How to use Dave Ramsey’s Envelope System [and 4 Envelope System Wallets]

I have noticed that since I’ve started using the envelope system, I’m spending about $60 less per two-week period than when I used a debit card. I think it’s because when I lay three $20s down for groceries, it hurts! When I paid with debit, it didn’t really register with me.

—My Total Money Makeover member mgtyjoe

How to use Dave Ramsey's envelope system to budget... /how-to-use-dave-ramseys-envelope-system-to-budget/...What is the “Envelope System?” Glad you asked. It’s a simple and effective way to budget by using envelopes to organize your cash. The envelope system has no doubt been popularized by financial expert, Dave Ramsey, but he will be the first to let you know he didn’t invent it. Dave says, “I found out that Grandma's way to handle money still works. People used to always use cash envelopes to control their monthly spending, but very few do in today's card swiping culture.” I first learned about the envelope system in 2005 from a couple from my church who were successful business owners. I later completed Financial Peace University with my wife where we learned even more about the power of paying cash versus using a card....What is Dave Ramsey’s “Envelope System?”

Glad you asked. It’s a simple and effective way to budget by using envelopes to organize your cash. The envelope system has no doubt been popularized by financial expert, Dave Ramsey, but he will be the first to let you know he didn’t invent it. Dave says, “I found out that Grandma’s way to handle money still works. People used to always use cash envelopes to control their monthly spending, but very few do in today’s card swiping culture.”

I first learned about the envelope system in 2005 from a couple from my church who were successful business owners. I later completed Financial Peace University with my wife where we learned even more about the power of paying cash versus using a card.


Here is how to get started:

1. Review Current Expenses

If you already track your expenses, this part will be easy. If not, you can pull up your online banking and do your best to categorize your expenses over the last three months. Once you’ve done that you will have a better idea how much money to allocate for each category going forward. Click here for a printable budgeting worksheet.

2. Find Out How Much Cash to Withdraw

Before you go to the bank and cash your paycheck you need to know how much cash to withdraw. When you first start using the envelope system your goal is to pay cash wherever possible and practical. It’s more practical to pay certain bills online every month (i.e. cell phone, rent, car insurance and life insurance). So leave enough funds in your bank to cover for these.

After you subtract the amount you need in your bank from your net pay then you know how much cash to take out. For example, if your net pay was $3,000, rent was $1,000, cell phone $80, car insurance $100 and life insurance $35; then you would withdraw $1,785 cash.

3. Create Envelopes

Now the fun part. Take a marker and label your envelopes. Here is a list of the most common categories:

  • Tithe (10% of gross income)
  • Offering (you decide)
  • Gifts (i.e. Birthday, Christmas, Anniversary)
  • Food
  • Gas
  • Vehicle Maintenance
  • Clothing
  • Coffee
  • Personal Care (toiletries, makeup, etc.)
  • Home Supplies
  • Entertainment
  • Books/Music/DVDs
  • Blow Money

4. Fill the Envelopes

Now refer back to your last three months of expenses. On average, how much did you spend on food, gas, coffee and so on? When you fill your envelopes, be realistic. If you’re spending $500 on food you may be able to get by on $300 if you don’t eat out as much. But do you think you can really go from $500 to $100/month?

5. When an Envelope is Empty…

You guessed it – it means you are done spending in that category until payday. If you want to go to the movies but realize your entertainment envelope is empty it doesn’t mean you steal from your food envelope. It means you get to stay home and read a book or play some board games with friends. I know, you have it rough now.

Benefits of Using the Envelope System

So why go through the trouble of stuffing a bunch of envelopes with cash? I’m glad you asked. And no the answer isn’t Because Dave Ramsey says to. There are several benefits to using the envelope system:

  • Psychologists have found that people spend less when they spend cash rather than use a card.
  • You will have cash leftover. It’s common to forget that you put cash in an envelope only to realize a few months later, Hey, I have $80 in clothing. Time to go shopping!
  • It works. Your financial situation will improve if you stick to this for at least six months. If it doesn’t, what have you really lost?
  • No more waiting for the waitress to return your card at restaurants. Just pay and leave.
  • You get better deals. Many businesses give discounts when you pay cash. Sometimes they advertise it and other times you just need to ask, “Hey, do you guys give a discount if I pay with cash?”

Get Started Today

If you’re ready to get started then just keep on reading about some of the wallet options that you can use – though they are NOT necessary and envelopes for budgeting will work just fine.


4 Great Cash Envelope System Wallets

The envelope system of budgeting requires that one keeps their money in, well, envelopes. You label the envelopes for each area of spending, like gas money, groceries, eating out, entertainment, etc.

Carrying around a bunch of envelopes can be cumbersome, to say the least. Also, since my sister-in-law once threw a large sum of cash into the garbage thinking she was throwing away an empty envelope, my husband has his hesitations about the system.

We’ve used the system anyway.

Paper clipping bills together and labeling with a sticky note helps. But then, what do you do with the change?

