How can the cash envelope system help clear your debt

How can the cash envelope system clear your debt. By only shopping with cash you will not be tempted to spend on your debit or credit cards.

What is the cash envelope system

The envelope system is a simple way to control spending. Removing any temptation away from overspending.

It is a cash system where money is separated  into sections such as food, social spending, lunch money etc with either a weekly or monthly allowance. This depends on the frequency you are paid, whether weekly, fortnightly or monthly.

Can you cheat the cash envelope system

Once the money has gone, you are not allowed to dip into your normal current account as this will defeat the object in using the cash envelope system. The idea is to keep within budget, not move the goalposts to allow you to keep spending.

If you cheat and go back to using your debit or credit cards you are only cheating yourself.

How can the envelope system help clear your debt

clear debt

By not using your credit cards or debit cards and only withdrawing money that you need, all temptations will be removed.

How often when you are shopping do you see that item that you think it would not hurt to buy. Try and list all of those items that you have purchased under these circumstances in the past 3 months.  This temptation will be removed by using this system.

Cash only method of spending

It is so easy when we use any type of credit or debit cards that we forget to monitor our spending. Many people will continue to spend and not worry about the consequences until it is too late. Often ignoring any potential issues with debt in the future.

By using the cash envelope system, you are accepting accountability for your spending. Visually seeing the money reduce each day or week. This will have a more meaningful impact on your attitude towards money.

It will also make you appreciate the money you have, realising that it is not a never ending pot of gold. Although we would all love this to be the case.

Clearing overdrafts or credit cards debt

credit card cash envelope system

By only using cash the excess money in your current account can be used to either clear your overdraft or paying of credit card debt. This is because you will not be using your debit and credit cards. Only cash will be used for everyday spending.

No more bouncing regular payments

By not continuously dipping into your main bank account using a debit card, you no longer run the risk of bouncing important monthly payments.

There is nothing worse than near the end of each month, not being able to pay any outstanding direct debits or standing orders. Having to move money quickly or incurring bank charges because you do not have any spare money.

Allocate every penny from your wages

Every month allocate every spare penny to clearing your debts. If you are clearing credit card debt, try to clear this as quickly as possible. The monthly interest you are paying, you can reduce quicker over time, if you use the cash envelope system. Although this does depend on the amount of debt you have.

Keep yourself motivated

keep motivated

Implementing the cash envelope system as well as a household budget is hard. It is important that you keep yourself motivated. 

If you are clearing credit card debt each month, watch the interest fees you are charged go down. Or even overdraft fees. Watching these fees reduce and your debt balance reduce will keep you motivated.

After a couple of months, treat yourself. But only do this with spare cash, not by paying by your debit or credit card. Even if this is a coffee in a coffee shop, it is a reward for your hard work. 

Allowing yourself that one treat will help. But if you treat yourself by using your debit or credit card you will be tempted to treat yourself more often. This will defeat the reason why you are doing this in the first place.

Calculate your shopping as you go

Whether you are grocery shopping, clothes or general shopping either calculate manually or use a calculator as you select your items. You will find as you spend and more aware of what you are buying, you will put items back and ask yourself if you really need it.

This is important if you are using the cash envelope system as you will only have the money allocated for that week only. It is important that you do not dip into the next weeks spending, as this will leave you short of cash by the end of the month.

The cash envelope system will make you a more savvy shopper.

Other ways to store your money

I am not happy with keeping a cash tin in my home or lots of different envelopes. The envelopes can easily go missing over time. 

You can purchase money folders instead. These are not obvious and can be placed in secure places, plus everything is kept together. These can be expensive, so another option is to purchase a A5 organiser. These range from £4.99 plus.

Advantages of cash envelope system

  • Stop impulse buying
  • It works to help you control your money
  • Reduces you debts
  • Only spending cash, give your more accountability for your finances
  • More control over your household budget
  • Never bounce a direct debit or standing order
  • Reduce wasting money on impulse buying
  • Able to monitor spending habits
  • Important to set a household budget

Disadvantages of cash envelope system

  • Have to withdraw cash
  • Important that the cash is secure and not misplace in your home
  • Can be hard to keep track of spending
  • Difficult to get used to using the system
  • You have to always remember to take cash with you when you go out
  • Have to keep to a strict purchase listing, restriction on purchasing. Although this is the purpose so you can gain control of your spending


At first I found the cash envelope system very hard to maintain and really frustrating.  Mainly because I was so used to using my debit card all of the time. It did take some time to crack not using my debit cards and really annoying when you see something that you just want. But the cash envelope system has helped me to stop impulse buying and then regretting later. 

I have realised that if I see something that I really want, within a few days I normally feel pleased that I did not buy it.  If after a few days I still want it, then i save up and purchase with cash at a later date.

Plus I did not like the idea of leaving my cards at home incase of any emergencies. So to reduce this fear, if I have a long distance journey to make, then I do keep by cards tucked out of the way, just in case.

This does defeat the object of cash envelope system, but at times it is important to have that peace of mind when you are away.

Although I keep to my household budget, using the cash envelope system has given me more control. I no longer think that it does not matter spending the odd £1 or £2 here and there. With only carrying cash I can no longer do this. I tend to save my excess money and treat us to a movie night or a meal out after about 6 months. 

It enables me to feel settled that all of my household bills are paid, and I do not need to worry about over spending and not having any money at the end of the month.

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