Dave Ramsey’s Cash Envelope system has taken over social media by storm within the last few months. From small businesses popping up to sell custom envelopes and holders for them to TikToks showing people how to do it, what’s the hype all about?

What Is The Cash Envelope System?

The cash envelope system is self-explanatory, you put your cash into different envelopes based on various budget categories you set. You decide what amounts go in which envelopes. This forces you to use cash for these expenses so you can’t just swipe your card and forget about it.

People use the cash envelope stuffing method to help manage variable expenses like groceries, entertainment, hobbies, gas, etc. Fixed expenses like rent payments or car payments are not covered in this budget planning, as you stuff your envelopes with your fixed spending in mind.

How Does It Work?

Let’s say after my fixed expenses of rent, car payments, insurance, and etc. I have $900 left in my monthly budget or $450 biweekly, how would I go about stuffing my envelopes?

First, let's create our envelope categories. Mine will be Groceries, Entertainment, Clothing, Ordering Out, Savings, and a Vacation Fund. Go down your list and determine what is most important/necessary and stuff those envelopes first.

If you’ve been observing how much you spend on these things, that’s great, this makes things easier! If you haven’t, this might take some experimentation, and it’s okay to not be perfect right away. 

You can also always add/subtract categories each month, for example, some people might have holiday gifts in their categories this time of year.

Here’s what my monthly envelope budget might look like:

CATEGORY    BUDGET

Groceries    $250

Clothing    $150

Eating Out    $100

Entertainment    $150

Savings    $150

Vacation Fund    $75

Total:     $875

If you have any extra cash as I do in this case, save it in your bank account for emergencies, this extra cash can add up over weeks!

Keep track of how much you put into/take out of the envelopes so you can easily track just how much you use each month.

How Does THIS HELP ME SAVE?

The cash envelope system makes it easy to keep track of how much you spend and what you spend it on. Seeing where the money is going can be a transformative process on its own, however, having these envelopes can make you think twice about that impulse purchase, as you might not have a lot of money left in your envelope. 

Go get some plain envelopes and get budgeting!