Grow Your Wealth

How to Save Money with a Cash Envelope System

For the ✨ visual learners ✨ among us

An Octopus' arm reaching out and grabbing a pile of gold coins.

Struggling to find the right method to help you save money fast?

Ok, bestie. First question: are you doing your budget in your head?

If the answer is yes, please don’t do that.

Alternatively, maybe you have tried electronic budget systems, but they’re just not doing it for your brain right now.

One downside of the cash envelope system is that it might not be super sustainable in the long-run, unless you’re paid in cash, because it involves a lot of… cash. And envelopes. As you might have guessed.

BUT (despite literally being a money app with a ✨beautiful, free budgeting feature ✨... more on that further down) we understand that sometimes you need to try something new to change your view on money management. Enter the cash envelope budgeting method.

What is the cash envelope system?

It’s pretty self-explanatory.

  • You make a monthly budget, then take out the required money in cash.
  • You divide this cash into spending categories.
  • Each category has an envelope.
  • You stuff that envelope with the required cash.
  • So for example, you put $300 in your groceries envelope. This is all the cash you have to spend on groceries for that month, so you gotta make it last.

The good thing is, you can actually see the cash disappearing as you spend it, which can change the way you think about spending. This leads us on to the next point…

Why the cash envelope system is different

When all you have to do is swipe your card to spend, burning money is a lot easier.

The cash envelope system is different because it forces you to see your funds dwindling as you spend. So you get a feel of how much you have to burn before you have to force yourself to stop.

The problem is impulsive spending. But having to get your cash out and see what you’re losing, allows you a moment to pause and reflect on whether the purchase is absolutely necessary.

Think of the cash envelope method as a boot camp for breaking an overspending habit.

How to get started

📊 Create a budget

To create a budget that works for you, you’ll need to take a look at your spending habits. There are plenty of apps that can do this for you (more on that further down…) but for this method we’re gonna have to do it the old fashioned way.

It means taking a look at your bank statements. Maybe printing them out, and sorting through where your money goes to each month.

You’re looking to divide your total income into spending categories. Since fixed outgoings like rent, bills and insurance won’t differ too much month on month, you’re just looking at your variable spending categories. Areas where you tend to overspend given the opportunity.

Divide your spending categories

You make the rules on how you categorize your variable spending categories. Here are some examples:

  • Groceries
  • Eating out
  • Retail
  • Fun
  • Makeup

Once you know your spending categories, you can decide how much you want to spend on each. Obviously, the first time making this budget, you might end up realizing you need to adjust your categories a little. But generally, try and set a realistic target that you can stick to each month.

Stuff the envelopes

The last step is the simplest.  Stuff the amount of cash you’ve decided to spend on each category in each envelope. That’s your budget for the month.

Pros and cons to the cash envelope system


  • The cash envelope system can be a great way to break impulsive spending habits if nothing else is working for you
  • It forces you to understand how much money you have to spend each month, and learn to stop yourself when you don’t have enough money


  • It might not be the most sustainable method of budgeting in the long-run given the amount of admin that goes into withdrawing money and trawling through bank statements.
  • Obviously, carrying large amounts of cash on you can put you at the risk of theft.

The takeaway:

If you’re a compulsive spender, a cash envelope system might be the right way for you to reshape how you see your money. However, once you’ve done this, it may be more rewarding to move onto an electronic budgeting system in the long run, given the amount of work that goes into a cash envelope system.

If you’re a visual learner, there are plenty of budgeting apps that can do the work for you to help you visualise your budget and keep you on track.

Cleo makes the money thing easy

Here’s what Cleo will do for you (and you don’t have to pay a dime):

💙Tell you exactly how much you spent on Uber last month…and roast you for it

💙 Categorize your spending for you into essential and non-essential

💙 Create a budget that's personalized to you

💙 Show you how much you have left to spend per month, including what is scheduled to go out

💙 Show you exactly how much you have to spend per day, too

Enjoy this post? Give it a share or send it along to a friend. You never know, it could make a big difference.

Big love. Cleo 💙

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