And who wants to be in the checkout line behind someone trying to juggle paper clips and sticky notes with their wallet and their bags of stuff? Not me, and I consider myself a pretty patient person.

Enter the Envelope System Wallet . . .

Recently, I discovered the envelope system wallet.

Now I have an organized way to, once again, implement this budgeting system without all the obstacles.

An envelope system wallet is designed to be used with the cash envelope system of budgeting. Here are four great envelope system wallets I’ve found…

4 Envelope System Wallets

1. Dave Ramsey’s Envelope System

Personally, I don’t care for Dave Ramsey’s Designer Envelope System. I prefer natural materials like leather or fabric and his wallets are vinyl.

I also cannot appreciate the huge Financial Peace University logo embossed on the outside. But since I know that a lot of readers are Dave Ramsey groupies, I’ve included it. Actually, he has several envelope systems to choose from, plus a coupon organizer and they are all reasonably priced.

2. SavvyCents

If you want your wallet to stand out in the crowd, choose one from SavvyCents. These envelope systems come in black, pink, or polka dotted patent leather or zebra stripes.

However, if you’re a firm believer in the idea that it’s the inside that counts, SavvyCents wallets have the goods. Inside the zippered wallet are an accordion-style file system, six debit/credit card slots, and room for your checkbook. Included are pre-printed and blank labels for the tabs on the accordion sections. SavvyCents wallets measure 8”x4” and sell for $28.

3. Etsy

A search on Etsy for “cash envelope wallets” returned over 300 hits. Ranging in price from $12 to $76, most of the wallets featured are for women. At least my man wouldn’t carry any of them. I did see one labeled “Man Organization Wallet Carhart.” The fabric on the exterior resembles a Carhartt® coat. One other is made of camouflage fabric and is more like a zip-shut bank bag with fabric envelopes inside. I think it would be something a man would keep in the glove box of his car, but not carry around in his pocket.

Two crafters’ wallets were my favorites. CitrusDesigns makes the camo one already mentioned and another style made of vinyl. Her design looks less bulky than those with zippers on all the pockets; plus I really like her choice of fabrics. TheLaughingHouse is the other crafter. Her accordion design is my absolute favorite because you don’t have the bulk of a bunch of envelopes to contend with.

4. Make your own!

For those of you with a creative touch, or at least a little sewing/crafting know-how, make your own wallet. sells a great pattern for a wallet that includes six zipper-shut pockets, slots for credit/debit cards, and a place for your checkbook.  The pattern sells for $1.61 and you can choose any fabric in the store to make it out of—even zebra-striped.

If you enjoy crafting, but not sewing, consider modifying a wallet you already own. Kelleigh Ratzlaff is a work-at-home mom that designs papercraft templates to sell. On her blog, she has a free template and tutorial for making your own envelope insert that will fit into a standard-sized wallet. She also has an Etsy store where she sells pre-made envelope sets for your cash budget system.

I’m excited about this wallet discovery because, honestly, I’ve gotten a little lax with the use of my debit card lately. Now, I have a true reason to go shopping—with cash, of course.

Do you use the cash envelope system of budgeting? What do you carry your cash in? I’d love to hear about it in the comments.

Ready to Quit Living Paycheck-to-Paycheck?

Just click to join 225,000+ others and take our FREE email course to better manage your money, pay off debt, and save!

Related Articles:

  1. allabounurti

    thanks you share

  2. jmonen

    I wasn’t singing and I did share…starting to wonder if these are real people leaving comments.

  3. Jonathan K

    These posts after yours, jmonen, are interesting. I wonder if they are real people or what…

    Thanks for the conciseness and great information! This was a great challenge for our family we undertook this month. We are already saving a ton. And when the envelope is empty… No more spending ;). We took Dave Ramsey’s Financial Peace last year and it was awesome! You can also do the envelope system with just plain envelopes.

  4. jmonen

    Jonathan, thank you for the comment. Glad to hear your family is already seeing a significant savings as a result of the envelope system. Keep up the good work!

  5. Jonathan K

    Your welcome! Yes, the savings are amazing. This stuff really works!


    Cheetahs run fast, really fast—as in 70 to 75 mph fast at their top speeds. Not only is the cheetah the fastest animal on earth, but it accelerates faster than a speedy sports car.

    The gazelle doesn’t have a chance, right? Wrong! Gazelles have learned that the cheetah’s speed is limited to straight-line running. So the gazelle bobs and weaves and runs in circles until the cheetah gets tired and gives up.

    So what does this weird animal metaphor have to do with your financial situation? If you’re sick and tired of debt and all of the headaches that come with it, then it’s time for you to think like a gazelle. – Dave Ramsey

  6. totalhomeinterior

    This budgeting system really does work. Although I have never been to any of Dave’s seminars,I do use his envelope budgeting system for both my home and My business budgets. Its good to see that other people are having success in their financial lives as well.

  7. 4jacks

    I wasn’t singing and I did share…starting to wonder if these are real people leaving comments.

