'I Tried Out the Cash Envelope System for 30 Days and Saved $500 for a Summer Vacay All Thanks to One Important Step'

Woman using the cash envelope system to save money

When it comes to sticking to a budget, I always have good intentions to be consistent. But after a few days, I become more relaxed about tracking my spending. By the end of the month, the budget is usually completely ignored and I’ve spent way more money than I hoped I would.

At the start of 2024, my husband and I decided that we wanted to take a summer vacation for the first time in years. The only way we’d be able to afford the trip was to save money every month. I was up for the challenge but knew I needed to try something new to stick to a strict budget. In the month of March, we tried out a new system where you store all the money you want to spend for the month in cash envelopes. Here’s how it worked and how we were able to save $500 by doing this.

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Cash Envelope System: How To Make It Work for You

The Most Important Step: You Have to Pre-Plan a Budget

The cash envelope budget system requires a lot of preplanning. At the end of February, we spent a few hours setting a budget for March. We came up with an overall spending amount and then decided how much we allotted per category.

For example, we put aside $350 for groceries, $200 for clothes shopping, $200 for household items, etc. We took out a dozen envelopes and labeled each one based on the category (Ex: "Groceries") and put the designated cash inside.

We also gathered up our credit cards and put them away in the closet. For all our purchases, except recurring fixed bills like rent and insurance, we would use the cash in the envelopes to pay for them.

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Carry Mini Envelopes

By March 1st, the envelopes were stocked with the appropriate amount of cash. But the only way to make this work was to preplan every morning how much money we’d need to take out of the envelopes before we went out and about.

For example, if I knew I was going to grab lunch, pick up groceries or head to a store, I would have to section out enough cash to take with me to pay for it all. I ended up getting smaller envelopes and labeling them based on categories. I’d carry those with me, with the money for that specific day, when I’d go out.

What I Liked About the Cash Envelope System

I Wasn’t Tempted to Overspend

At first, it was a little frustrating to have to be so strategic with my money for the day. If I was invited to lunch with a friend or wanted to pick up an extra item when I was out shopping, I wouldn’t be able to because I couldn’t use my credit card to pick up the extra tab. But I ended up appreciating this as it prevented pop-up purchases and deleted any temptation to buy things I didn’t really need or plan for throughout the week.

It made me realize how often I pull out my credit card—often without thinking too much about it—to pay for things when I’m out and about.

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I Could Visualize My Money for the Month

At the end of every day, my husband and I would sit down to take inventory of the envelopes. We’d track how much money we had left in each category. It was helpful to be able to count the cash and visualize how our spending was progressing throughout the month.

I’m someone who really needs to see and feel something to understand it. When we used to budget on a spreadsheet, it didn’t stick with me how much progress we were making. But when I was able to see and feel the money inside each envelope, it really helped me understand and track our spending in real time.

One Unexpected Challenge

Something we didn’t plan for was that some stores don’t accept cash anymore. In New York City, we found this to be common, especially at fast casual dining spots and in some boutiques. It was awkward when I’d go to pay and see that they only accepted credit cards. Because I was only carrying cash, I had to put back my items and leave the store. I ended up avoiding around five of my go-to spots during this challenge because they didn’t accept cash payments.

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Final Takeaway: We Saved Money But Won’t Do It Regularly

At the end of March, we compared our spending over the past 30 days to how much we spent in January and February of this year. Because we stuck to the envelope budget and pre-planned ahead of time, we were able to save $500 more than in previous months. The main reason this was possible was because we didn’t have our credit cards to rely on and we were able to avoid impulse buys.

While we were able to save a good amount of money to put toward our trip, I don’t think we’ll stick to the envelope system every month. It took a lot of pre-planning and strategy almost every day of the month in order for it to be successful. I think it’s something we’ll do during the months when we want to save extra cash. But I am excited to have my credit cards back in April and hope to just be more intentional about how I use them.

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