The Envelope (Budget) System

Updated: Apr 3

According to Forbes, 78% of U.S. workers lived paycheck to paycheck in 2019. How many times have you had to wait till you got paid to buy an essential item? That uncomfortable feeling of not being able to pay your bills due to misspending is unsettling. There were times where I had to live off my credit card in order to get by and that would only be for a short period before that was maxed out.

I didn’t have a math problem when it came to money, I had a behavior problem. Every dollar didn't have its designated place to be. I did not know how to say “No” to going clubbing 3 times out of the week, eating out and going to events. So when I had enough I looked on google “How to pay off debt” and the first thing that I saw on YouTube was Dave Ramsey. Dave Ramsey’s radical solutions on saving money and paying off debt was just what I needed in staying disciplined and learning how to say “no” to my wants and solely focusing on my needs.

Envelope System

It all starts with budgeting and the tool I used to stick to my budget was using Dave Ramsey’s envelope system. Each envelope had a designated cash amount for my groceries , gas, household goods (toilet paper, detergent), grooming (pedicures, haircuts), and gas between every two weeks I got paid. Whatever amount of cash that was left over after I got paid was dumped into any debt I wanted to focus on. The reason why it’s cash and not money separated into different bank accounts is because when it comes to using cash you feel that emotional pull when you break a $50 or $100 bill right ? Using this system helps me stick to a budget on categories I tended to overspend in and it showed me how much I really needed to survive.

An easy template example is if you make $4000 a month $1000(25%) (recommended amount) goes towards your rent, $400(10%) goes towards groceries, $200(5%) goes towards gas, $200(5%) towards grooming and $80(2%) goes towards household goods. That’s $1880(47%) spent on essentials. Now you have $2120 left per month to take care of other items. See how much money you have left over? You’d be surprised how much money gets lost in the sauce. This all starts with the envelope system.

Now what I just went over were your essentials. These things are required in order to make sure you're not living underneath a bridge, you are not starving to death, you don't have your hair growing out of control and you have toilet paper.

Identifying Your Needs and Wants

Now that you have budgeted for your absolute necessary items its time to start identifying your needs and wants. Do you really need cable TV? Do you really need those $150 pair of sneakers or that $200 purse? I bet you actually need money for your child's daycare though, because you have to go to work. You have to be completely honest with yourself so that you are in the positive after all your bills are paid. I'm not saying you're at least $50 positive.


Give yourself a good cushion of extra money left over after your needs are met so that you can actually save money each paycheck. I say this because emergencies can and will happen. You want to make sure you are prepared for the worst. When emergencies happen they will not be a crisis to you but only an inconvenience. I want to mention this because people tend to take from their envelope system or any other essential bill in order to take care of an emergency. Now your rent isn't paid because you didn't plan to save.

Left Over Cash

What if you have left over cash in your envelope system by the time you get paid again? You guessed it! Put it into your debt or savings account. You not using all of the money in the envelope system is just another testament to the fact that you were overspending before changing how you budgeted.

You Don't Have To Go The Oodles and Noodles Route

I don't want to scare you into thinking that being on a budget means you have to eat oodles and noodles and that you cannot enjoy life at all with your envelop system in place. Budget for your sanity as well. When I started my envelope budget I would stick to not overspending but would set money aside to go to one of my favorite restaurants in Torrance, CA every time I got paid. The meal would usually cost $25. That was my sanity treat to keep me going in my journey to become debt free.

Closing Thoughts

I am a firm believer of if you don't plan, then you plan to fail. I encourage you to take this budgeting system and make it your own for you. Share this budget strategy with friends and family. Trust me when you are at the register taking out your "Grocery" envelope to pay, people will not be laughing at you, they will admire how organized you are and may even ask how they can do what you are doing. Remember, 78% of U.S. workers live paycheck to paycheck. You are already starting off on the right foot with implementing the envelope system. Also look into side hustles that could help speed up the process.

If you can't read this blog you can listen the envelope system explained on our Youtube channel:

Click on the links below to view an envelope system that could work for you :

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