Envelope Money Challenge

Envelope Money Challenge: An Easier Way to Save By Dividing Your Cash

Getting a hold of your money can be an extremely daunting task. How many times has payday arrived, and you wake up three days later, not understanding why you have -$6.14 in your account?

You possess the desire to start saving for those big goals you have, but you just do not know what tools to use to achieve them. Well, it starts with your everyday spending habits. The envelope budgeting system is a great tool to use to get started.

How It Works?

If you are willing to follow these 6 easy steps, the envelope budgeting system can be highly effective. It forces you to become consciously aware of your spending habits because you will only be using cash. This way of spending will help you to start saving money easier.

1. Budget

You have to start with reviewing your budget. Grab a piece of paper and pencil, or if you are more tech-savvy, head to www.youneedabudget.com and write down every single expense you have. A good tip would be to look at your last month’s bank statement, which will clearly show you where your money was spent.

2. Separate

Once all of your expenses are written out, you need to separate your fixed expenses. A fixed expense is a bill that is about the same amount of money each month and is difficult to pay with cash. Some examples would be utilities, rent/mortgage, student loans, car payments, etc. Those bills should not be involved in your cash envelope budgeting system.

3. Categories

Be realistic with this step. Some common categories would be groceries, gas, entertainment, clothing, etc. If you know that you enjoy purchasing a lane at your local coffee shop on the weekends, then make an envelope for it!

Budgeting does not necessarily always mean that you have to give up your favorite things in life. If frugal living is something you are looking to achieve, then maybe start with only purchasing a lane on Saturday to cut that expense in half. Whatever it may be, it is your finances, and you choose what works for you.

4. Envelopes

Calculate the amount of money you will need for each category, and put the designated amount of money into each envelope. If you are one of those tech-savvy people like we discussed before, or you do not like the idea of carrying around cash everywhere, then go check out www.goodbudget.com. It is the same concept as the envelope budgeting system, but it is all done electronically instead.

5. Spend

It is time to put those envelopes to work! Got to the grocery store like you normally would, but when it is time to check out, simply use your cash envelope instead of swiping a credit card. You spend until that money from that envelope is gone, and you stop all spending in that category until the next month.

6. Save

You have spent the cash needed, now it is time to save money! If there is money left over in your envelopes, then start saving it!

Do your research for the best high-interest savings accounts in your area and reap the benefits of your money growing at an attractive interest rate. You have worked hard to keep track of your money, now let your money work for you!


Now do not get discouraged if you hit some unexpected expenses down the road. Unfortunately, life does happen, whether you are budgeting or not. This will take some time to develop the discipline needed to get a real grasp of your monthly spending, but once that happens, it will help you save money easier every month.

Once you develop this system into a habit, there are many different options of utilizing a credit card for some of your expenses to collect cash rebates and rewards. The best credit cards for these benefits should only be researched once you have the discipline to use them in alignment with the envelope budgeting system. If you believe that you will fall back into an old habit of spending blindly, do not tempt yourself.

The goal is to find a system to start helping you to control your spending. This will help you gain the confidence to start saving money. It will take time to develop being accountable for your spending. If you get paid bi-weekly, by all means, create the envelope budgeting system for every two weeks. You can design this system that fits your needs and ultimately get you to achieving your goals.

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