Managing Money Take Charge of Your Finances with this Easy Budgeting Tip

by Lauren Tucker | July 16, 2020

Over the years, I’ve picked up budgeting tips to help me stay on track. And my most favorite one is also the most basic: cash envelopes.

Cash envelopes are pretty much what the name suggests: a place to keep cash you want to set aside. You can do this with physical envelopes (no fancy app or software required) or use virtual envelopes, which can be created in a spreadsheet. Either way, cash envelopes are completely customizable and can help you manage your expenses in a visual, tactile way.

To get started, you just need to have a desire to take control of your finances and decide on a method that’s right for you. With that, let’s look at how you can use cash envelopes to enhance the way you keep track of your budget.

Why cash envelopes?

In a budget there are two types of expenses: fixed and variable. Fixed expenses are items that remain consistent (or fixed) every month, like rent or mortgage, car, internet and phone service. Variable expenses, on the other hand, can change month-to-month; these might include car repairs, lunches or a medical bill.

Some people find it easier to control their variable spending when dealing with physical cash, myself included. Cash envelopes work in conjunction with your overall budget and are most effective for tracking your variable spending. Whether you budget with paper and pen or digitally, you can incorporate cash envelopes to help control certain outgoing changeable expenses.

It’s up to you how many you create for your budget once you work out the numbers.

Start with number crunching

The first step in creating your cash envelopes is to identify the variable spending categories you wish to track closely and/or fund with cash. How? You create a budget.

There are many software platforms and methods out there to help you build and control your budget. But, if you're new to budgeting, simply grab a piece of paper and pen and start the old-school way.

  1. At the top of the page write your projected income for the month.


  2. Identify your fixed or recurring expenses: These don’t change.


  3. Identify your variable expenses: These fluctuate, but can be better controlled by you.


  4. Math time! At the bottom of the page, write your income minus fixed expenses minus variable expenses to determine what you have left in your budget.

That final step will determine the figure you’re working with for the month. If your budget is in the negative, you’ll need to find areas where you can reduce costs (perhaps eliminating a variable expense). Or, you may have money remaining, which you could put toward debt repayment or your savings depending on what you are working toward.

Now that your budget is sorted, you can create your cash envelopes.

Metaphorical illustration of how a budget works. Illustration consists of money going into a funnel with a wallet surrounded by a credit card and a calendar.

Creating cash envelopes

Now comes the fun part — stuffing the envelopes. I’ve created a cash envelope template to print out to get you started.

However, there are many styles available — vertical, horizontal and wallet systems. Remember, you can also create a digital version of a cash envelope with a basic spreadsheet to track cashless expense categories, or use an empty envelope simply to keep an ongoing tally of a type of expense you pay for with cards.

With your budget worked out, you now know how much you need for each category (babysitting, clothing, personal care). The next step is to decide on the denominations you need for your cash envelopes. Would $50 bills be easier to carry than $20, or do you need $10 on hand to pay the sitter?

After you have decided what and how many denominations you need, withdraw the amount necessary and then stuff. Work envelope by envelope and place the predetermined amount of cash into each slot.

Illustration showing 5 envelopes of different shapes, sizes and colors showing "fixed expenses" such as weekly expenses, groceries, mortgage, car payments and rainy day funds.

Focus, track and assess

Throughout the month, be sure to track your cash spending either on the cash envelope itself or in a separate spreadsheet. I add a sticky note to each envelope to track the date that I’ve filled it and removed or spent money (in the printable cash envelope provided there is a space for that on the front).

Being aware where your cash is going will help you decide how much to allocate to the next month's budget. As you approach a new month, take a look at your cash envelopes and ask yourself some questions. Did you overspend in a category? Were you under? Can you roll over remaining cash into the next month or apply an additional amount for debt repayment? How can you budget differently next month?

Metaphorical illustration of a traffic controller directing dollars and coins to show how money is broken out for different buckets.

Having a hold on your finances (both physically and metaphorically) puts you in charge of your money.

Which is why cash envelopes are a smart — and simple — way to help make sure that you and your finances are on the right track to meeting your short- and long-term budgeting goals.

Lauren Tucker

is the woman behind An Organized Life. Originally from Toronto, Canada, Lauren traded in her figure skates for sunscreen and now resides outside San Francisco. She can usually be found caffeinated and budgeting.