Cash Budgeting Envelopes

I recently posted on my instagram (on the above post) and talked about going back to basics with my budgeting and envelopes are one of the ways I do this. I didn’t realise how many of you would want to know more. So I am hoping this explains everything to you a little bit better.

In 2020 as a family we will be navigating what self employed maternity leave is, we have some travel plans we would really like to go on whilst we are all together at home and we would like to boost our savings accounts again, this means we need to reign in our spending and all those little trips to Tesco for milk which end up being a £15 shop need to stop!

I started using this system years ago when I originally started paying off my 20k debt! Whilst I have now paid all this off, whenever I want to save for something or get back on track with budgets I go back to this process. I did mention it briefly in my ‘Lets talk cash’ blog post which kick started this money conversation (you can read here ) but this post is specifically focusing on the cash envelope system and how I do it.

The reason I am so sure this works for me is contactless is wonderful and debit cards are convenient but it makes you loose touch with real hard cash. Psychologically I am more reluctant to spend when I have the actual cash in my hands and this is why this method works! Seeing it and seeing how much you physically has left will make you think twice if you need those cakes (ok you always need the cakes but you know what I mean)

Now please note, this is NOT my original idea and I am no financial expert, I did not create this system. I found it online years ago and have adapted it over the years to work for me and my family and my circumstances at the time. You can google various different cash envelope or budgeting envelope systems if you want a variation of the process to make sure you find a way that works for you.

Should you need immediate financial support or feel overwhelmed by your finances then please scroll to the bottom of this blog post where I have linked various free resources that you will be able to access and charities to help

Top Tips

Before I get into it; I wanted to share some top tips to help and guide – I will then try and go into as much detail without writing war and peace!

Top Tip #1 – START SMALL. If you want to start but do not want to go full hog and overwhelm yourself then start with the outgoings that you find the hardest to budget. Food is my biggest! Like mentioned the little trips to the shops or the cheeky take away all adds up so if this is the same for you then start here! Do just one envelope for one subject to get to grips with the method but also to see results that will make you want to do it in all areas moving forward and save more.

Top Tip #2 – You cant ‘fail’. Cut yourself some slack – getting to grips with anything new is not easy. It may take you a hot minute to get to grips with budgeting and that is ok. There is no right or wrong, just try to be disciplined and consistent and you will see results.

Top tip #3 – Get ideas from others but remember we are all different! Everyone will have a different budget, income, outgoings and envelope subject. If you try and copy someone exactly it may not work and this can also make you feel like you are doing it wrong (remember there is no right or wrong) so ensure you are creating a system that works for your current circumstances.

Top Tip #4 – Get a goal. The one thing that motivates me the most is to have a goal in mind. Whether it is starting or continuing your journey to becoming debt free, whether you want to treat yourself a new handbag or a holiday or just finally having savings and money left over at the end of the month – Whatever it may be you need to have a clear idea of what you are budgeting for as having a clear purpose will help keep you on track when you want to waiver but also give you something tangible you can see/measure.

Step 1 – Budgets.

The first thing you need to do is work out your monthly or weekly budget. Depending on how often you have income (weekly/monthly) or how you prefer to manage your money you need to create a budget sheet. To do this you need to work out exactly what ALL your outgoings are every week/month. If you are unsure then have a look at your bank statement and go by your last months spend.

Be mindful, this task can be overwhelming! I remember when I did this once and I realised quickly just how much money we wasted on all these little trips to the shops or supermarket and it was in the hundreds a month! Going by our last months spend made us really see all those little trips and how much we are actually spending each month – not how much we think we are spending – trust me the figures will be very different.

I have popped an image of a budget sheet you can find online but you can always just grab a piece of paper and list everything down! It can often be worth also looking at the date of when each of those outgoings needs to be paid.

Step 2 – Categories & Cash

Once you have worked out your budget you need to put your spending into categories (my envelopes are listed above). Now the cash envelope system is for spend that will change all the time or you need to reign in, we do not use the envelopes for standard bills or direct debits for things like mortgage, council tax and utilities. What I use the envelopes for are things that we buy frequently or spend cash on throughout the month. I purchased my envelopes which are reusable from amazon (Budget Envelopes/affiliate link)

My envelopes are for the following and I have included what that title covers on a monthly basis:

Food – Any grocery shopping for all the family and the 2 cats

Fuel – Diesel for both cars including travel to work

School Activities – Brownies or any extra other clubs attending where cash is required and not paid on a term time or annual basis

Household – Cleaning products or any household items including bedding or logs for the fire

Beauty – Make up or Toiletries for anyone in the family

Fun – Family activities and spending money for the weekends

Misc – Miscellaneous, this is used as a back up or for any unexpected spends throughout the month.

