How to use envelope budgeting to increase your savings


    Are you having a hard time saving your hard-earned money every month? Perhaps it is time to consider the envelope budgeting method. This money management strategy forces you to accurately budget your expenses each month by only having access to a predetermined amount of money, and the goal is to teach you to have better control over your finances.

    While the envelope budgeting method may not be for everyone as it only requires the use of cash, it is still a great exercise to help you develop a disciplined budgeting habit. How does the handling system work and is it the right choice for you? Here’s what you need to know.

    What is envelope budgeting?

    The envelope system is a money management technique that allows you to keep track of exactly how much money you have in each budget category for the month by keeping your cash in physical envelopes. Once you’ve decided how much to budget for each category, you’re only allowed to spend what is available in each envelope. Once you run out of cash, you will not be able to spend money in this category until the next month.

    A recent study has shown that credit cards can often stimulate and increase the desire for money. In fact, the study also found that many people were willing to buy more expensive products with credit cards because the feeling of spending money is less immediate and less tangible than when using cash. With the envelope method, you avoid impulse purchases and possible overdraft fees associated with cards.

    How to start using the envelope budgeting system

    One of the best ways to keep track of your expenses and control your expenses is to use the handling system. While sticking to this budgeting method can take some self-discipline, it is easy to learn and can have a positive impact on your financial life.

    1. Create categories and a budget

    Rather than simply grouping different spending activities under “other”, it is important to create clear categories so that you know exactly where your money is going and how much is being spent. Some suggestions for categories include: groceries, utilities and rent, automobile expenses, and entertainment.

    2. Label the envelopes

    Now that you’ve decided which categories to include in your spending budget, the next step is to write the category names and budget amount on each envelope. This helps you keep track and stay organized.

    3. Assign money to each envelope

    Once you’ve received your monthly or bi-weekly paycheck, cash it out and put the allocated funds in each envelope according to your budget.

    4. Spend wisely

    When it’s time to shop for groceries or pay bills, take funds from the appropriate category or just take the envelope with you on your trip. Think carefully before making any purchase because once you have used up the money in an envelope, there is nothing you can do without going over budget.

    If you have money left at the end of the month, you can carry it over to the next month or use it to replenish your emergency fund.

    Free printouts for the envelope budgeting system

    To make it easier for you to get started with the cash handling system, we have included free printouts for downloading and printing. To make your own money envelopes, just cut, fold and glue according to the instructions.

    Envelope budgeting printable


    Other money saving methods + printouts

    Cargo handling isn’t the only effective way to improve your financial health. Here are two more money-saving methods to provide you with some inspiration.

    Take part in a savings challenge

    If you need motivation to save money, why not take part in a savings challenge to blame yourself? For example, a no-spend challenge, where you stop buying things you don’t necessarily need, or a year-long savings challenge, where you can quickly top up your savings account.



    Use a monthly budget tracker

    Even if you already have a healthy emergency fund, you can use a budget tracker or worksheet to keep track of how much money you are making, investing, and spending each month. Unlike the envelope method, you’re not limited to just spending cash, which allows a lot more flexibility. While tracking your expenses manually can take some time, it also forces you to think about possible ways you can reduce your expenses and improve your money habits.

    We have included a printable Mason Jar Savings Tracker below to help you build your savings in a fun and interactive way.

    Mason jar savings tracker


    The purpose of the transshipment system is to help you keep control of your savings and expenses. Once you have spent all of the money in one envelope, it is gone for the month and you will no longer be able to reach into other envelopes. This forces you to stay disciplined and make real effort to improve your money management skills and spending habits.

    Even if you don’t see the envelope system as a suitable budgeting option for you, many budgeting apps and software based on the same concept allow you to manage your expenses without having to stick to the cash envelope budgeting method. Are you ready to bolster your finances? Check out Mint’s budget tracker to get started!


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