First steps to implement the cash envelope system

cash envelope system

The first step to implement the cash envelope system is to be aware of your incoming and outgoing money. Spend time on working on a household budget, that is not impossible to maintain.

Create a household budget

Create a household budget that works for your household. The budget needs to be compiled with full details of your incoming and outgoing money. 

It is important to calculate exactly how much money you will need to leave in your bank account. As you will need to leave sufficient money to cover all of your standing orders or direct debits.

Involve all of your household

Involve everybody in your house who has authority over how money is spent. Everybody needs to work together to ensure that the cash envelope system works for you all. 

There is no point starting the cash envelope system if another person in your household is still going to carry on using debit or credit cards. This will defeat the object of starting the system and you will never be able to control spending.

Get yourself organised before you start

As soon as you have confirmed your budget, find some envelopes. You can divide them into weekly allowance which I find easier or monthly. Whichever is easier for you.

Make sure that you do not leave them in plain view. Find somewhere secure to store them. 

It is important that you only withdraw the exact cash you need from the cash point. You are not allowed to withdraw any additional money, as this needs to stay in your bank account to cover your monthly bank payments.

Purchase a cash wallet


This does not need to be expensive, or you can stick with plain envelopes. I purchased a small organiser from Amazon A6 for £4.99. It is not ideal but it is adaptable to my needs, plus it is cheap. There are gaps under the dividers, but you can insert small envelopes into it and it keeps everything together.

There are expensive ones available, but that defeats the object of trying to control your spending.

You can even make your own if you want too. Just make sure you are happy with your choice.

Use an old savings account

If you have a saving account or an old current account you do not use, think about transferring money for the following into one of these accounts.

  • Savings
  • Car insurances 
  • Car Maintenance
  • Christmas
  • Birthdays
  • Household maintenance
  • Clothing

This removes any temptation of dipping into a cash fund, after several months. Try to use an account that you can transfer to, but you cannot gain quick access too. 

Each month I transfer  money for my savings, car insurance, and also misc household expenses into my savings account. I cannot gain access via a cash machine and I can only transfer to my main if I really need to. But this does take several days. It removes any temptation if I feel like I just want to spend money.

By the time the money is showing in my bank account, I no longer want the item. This is a very good deterrent to stop impulse buying.

What should you withdraw for the cash envelope system

It is important to withdraw money that you will use for a set period of time.  For example and week or a month. Depending on when you are paid your wages.

Split all of the below into week 1 to week 4

  • Groceries
  • Fuel – Divide depending on fuel usage per week
  • Social spending
  • School lunches or other school activities
  • Lunches for other members in your household
  • Pet expenses

Keep your cash receipts

Each time you shop, keep the receipts and store them in the envelope. This will allow you to track your spending. If you are finding it hard to keep within the cash amount you have allocated, review your receipts.

Check to see if you have purchased anything that was not on your shopping list, which may have blown your weekly or monthly allowance.

Spare change

spare change jar

As soon as you have finished the week, put your spare change in a jar or pot. Ideally one that you cannot break into. At the end of each month you can bank the money or leave in your jar so that you can visually see how much money you are saving each week.

Spare change rule

One rule I have in our household is at the end of each day I clear my purse of all loose change. Coppers I place into a large jar, which I  change or bank them at a later date.

Pound coins at the end of the month I half. Half I will bank into my saving account and the other half I place  into an unbreakable pot. The unbreakable pots are idea for holiday saving or for a family treat half way through the year.

Try to beat your weekly envelope cash allowance

Each week we try to beat our allowance and have change left. This change can either be used to offset against any debt or for savings. I turn this into a game with my son to see who can find the cheapest item of food to buy. But it has to be on our shopping list.

We keep a tally chart of how often we can beat our allowance, but I never reduce our weekly allowance. This is because we have to eat.

Only carry the cash you are allowed to spend

When you go shopping only take the money you are allowed to spend for that week. Don’t carry all of your cash envelopes together. If you take all of the envelopes with you, temptation will creep in and you may overspend, or even spend it all.

Don’t cheat the cash envelope system

If you are going to cheat, you will only be letting yourself down and nobody else.  Spending all of your time sorting a budget to help you gain more control over your finances, and then not adhering to it. Why did you waste your time in the first place?

Okay, that is a bit harsh but true. If you feel like you want to cheat the cash envelope system, just remember those words. It is not worth it.

Only use money for that category

Don’t use money from another section, for instance if you want to spend more money socialising do not take this from fuel or grocery. It is important that you keep to your budgeted amounts for that specific area.

If you do find that it is impossible to maintain in some areas, recheck your budget. It is important that this works for you, otherwise you will not be successful.

Although if you are changing your budget so that you can carry on spending in areas that you  need to gain more control, then I suggest that you stop and think if you really want to do this.

Keep a goal in mind

holiday saving

There will be days that you wonder why you are doing this. But it is important to keep your goal in mind as to why you are trying the cash envelope system. Either to clear debt, save for a dream holiday, wedding or even saving for a deposit on your dream home. Whatever it is, it is important to you.  Whether big or small, it is important that you keep this reason at the front of your mind a majority of the time. 

Although after a while budgeting and using the envelope system will become automatic and you will not even think twice about it.


When I first started using the cash envelope system I found it very frustrating.  I actually doubted that I would be able to continue, as I hated not having my cards with me.  After a few weeks, I did feel a lot more comfortable, but I did find it a bit of a pain having to remember to put cash into my purse.

At first I also panicked because I was worried about emergencies. I hated the feeling that if I needed money, I would not have it with me. For instance, if my car broke down, or I needed to urgently buy something. So I compromised and when I have to travel a long distance, I will have my credit card tucked away in my purse. 

Overall, it has taken me about four months to become accustomed to the envelope system and it really works for  me. To only have the minimum amount of money in your bank account and basically bring the balance to zero each month, did scare me and made me feel uncomfortable. But I have realised that the cash envelope system is idea for me.

The cash envelope system may not suit everybody, but if you do not try it, how can you tell if it will work for you.

1 Comment

  1. Lesley

    I use the cash envelope and does work … I even have a Going Out envelope and one called Spare which is my weekly anything allowance that goes in my purse… I put a set amount in my purse each week. Then I have other envelopes. My savings go into bonds and I reinvest winnings. The more you have the more you win … better return. I use Tesco savings for car ins, car service, house ins then I pay in full when renewed. (If possible I use Quidco). I have a vet account plus another for food/fuel. And I love a spreadsheet!!

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