Who Knew Stuffing Envelopes With Cash Could Be So Fun?

Download Free Envelope Budgeting Printable

The envelope budgeting system can be a simple and useful method to create a simple and practical household budget. Here’s how you can get started.

“There’s no school like old school.”

“Classics never go out of style.”

“If it ain’t broke, don’t fix it.”

Whatever the expression, the sentiment appropriately describes how we feel about the cash-and-envelope system for managing our household expenses. This method is a virtually foolproof way to live within our means (or even better, below our means), avoid credit card debt, and kick-start our savings goals.

There are some long-term drawbacks and shortcomings to this approach for managing our cash flow, but this is likely the best option out there for those who need a serious check to overspend and continually spiral into debt. If you’ve struggled with any of the following financial setbacks within the past year, please take that as a sign that you should switch, at least for now, to the cash-envelope system:

  • You overdraft on a checking account or bounce a check or two, or more.

  • You carry a balance on at least one credit card from month to month and pay interest on the account.

  • You have no savings to speak of.

  • You need to work overtime or get a second job to cover basic living expenses.

  • You spend money on trivial stuff before priorities are met.

  • You take out a cash advance on a credit card.

  • You have used a payday loan, title loan, rent-to-own, pawn loan, or tax refund anticipation loan.

The power underlying the cash envelope system is twofold:

First, it’s simple. Put a predetermined amount of cash into an envelope for each monthly household expense and use that cash throughout the month (e.g., $600 in a “Groceries” envelope, $100 in an “Entertainment” envelope, a “Christmas Gifts” envelope, etc.)

Second, you can’t overspend. Once the cash from the envelope is gone, it’s gone.

That’s it!

Of course, there are a few other keys to making this work. First, commit yourself and, if you have a partner, to stick to the system. You must also take your debit and credit cards out of your wallet and leave your checkbook at home.

Keep in mind that as you proceed with the envelope system, it does not need to be a permanent program. Once you regain control of spending and establish a habit of short-term savings and planning, it will eventually make more sense to move from the envelope system to savings accounts. There’s nothing stopping you from opening up multiple savings accounts, one for each monthly expense and short-term savings goal that you once used envelopes for.

On the other hand, if you begin to feel that your finances are starting to head back down the road to chaos (a.k.a. overspending, no savings, credit card balances, etc.), you can always move immediately back onto the envelope system. Like an old friend, it will be there to get you through the tough times.

Step-by-Step to Stuffing Envelopes

Each household’s envelope system may, and probably will look different. We can choose to use actual postal envelopes or we can use separate boxes and piggy banks. Some will have plain, handwritten labels while others may be colorful and clever enough to be eye-catching. Regardless, below are a few steps that every system needs. Remember that our envelope system should not include expenses that we can automate through the merchant or through our financial institution’s bill pay service.

  1. Identify and make a list of monthly household spending categories that cannot be set up on an automatic payment plan. (Groceries, entertainment, fun money, dining out, gasoline, gift giving, vacation, recreation, etc…)

  2. Choose an envelope-like receptacle where you can store cash and coins for each spending category you’ve identified in step one.

  3. Determine how many bills in each denomination you’ll need for each of the categories in step one and for all categories put together. You’ll want to know this for step four.

  4. The day you get paid, withdraw cash from your financial institution account in the amounts and denominations identified in step three.

  5. Use only the cash from your envelopes for household expenses. Take your debit and credit cards out of your wallet and purse so you’re not tempted to use them. If necessary, shred them.

A Point to Consider: The “Denomination Effect”

The “Denomination Effect” refers to a phenomenon of consumer behavior studied by Priya Rhagubir and Mary Jacoby Fellow that says, in essence, that the larger the denomination of bill you have to spend, the less likely you are to spend it on small purchases. Translation? Don’t carry lots of $1 dollar bills. You’re hesitant to break a $50 bill, particularly for a small, unnecessary purchase.