    A belated welcome to the boards, and thanks for sharing it’s a good posted. It’s weird how Dave Ramsey gets credit for the envelope system, when it’s really much older than his ministry, but it’s working for lots of people, so that’s good.

    the weird posts that say “thanks for sharing” or something weird and generic are not real people. For the life of me I can’t figure out why the spam bots are doing that. I’ve literally deleted thousands of those posts from this forum, sorry I haven’t been around much at all to keep up.

  8. 4jacks

    Find out how many different bank accounts your work will let you split your direct deposit into. Then go to the bank and open up that many different bank accounts. Instant X amount of envelope, electronic records, security protect, etc. etc. etc.

  9. Jonathan K

    So true! We did open up 9 savings accounts at our bank this past year. However, instead of x amount in each account (envelope) each paycheck we deposit at the end of the month the total budgeted for that savings account for the month.


    New Car: 150
    Car Insurance: 100
    New Computer: 50
    Car Repairs: 100

    As long as we deposit at least $25 a month into each account we get charged nothing. Since we are paid every week this is a lot more convinient and easier to manage from an accounting/personal budget standpoint.

  10. Rebecca K

    I think the envelope system is a good way for people to learn to stick to a budget. When the cash is gone, it’s gone.
    I was always a budgeter, but my husband was not — so now we are starting the envelope system so we can STICK to the budget more easily. We’d make one, but then it wouldn’t be adhered to very well. It’s easier for him to keep track with cash, because he’s not the nerd who looks at how much money is spent or left in the bank accounts all the time like I do.

    Dave Ramsey’s forms are pretty good for budgeting, so I created a spreadsheet out of the Monthly Cash Flow form. My own copies are tweaked for particulars that I use, but here is the basic google doc version of my spreadsheet. (It should be downloadable if you want it). The categories at the top are frozen so that you can see the income, how much you have budgeted, and how much is left. There is a cash column that keeps track of how much cash you should withdraw for the month also, for easier envelope budgeting. If you don’t use a particular category for cash, but it’s showing up in the cash column, you just have to delete the cash cell contents for that particular category. There’s a tabbed sheet for each month of the year. Hopefully someone will find it helpful!

  11. ontargetcoach


    Great summary. Did you start with all those categories at once or add a few at a time? I also wrote about envelope system recently here.

  12. ontargetcoach

    I like the google doc. Very short and precise.

  13. jmonen

    Hi OnTargetCoach,

    Yes, I started with all those categories. Later on I simplified it and started using my debit card for some things. I’ve found we save the most when we use the envelopes for food, eating out, coffee and entertainment.

  14. Diane

    I think the envelope system is a great idea and super helpful for keeping one from over spending on certain categories.

    My story’s a little weird with mixed feelings about the envelopes (which I love in theory). Before I got married a year ago, I used my credit card for everything to earn cash back bonuses (i.e., starbucks gift cards . I’ve never had credit card debt or carried a balance on my card. I just pay it off in full when it’s due. When we got married, we started out that way too. Any cash that found it’s way into wallet was “free money,” or money that was already accounted for and out of our checking account so I could spend it without having to account for it.

    In October, we decided to try envelopes. We weren’t overspending with the credit card, but we just thought it might be fun to see things in cash (and maybe that would be an incentive to have more of it at the end of the month and see it smiling up at us from the envelope! . Unfortunately, I was accustomed to using cash as “free money” and ended up spending it much more liberally that month than I had ever used my credit card. The last week of Oct. our menu was definitely all about Ramen and hotdogs! Also, I tend to forget to bring all the envelopes with me and sometimes get the cash for different categories messed up due to that.

    I am adjusting, though, and we even have about $100 leftover this month (which is good as my b-day is next month and we’ll get to have some extra celebrations!).

    All in all, I am a fan… it just takes some getting used to.

  15. jmonen

    Hey Diane,

    Thanks for sharing your story. Your story is a little different in that you spent more with cash than with cards. For most people (myself included) it’s the other way around. Glad to hear you’re a fan but I’m curious, why are continuing with the envelope/cash system if you spend less with the cards? Just curious.


  16. 4jacks

    99% of cash I carry goes into the vending machine at work. definitely not a good thing for me to carry cash.

  17. pochax

    99% of my cash goes to my wife. 😛

    “People don’t care how much you know, until they know how much you care” – GKC

  18. Debbie

    Been doing this our whole married life – 35+ years. My husband learned from his mom who learned from her Mom. Also save for long term expenses such as car insurance, car repairs, etc. Any extra monies such as bonuses or tax refunds go into separate savings account for vacations. Allowed us to pay off our house in 10 years by making extra principal payments at the beginning of loan when they were cheaper.

  19. shawna mentafundal

    Another method is to have a bills checking account and a what’s left checking account for fun. Or, his hers and our checking accounts. One time, after losing total control and not understanding three day waits and policies I used postal money orders and Walmart money orders for paying bills for six years. I never bounced a check. Money was tight. Getting hit for 100 in bounces fees HURT to the point of almost homelessness and carlessness.

  20. Ashley Z.

    Thanks so much for these tips! I’m going to use the envelope ideas!

Speak Your Mind