Take Control of Your Finances with the Cash Envelope System

Stats Canada recently reported that “nearly three in four Canadians reported that rising prices are affecting their ability to meet day-to-day expenses such as transportation, housing, food, and clothing.  As a result, many Canadians are adjusting their behaviour to adapt to this new reality…”  and I am definitely one of those Canadians.

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While I have been using strategies for saving money and making extra money for well over a decade now, I still am finding the rising costs of living to have a big impact on my life and am making changes wherever possible.

Now I am a big fan of reward programs and cashback credit cards, but am finding that I get a little too click happy (especially on Amazon) and end up blindly spending money without much thought.  So I’ve decided to look into the cash envelope system to make our money more tangible.  The psychology of seeing the money disappear is significantly different than just tapping a card.

What is the Cash Envelope System?

various open envelopes laying on a table

The cash envelope system was popularized by finance guru Dave Ramsey.  It is a method of budgeting where you allocate a certain amount of cash for different categories of your expenses and put the cash in separate envelopes labeled with the category name. For example, you might have envelopes for groceries, entertainment, transportation, and so on.

Once you have allocated your budget for each category and filled the envelopes with the corresponding cash amount, you only spend the money available in each envelope for that particular category. When the cash in an envelope is gone, you cannot spend any more money in that category until the next budget cycle.

This system is useful because it allows you to see exactly how much money you have left for each category at any given time, and it can help prevent overspending. It also forces you to make conscious spending decisions and prioritize your expenses.

The cash envelope budget system can be particularly helpful for people who struggle with overspending or impulse purchases. However, it may not be practical or convenient for everyone, especially if you prefer to use credit or debit cards for most of your purchases and rack up extra rewards points (of course, this is a great strategy for those with the discipline to not overspend and pay balances off each month).

Benefits of a Cash Only Budget

stack of post it notes on a teal background with "Benefits" written on them.  To the right in black reads "Cash Envelope System"

There are several benefits to using a cash-only budget:

  1. Helps you stick to your budget: When you use cash, you are more aware of your spending because you physically see and feel the money leaving your wallet. This can help you stick to your budget and avoid overspending.
  2. Limits impulse buying: With a cash-only budget, you are forced to plan your purchases ahead of time and limit your impulse buying. This can help you avoid unnecessary purchases and save money.
  3. Helps you track your spending: When you use cash, it’s easier to track your spending because you have a physical record of every transaction. This can help you identify areas where you may be overspending and make adjustments to your budget.
  4. Reduces the risk of overspending: With a cash-only budget, you can only spend the money you have on hand, which reduces the risk of overspending or going into debt.
  5. Increases your financial awareness: When you use a cash-only budget, you become more aware of your spending habits and develop a better understanding of your financial situation. This can help you make more informed decisions about your finances and plan for your future financial goals.

How to Use the Cash Envelope System

canadian money bills laying a table

  1. Determine your budget categories: Start by listing all of your expenses for the month. This could include things like groceries, transportation, entertainment, etc. You should have a separate category for each expense.
  2. Assign a budget amount to each category: Once you have your categories, determine how much you can afford to spend on each one. Be realistic, but also make sure you’re not overspending in any one area.
  3. Label an envelope for each category: Write the name of each category on a separate envelope.
  4. Put the budgeted amount of cash into each envelope: Take the cash you have allocated for each category and put it into the corresponding envelope. For example, if you have allocated $200 for groceries, put $200 in the “groceries” envelope.
  5. Use the money from each envelope for its designated category: When you need to make a purchase, use the money from the appropriate envelope. For example, if you need to buy groceries, use the money from the “groceries” envelope. If you run out of money in a particular envelope, you cannot spend any more money in that category until the next month.
  6. Review your spending: At the end of the month, review how much you spent in each category. If you went over your budget in any category, try to adjust your spending next month to stay on track.

Cash Envelope System Printables

image of three different printable cash envelopes for use in the cash envelope money saving budget system

Ready to try the cash envelope system?  Get your Blank Money Envelopes Freebie Here!

Want more categories or designs?  Check out my ETSY page for more options!  (Don’t forget to shop through Swagbucks for cashback!)

Using the envelope system can take some getting used to, but it can be a helpful tool for sticking to a budget and managing your money



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