how much it holds but I’m guessing a hundred dollars or so if I let it get full. I put my coins there and it acts as a way to passively save money. It’s a win all around. When I’m ready to cash out, I take my coins to my credit union and use their machine to get a voucher to give to the teller.

I realize not everyone has that but even if you pay a small fee to use the machine in the grocery store, that’s still better than nothing.

What to do with the leftover money

You’ve made it to the next pay period and you have money left in your envelopes – congrats! You have a few options:

Option 1 – roll over the cash to the next pay period

Option 2 – remove the cash from the envelope and put it into a savings account

Option 3 – make an extra debt payment

This year I’m taking the 1’s and 5’s and putting them in zippered bags to count at the end of the year. It’s like another savings challenge. Those are usually the only bills I have left. In the end, you can do whatever you want with the leftover money. 

What to do if you run out of money

I know, this is the worst-case scenario, but there are still options depending on how close you are to payday and what you need the money for. This is a likely scenario if you run out of money in your groceries or fuel envelopes. What I’ve done is take money from a lower-priority envelope and adjusted my budget for the next pay period – assuming this was a one-time increase in the bill.

If I’m chronically running out of money in an envelope, that is a sign there wasn’t enough money budgeted in that category. On the flip side, if you always have money left over, you may have budgeted too much. Either way, adjust your budget accordingly.

Try not to rely on credit cards if you don’t have to since that involves interest for unpaid balances. However, I’m not going to judge you if that’s what you choose to do.

You could also take money from your emergency savings if this is an emergency. However, Christmas is not an emergency. Birthdays are not an emergency. They occur at the same time every year so do your best to budget as far in advance as possible.

Where to keep your cash envelopes

Whether you use a fancy binder, cash envelope wallet, or another system to organize your cash envelopes, keep them in a safe place when they are at home. A fire-proof safe is preferable.

Do not take all of your cash with you all of the time. You won’t need it and you’ll be too afraid to lose it. Just take the envelopes you need when you go out. For the cash envelope wallet I have, the envelopes are removable so I’m not always carrying around hundreds of dollars.

Cash Envelope Wallet Review: Amazon | Three Way Cut #cashenvelopesystem #cashenvelopewallet

In the end, you want to create a cash envelope system that works best for you, your family, and your budget. I want to know: how do you budget? Are you now inspired to use the cash envelope system? Leave a comment below!

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