The Money Envelope System

My wife and I have heard about budgeting money using cash in envelopes that separate different categories of spending, but I guess we never though it was “for us.” The more I thought about it, I figured that if it saves money in the end, why not do it? So I went to the bank and got out some cash for three main categories of spending (plus one for “other”) that are categories that are not “fixed” each month. These three are groceries, dining out, and gas. These three categories usually end up fluctuating each month because my wife and I have no budgeted goal for keeping those expenses down. With these envelopes, we know we can only spend “x” amount of dollars at the grocery store this month. Whatever is leftover we can put into savings and then start all over again next month.

If you think about this, it will save money and give more freedom. We will save money because we won’t just impulse buy – we actually have to think about our purchases before we put them in the grocery basket. It also produces more freedom (ironically) because we know we can go out to eat and spend money from our “dining” envelope at some nice restaurant at the end of the month because we held back from dining fancy at the beginning of the month. We often go out to eat and feel somewhat guilty that we are spending money frivolously. But now that we have a budget, we can feel the freedom of spending what we budgeted.

The reason why many people have financial wealth in this world is because of a simple principle called “delayed gratification.” They shop at JC Penny and maybe even Thrift Stores. The other reason they are wealthy is because they spend less than they earn. And that is a principle that can apply to anyone of any income level.

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Dr. Jesse Joyner travels nationwide as a speaker and entertainer. His primary role is that of a performing juggler spreading joy and the love of learning to family and kids events. H earned his PhD in Educational Studies at Trinity International University (Deerfield, IL). He enjoys playing the piano, bird watching, and old houses. He lives in Richmond, VA with his wife, Sarah, and their three kids - the perfect number for juggling children.

2 thoughts on “The Money Envelope System”

  1. The only issue I’d take with the envelope method is that it removes that money from savings where it can potentially accrue interest. Of course it’s much easier to actually limit spending with physical money than it is with ethereal credit. The other problem is that with leftovers in the envelope at the end of the month, you may be more likely to splurge than to reinvest that money into savings. (It’s already cashed out, might as well spend it.)

    I’ve found a combination method pretty effective for tracking spending and limiting myself in certain categories. I allow myself a set amount of cash per week (length can vary) for eating out and other incidental items. I also track my spending on credit/debit via an online site ( to see how much I’m spending on various categories and set budgeted limits per category.

    No system is perfect without a degree of willpower.

  2. I totally agree on the willpower thing. That is the real “method” that gets people out of debt. The envelopes are simply tools. They are a means to an end. They have certainly helped Sarah and I the past two months. In March (before we went to the envelopes), we spent about $540 on food (groceries and dining). In April and May (which were both envelope months), we spent only $360 on food (and we did not starve ourselves). If we would have continued our spending habits of March and taken them into April and May, then we would have spent an additional $360 on food ($180 extra in each month, which is the difference between $540 and $360).

    In other words, the envelope system helped us save $360 over the period of two months. Of course, we saved the money. The envelopes did not save the money, but they were the means we used. $360 saved in 60 days is tons better than any interest-bearing savings account out there.

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