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Reader Tip: Our Modified Envelope System (no cash required)


Guest post from Kathy of Kathy Hutto:

I know about the lean years that Crystal talks about — I’ve had times when budgeting was an absolute necessity.

Like Crystal, I’ve tried to continue a philosophy of frugality, even now that times are better. I’ve tried to adhere to a strict budget. In fact, I have a penny taped to the dashboard in my car as a constant reminder to “watch every penny”!

Throughout the years, I’ve tried lots of different strategies for budgeting. I’ve tried the Excel spreadsheet idea, the envelopes with cash method, and the notebook with pockets system. But, what I’ve found most effective for my family is a modified envelope system.

Our Modified Cash Envelope System:

I write the name of each budget item on the outside on an envelope. For example – Food, Gas, Recreation, etc. I do not load the envelopes with cash, but instead I assign a dollar amount to each category (you can write the amount on the envelope, if you’d like… I just keep up with it in my head.)

Here’s how it works:

Throughout the week, I put the receipts from trips to the grocery store, Farmer’s Market, or restaurant visits in the Food envelope. I’m ever mindful of how the receipts are totaling up. In fact, throughout the week, I’m known to take the receipts out and add them up to see what’s left for the week.

This modified envelope system can be especially effective right now with our Christmas gift budgets. I have an envelope labeled “Christmas” and a certain dollar amount budgeted for that category.

When I purchase something from a store, I put the receipt into the envelope. When I order online, I print the receipt and add it to the envelope.

I’m ever mindful of how much I’ve spent, and though I use my debit card, the receipts are accounted for and this helps me to keep a close eye on my spending.

I hope this gives you yet another idea for staying on budget!

And since I mentioned my “Food” category above, I thought I’d share my simple Winter Budget Menu booklet that I created for my family. Enjoy!

Kathy Hutto is a homeschooling mother of two. She also serves as the Preschool Ministry Coordinator for her church. In her “free” time, she writes curricula and other resources for teachers. You can find her blogging at Kathy Hutto.

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  • Shelli Mader says:

    Thanks for the idea! I used to use cash, but I order so much online I seem to use my debit card more often than cash now. I use online budgeting software, but I am going to try this too! It will help me keep more organized I think!

  • Rena says:

    Such a good idea. I’ve always liked the idea of the envelope system but not carrying all that cash. I’m going to try this.

  • Laura says:

    This reminds me of Jordan from Fun Cheap or Free’s envelope budgeting technique:

    I need to give this a try!

  • Kelly P says:

    This is a great idea! I like using my credit card (paid off every month, of course 😉 because it earns me hotel stays, but this is a great way to keep closer track of my spending throughout the month. Thanks!

  • Lisa says:

    I have a budget sheet that lists the categories on the left, the budgeted amount in the middle and a column to put the actual amounts spent on the right. I just write down what I spend in the appropriate category and total them up at the end of the month-or more often to keep on track. That way I have less paper to keep track of and can keep the sheet out so I don’t forget to write something down.

    • Barb says:

      This sounds so interesting Lisa. I’m trying to understand the layout so I can make me a budget sheet like this. Any more details to help us understand the way you do it? Thanks!

      I like the idea!

      • Lisa says:

        Looks like this…I keep a copy on my computer and change amounts monthly to account for bills due, such as life insurance.
        Category Amount Budgeted/Amount Spent Total Spent
        Groceries $250/ 10, 25,15

        Hope this helps!

  • Such a great idea. I use credit card for all my purchases and enjoy the rewards from it (I pay them within the due date every.single.time). So, I don’t want to go to envelope system. But this is a great idea and I believe I can use it effectively.

    • Charlotte Sellers says:

      I go online weekly and pay on my credit card. I pay what I’ve spent that week. It gets tempting to spend money if you have it in your account. When the money is gone, the credit card gets put up.

  • Veronica says:

    I love this idea! I’m so bad with cash, so the traditional envelope system was a complete fail for me. But THIS I can probably do! haha Thanks for sharing!

  • Karen says:

    Ooo! I like this idea!! My money is so tight I really don’t have money available for extras, yet seem to buy food, McDonald’s and clothing anyway . . I’ve needed a system for tracking and sorting receipts and this one looks awesome!! I can use my extra coupon pouch . . . *wheels spinning in head*

  • Suzanne says:

    I use a similar system but I write the purchase amounts on the outside of the envelope. That way I can do sub totals anytime. I have most categories such as grocery and fun money separated by rows on one envelope. At the end of the month I have a perfect record. I use a separate envelope for Christmas and vacations with the budget written on the outside. I save the envelopes for a year to use as reference or to easily find a receipt.

  • Athena says:

    I’m able to get separate checking accounts through my bank (USAA). I have opened accounts for each of my budget items (groceries, clothing allowance, etc). In the beginning of the month, I transfer funds to each account. The debit accounts don’t have overdraft so when they are done, they are done. I have a “bills” account where our income is directly deposited. I don’t bring the “bills” debit card with me, only the “groceries”, “gas” and allowance debit cards (which are labeled). This has made things so much easier! Then at the end of the month, I transfer whatever money is left over to our savings. I have a few different savings accounts too (“emergency”, “Christmas”, etc.) I can’t do cash!

    • MissyRuth says:

      Interested, but open separate checking acct for each category? Or sub accts? How are they connected? Seems more convenient with the cards but if I said I want 10 accts they’re going to think I’m crazy.

  • Missy says:

    I use an app called expense manager. I only have 1200 a month to cover all house expenses except our mortgage. Let’s say it’s so hard to stay within that amount. Next year , I hope to trim some of our expenses. Unfortunately DH is a major spender hehe

  • Ashley says:

    This is what I do!!!! Love it. But I write my budget amount on the envelope. Every time I add a receipt I deduct it directly on the envelope so I always know how much I have left. Works out great!

  • Linda says:

    Might be off track but I want to move my checkbook balancing/tracking to online only. Any good free websites or apps anyone can recommend?

    I’ve used Mint but not very consistently.


  • Alyssa says:

    You should try YNAB. It’s the most amazing budgeting software ever. No envelopes necessary, but it truly works.

  • Amy Jo says:

    I think an app like everydollar or YNAB would be very helpful for some of the commenters here. You connect to your account and move the purchase over to the budget category and it deducts the amount from the balance.

  • Tara says:

    The tricky situations are when you go to places like Walmart or Target and purchase items in a bunch of different categories. And then you have to split out tax. We used to do trbcadh envelopes 10 years ago when we first got married, and this modified version seems a lot more geared to this “age of the card”, but I still find it tedious dealing with mixed receipts!

    • Lori Goebel says:

      Check out YNAB – It is a virtual envelope system and you can easily split out those receipts from target and walmart……

  • Gen says:

    Dave Ramesy’s & app is great for this. With the Plus (links to your accounts) version you can track in real time with your phone! We still use cash for food and entertainment & kids activities but most things go on the debit card.

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