Recap of How the Envelope Budgeting System Works

Many individuals and couples find budgets difficult to create and even more difficult to follow. After all, budgets are just numbers and math, right? Well, no. Budgets have to involve priorities and plans. However, many people associate budgeting with restrictions, preventing most households from even getting started.

This explains why an envelope budgeting system can be such an effective tool in establishing household financial order out of chaos and reigning in uncontrolled spending.

Surprising Simple Details that make the envelope system work

The envelope system is beautiful in its simplicity. Here are the only two steps involved:
  1. For each general type of potential monthly expenditure, be it a bill, a purchase, or a savings deposit, identify an amount of money needed for the month

  2. Add that amount of cash into a labeled envelope to be used only for the intended purpose

Envelope Budgeting Systems have their advantages and their own set of challenges, but they are particularly beneficial tools for households prone to overspending.

Advantages of the Envelope System:

  1. Simplicity: No balancing required. No math or even accessing online bank accounts. When there is money in the envelope, you can spend it. When there is no money in the envelope, you do without or otherwise get creative, but it’s gone.

  2. Visual and Kinetic: You have no doubt heard that most people are “visual learners.” The truth is much more complicated, but it is true that most people learn better when they “see” the problem and the solution (visual). You also tend to learn and remember when you can have a hands-on experience (kinetic). The envelope system provides both. Seeing money in the envelope, seeing empty envelopes, and seeing money leave the envelope are all-powerful learning experiences. Holding the cash in hand also forces you to recognize the amount of money you are about to spend. You do not get that experience with plastic.

  3. Spend Less: Studies show that when using cash rather than plastic (credit, debit, or prepaid cards), the typical American consumer spends nearly 15% less at groceries, department, and clothing stores and over 30% less at restaurants.

  4. Avoid Fees: If you only take the specified amount of cash into the store, you won’t go into debt (e.g. credit cards) or face the possibility of over-drafting (e.g. debit cards and checks).

Disadvantages of the Envelope System:

  1. Accountability: You must be honest with yourself and, if you are married, honest with your spouse when using the money. Be careful not to steal from one envelope category to cover splurges or uncontrolled spending in another. Have a weekly “huddle” with your spouse to account for each other’s spending.

  2. Security: If you go the cash-only route, be careful how you carry it. Losing cash is not like losing a credit card when you can call the bank and have them cancel all future purchases. Once cash is lost, it is generally lost forever. If you place it in a wallet, carry it in your front pocket, not your back pocket.

  3. Safety: If you go cash-only, be careful how much you take with you. You never want to draw attention to the fact that you are carrying a lot of cash, for obvious safety reasons.

A full-blown envelope budgeting system may not be for you. If such is the cash, consider some sort of hybrid system. In particular, using cash for fun money, grocery shopping, gasoline, entertainment, dining out and clothes shopping can be very effective.

Whichever method you choose, we hope you take advantage of our free Envelope System labels download.

Instructions:https://<a href=”https://moneyfit.com/wp-content/uploads/2022/05/Envelope-Budgeting-Printable.pdf

  1. Download the Money Fit Envelope Budgeting System file in PDF format.

  2. Print using a standard label page, size 8½ x 11, 3 columns across, 10 rows down (e.g. Avery template 5160)

  3. On each label, note the amount of cash allotted to each category

  4. Affix each label to its own envelope

  5. After each payday, insert the proper amount of cash into each envelope

  6. Take the appropriate envelope with you when making the corresponding purchase or spending on the identified activity

What to Do & Not to Do with the Cash Envelope System

  1. Don’t carry a lot of small bills in your purse or wallet.

  2. Don’t use the envelope system as a replacement for short-term savings accounts or long-term investment accounts.

  3. Don’t give up. It might take three or four months to really get the envelope system working in your household.

  4. Do be specific with the envelope labels (i.e. “Trip to Our Favorite Spot on the Coast” rather than just “Vacation”)

  5. Do keep your envelopes in a safe place (not the car or where children and/or guests in your home might find them)

  6. Do leave debit and credit cards and checkbooks at home when shopping with cash.

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Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
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Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
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You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

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NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).