Your categories may be different to me! You may not have any children or cover school costs etc, you may not drive and have a travel category rather than fuel to cover travel expenses (trains/taxis etc). When looking at your budget and your spend throughout the month work out which categories work best for you, other examples include Childcare/Pets/Clothing/Eating Out.

Once you have your categories look at how much you have spent on each of those and consider where you can reduce your spend or cap it. For example we were spending £60-90 per week on a food shop but realised we were over buying, getting extra snacks or items we didn’t need and not being considerate of offers. We decided to reduce this to £50 a week (£200pm) and stick with this budget making swaps from some name brand to own brand, ensuring we meal plan properly and we were not over buying. This may seem like a huge drop but we have worked with a similar budget before so knew this was doable if we were savvy enough.

Another example is our FUN envelope. We knew we had so many options to entertain the children and spend quality family time without spending a fortune, swapping afternoon cinema visits to early morning cheap movies (check your local cinema!) or even no cinema at all and heading to out local free museum. We averaged our spend and decided on a £50 budget (the previous month we had spent around £70)

Step 3 – Track it!

If you spend it. Write it down. Tracking your spend is so key and keeping receipts can often help you in realising how much you spend and where.

Inside each of my envelopes I have a little slip with a balance check that means I can keep track of why I pulled money out and what it was for. If you have paper envelopes you can simply keep track writing it on the front. This will mean you are making yourself accountable for every little penny and it can really make a difference.

I find myself saying ‘do I really need this?’ far more than if I just popped to the shops and use my contactless.

You can also keep a track of expenses on a separate sheet or a budgeting diary. I bought mine from amazon (Clever fox planner/affiliate link) This has monthly budget pages inside as well as full expense pages so you can keep track of every penny. it is also small and perfect to pop in your handbag

Step 4. Be patient and prepared for change.

Patience is one of the things I have the least of in life and I would constantly get irritated with myself when I ran out of money or couldn’t see a huge saving but this isn’t about that. It is about being consistent and seeing small changes that actually add up over a period of time to being pretty significant.

I would also allow yourself 3-6 months to really start doing this consistently with strict budgets and also being able to see a change.

I used to have an envelope for Clothing but we do not need anything at the moment and shouldn’t need to purchase anything in the next few months, so we don’t have one this time and any random items we may need to replace (last week was some tights for the girls) then we use the MISC envelope.

We have also introduced a household envelope when historically we used to include this in our food shop. It may sound silly but it meant we could really see where our money was going and made us more conscious about the products we were purchasing as it can be cheaper to get cleaning products in shops that are not where you buy your food.

You will realise your not spending some budgets and over spending in others, review often where you are where you can make changes to make the system work for you and don’t loose faith.

Consistency is key with this process and after the month of December I have closed off my envelopes with a saving of £90 which was left unspent. We split this across our travel savings and our general savings accounts and it has motivated us to keep going and to get even stricter and save even more – This saving doesn’t even include all the money we would normally waste in all the little shopping trips or on things we just didn’t really need.


  • Keep your envelopes in a safe space or locked away where possible at home
  • Only take out the envelopes you need i.e Household & Food if that is where you are heading
  • Drop to weekly envelopes if you feel monthly is too much cash to have in one place
  • Don’t beat yourself up if you cant get to grips at first – remember this is all about you and what works for your circumstances
  • Get excited about your goals and keep your eye on whatever your prize is
  • Keep going, you deserve to feel financially free, to have the pressure off and to live a life and have the things you desire. This is just a stepping stone to getting there.

And finally…

There is always hope. I now finances can be an emotive subject and coming from someone who was in a significant amount of debt I know what that money anxiety feels like, please take your time with this and should you need support I have listed some great places that offer FREE debt advice below.

I really hope that this helps and kicks start your budgeting journey and if you have any further questions about how I do my budgeting please keep an eye out for further posts, join my money mailing list (click here to subscribe) or drop me an email in the contact form.

Resources and Support

If you are having financial worries and need immediate support please contact one of the following who will be able to provide support, free resources and put you in touch with any more local support available to you

Citizens advice

Step change

National Debt Line


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