How To Use The Envelope System (& WIN an Envelope System Wallet!!!)

How to Use the Envelope System (& WIN an envelope system wallet!) ~ Our Cozy Den

I’m a HUGE fan of the Envelope System. You may have heard of it – Dave Ramsey has been touting its benefits for years, and frugal housewives have been using it for decades. It can seem overwhelming at first, but here’s a quick tutorial on how to get started using it to save your family BIG money.

First, let’s talk about WHY.

To put things simply, people spend more when they swipe a card over using cash. It’s all about the way your brain registers the money as a tangible resource leaving your possession. When you swipe a card, it’s an abstract thing – you never see the money, or feel it in your hand. It doesn’t feel like you lost anything, only like you gained (your purchase). However, when you pay cash for an item, it is a real exchange of goods, one item for another, money for product. You feel it.

All this means that people spend more when using plastic over cash. They tend to go for upgrades, upsells, and add-ons. They grab extras in the checkout line. They spring for the warranty they might-but-probably-won’t need. McDonald’s figured this out when they started accepting credit cards: the average bill for people paying with a credit card is $7, versus $4.50 for those paying cash. (source)

Studies show that people spend an average of 12-20% more when using plastic. When you have cash in hand, what you have is what you have, and you CAN’T go over that amount. There’s no overdraft for cash. If you have too much on the belt, you put something back. You pay attention to prices as you shop, keeping a mental tally so you don’t go over. (By the way, this is great math practice for your kids — Connor keeps track of mine for me!)

In recent years, they have been trying to even further remove the customer from the payment process, by making it even faster and less tangible. With each upgrade, people spend even more. They have come out with keychains, bracelets, even phone apps that allow you to pay by only hovering your item near a payment device. It’s SO easy to be parted from your money.


  1.  First, you need to make a budget. I’m planning on an upcoming post about how to write a budget (WITH your spouse if you have one). You can also read about our budget here and here. Write out all of your bills and spending categories, and give each category a set amount each month. Give every dollar of your paycheck a place to go.
  2. Decide which categories are going to be cash-only. I recommend doing this for as many as you can. My cash categories are: groceries, miscellaneous (household items, office supplies, clothes, etc), fun money (eating out and activities), date night, and spending money, and gas. Gas used to be one where I would swipe the card (there are no impulse purchases at the gas pump), but recently we had a gas station open near us where it is 5¢/gallon cheaper if you pay cash, so we pay cash for that too now.
  3. Once you have it set up, get an envelope system wallet. It can be simple at first – a small accordion file or just some actual envelopes. Or you can buy a nicer one. See below to find out what I use, and enter the giveaway for a FREE Envelope System wallet!!
  4. When you go to the store, check how much money is in the envelope for that category, and don’t go over that amount. Also, never borrow from other envelopes.


  • When you are first beginning, take the credit and debit cards OUT of your wallet. You don’t want it to be accessible as a back-up plan. We need to cut the cord, here, and change is tough at first. But believe me, it’s worth it.
  • Reevaluate your envelopes each month. If you had too much or not enough money in a certain category, sit down with your spouse and make a plan to adjust the budget.
  • To use the envelope system with 2 spouses, you have several options:
    • you can have 1 set of envelopes, and whoever is going to make a purchase takes that to the store with them.
    • you can have 2 sets of envelopes, and split the money between the two, sharing when needed (within the same category, grocery money for grocery money).
    • you can have 1 person in charge of the spending, and the other spouse only carries their personal pocket money in their wallet (this is what we do).


I’ve been teaching Dave Ramsey’s Financial Peace University for a while now, and one of the common complaints with moving to an all-cash system is “What about shopping online!?”

There are two ways to deal with this, personally, I tend to use a combination of the two.

  1. Buy gift cards for your favorite online stores at the grocery store. At Walmart and Kroger, you can get gift cards for dozens of online places. My favorite online store is, and I can pick up a gift card when I do my grocery shopping, and pay cash for it. Sometimes, when Kroger has their 4x-fuel-points-on-gift-cards deal, you can pick up online gift cards, swipe your Kroger plus card, and save money on your gas too!
  2. Keep a paper envelope in your desk drawer. Every time you want to shop online, take cash OUT of your wallet and put it into the envelope in your desk drawer. Then use your debit card at the online store. This works because: a) it gets the cash into your hands, and you SEE it leaving your wallet; and b) you still can’t overspend. To spend it, it MUST be in your wallet. At the end of the month, take the cash in your desk drawer, and use it toward next month’s cash. *This option only works if you have a little cushion of extra money in your bank account. If money is tight and you don’t have a cushion, use option #1. 


I used Dave Ramsey’s paper envelopes that came with his FPU class for a while, until I found this AWESOME envelope system wallet from the Etsy store Thrifty Zippers. I’ve been using it for 2 and a half years now, and I LOVE it! It has 6 zippered envelope pouches for all of your cash, change, and/or receipts. It has plenty of pockets in the front and back for ID cards, debit cards, gift cards, discount cards, voter registration cards, insurance cards, and whatever else you carry around. It’s made of durable oil-cloth, which won’t rip or stain or get worn out. Mine still looks as new as the day I bought it!

Win an Envelope System Wallet ~ Our Cozy Den

I contacted Thrifty Zippers to find out if she would be willing to give one of these away to you guys, and she agreed! Take a look at the entry box below to enter for your chance to win a free wallet of your choice from Thrifty Zippers! Click here to be taken to to enter. Leave a blog post comment about which wallet from Thrifty Zippers is your favorite before you go!

{Giveaway Ended ~ Congratulations to our winner, Aliyana!}

Thanks for visiting, and I hope that using the Envelope System greatly blesses your family and your finances!

How to Use the Envelope System (& WIN an envelope system wallet!) ~ Our Cozy Den
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20 thoughts on “How To Use The Envelope System (& WIN an Envelope System Wallet!!!)

  1. Heather says:

    We have been talking about starting the envelope system a well. I NEED this envelope system wallet in my life, LOL! Looking forward to trying this plan and seeing how much it helps us stay on track with our budget.

  2. Cedric Stiles says:

    I’m impressed, I have to admit. Seldom do I encounter a blog
    that’s both educative and interesting, and without a doubt, you’ve hit the nail on the head.
    The issue is something too few folks are speaking intelligently about.
    I am very happy that I came across this in my search for something regarding this.

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