Getting Your Finances In Order: Save Cash By Using Cash

I thought it was time to come back to this post again, the Envelope Budget has been an overwhelming source help when it comes to our finances and I’d encourage you to give it a try.

This is the 2nd part of a 4 part series titled – Getting Your Finances In Order.  You can read Part 1 over here.  After reading this post, I’d highly encourage you to relax and enjoy this funny video to lighten the mood a bit.

Seems like a contradiction right?  I’m suggesting that by spending CASH (note – not debit, credit cards, or checks) but hard cold CASH, you’ll actually SAVE money!  We are a cash only family – simply put if you can pay cash for it, you should.  I know at first it might sound crazy, you might think if I have cash I will just blow it!  However, I think quickly you will see just the opposite happen. You will begin to ask yourself, do we really need this? You will find yourself using coupons more often and shopping at the discount store you always avoided. When you are on a fixed budget you will see that you actually DO have the time to hit a couple of different stores in search of a deal or sale. Amazing how this happens!

“When you pay cash, you can “feel” the money leaving you. This is not true with credit cards. Flipping a credit card up on a counter registers nothing emotionally. A study of credit card use at McDonald’s found that people spent 47% more when using credit instead of cash. This is money you could have saved!” – Dave Ramsey

We do not pay cash for any bill that can be paid through our online bill pay, and I highly suggest online billpay – it’s free and you’ll never incur a late payment again.  We get our cash out each week and divide it up between our envelopes, some of the acrue while other are spent each week.

As an example our Car Registration envelope accumulates while our Grocery Envelope is spent in full each week.  The difference is that you do not want or need for your Grocery Envelope to have excess, it is not a “savings account”  if you have extra money in there every week I’d bet that there is another category that could use a little bump up or if you’re working on paying down debt it should absolutely go there first.

Here is a post I wrote a while back about the “How To’s of Using Cash”

Step 1 – Define your categories, what can you possibly pay for cash with? One key here is to only include categories for things that you can’t pay online or through an invoice or bill. Anything that doesn’t come as a bill in the mail is probably a good candidate for cash.

Here is a list of our envelopes.  You may notice that we do not have an envelope for gas, it’s not that we don’t have it budgeted, but it’s because I don’t want to leave the kids in the car while I go into the gas station to pay the attendant. We use our debit card for this expense. You’ll need to figure out what best fits your families needs.


1. Groceries

2. Toiletries

3. Clothes

4. Gifts (Birthdays, Christmas, etc)

5. Date Night

6. Eating Out

7. Spending Money

8. Car Maintenance

9. Kid’s Date

10. Kid’s Allowance

11. Trip Money

12. Car Maintenance

13. Car Registration

14. Hair Cuts

15. School Supplies/Events

Step 2 – Determine how much you spend in several categories per month, ie. groceries, toiletries, clothing, etc. Not while on a budget, but what you have spent on a regular basis. This make take some time, and you may have no idea because you haven’t kept any track at all so you may have to start this process now for the next 30 days. Now hold on to your seat, you’re going to be shocked.  I’d highly suggest using, you can read Mr. Frugal’s review of their free system here.

Step 3 – Figure out how much you THINK you will NEED in each category, but the key here is to be flexible, it will change. It will change more than once, twice, and possibly even three times. Life is always changing and so will your budget. Another baby? Up goes the toiletry budget! Or maybe you just potty trained your 2 year old, well that saves $30 a month!

Step 4 – Get the cash! We go every week  to withdraw our cash, it is easiest if you can keep it to an even $20 amount so you can go to the ATM machine at your bank, saves you a trip inside the bank. This has got to be the best part, it’s like playing a game of monopoly. Divide your cash, you may need to go into the bank every once in a while to get $5’s, $10’s, etc depending on your envelope amounts.

Step 5 – Start saving money! When the envelope is empty, that’s it, your money is gone and you CANNOT purchase anything in that category until the next envelope payday. But remember, the first couple of months you need to be flexible. Also, please remember to make your budget realistic, if you undercut yourself too much, you will give up. So that is why my family has an eating out budget, because the reality is, while we shouldn’t eat out, we do. We put $15 a week into our eating out budget, if we save it up we can go out to a sit down dinner, otherwise it gets us a pizza night once a week.

“Hey I just wanted to share with you that after starting the envelope system 3 months ago we have finally met budget AND we were able to UP-IT! Also my husband told me the other day that for the first time he doesn’t feel like we are living paycheck to paycheck. We are buying things dirt cheap before the real need for them hits. It has been a hard but wonderful journey. One I really didn’t think we could do! Thanks so much.” – Cassandra

That is just one of hundred’s of  reader’s experiences, I’d LOVE to hear about yours in thecomment section below.  Do you use cash or an envelope budget system?  What does it look like for your family?


  1. Thabal says

    I have finally convinced my hubby to try the Cash System. We have started from Jan 1st and will let you know of our progress. Thanks for concentrating on things like Personal Finances to help us.

  2. Melanie says

    I want to do this. Can you help me figure out how to get around the reason why I think it would be way too difficult? For example: The toiletries category. If I’m going grocery shopping and decide to pick something up because it’s on sale… say it’s $3, but I only have fives or tens in my toiletry envelope. Am I making this harder than it is?

    Also, if I go to Sam’s for example, and happen to see a nice clothing item on sale, but don’t have the clothing envelope with me, what would you do? Do you carry all the envelopes around with you at all times?

    • Adriane B says

      I think I can help. You could get the toiletry item, since you have money in that envelope. But once the money is gone no more toiletry items should be purchased. I personal just have a Food envelope (use it for my main grocery store trips) and one for “household” Target, Walmart stores like that.
      You would not buy the clothing item unless you had the clothing envelope with you. This also help to cut down on impulse buys. If you knew you needed a clothing item and you where going to Sam’s you would take your envelope. Other wise leave it at home. If you get home and decide it was to good a deal to pass up go back to Sam’s with your clothing envelope and buy it.
      Yes the system takes some getting use to but that is the point. It makes you think about what you are purchasing before you make the purchase.

      • Melanie says

        Thanks for your reply, Adriane.

        I’m trying to figure out how this system can work with coupon shopping. I shop at Publix grocery store quite a lot. Sometimes, I buy household items, toiletries etc from there. I can get things for pennies… the envelope system for categories just seems like too much work to me. But, I need to figure out a way to stick to a budget. I am not an impulse buyer. I know how to stick to a list. But, if I happen to be in Sams and see a pkg of socks that I know we need, I won’t be able to buy it because I only have the grocery envelope. It seems too restricting. If I had to go back to the store after getting my envelope, my cost of gas and time would be lost. It just seems like too much trouble. But, I need to find a better way. I’m using now. It helps a little… but I need more control.

        When you put money in the envelopes, do you get all one dollar bills? I don’t see how it could be done efficiently with bigger bills.
        What does everyone do when they go to Walmart for example? Do you take a clothing, toiletry, household, and grocery envelope? It sounds like too much hassle.
        I cringe when I say that because so many people tell me that couponing is more hassle than it’s worth and they are so wrong. Maybe I just need to give this envelope system a try and see if it works. But, my brain hurts just thinking about it. LOL

        • Adriane says

          It does feel restricting in the begining. Just like a diet or excersie program would. You are learning a knew way to control your money and that is always hard. My “food” envelope and “household” are almost interchangeable. Depends more on where I am shopping then what I am buying. “Food” envelope at the grocery store “household” everywhere else. I always keep both of those envelopes on me. If I buy household items while I am grocery shopping I just use the “food” envelope. At Walmart I use my “household” envelope. If I happen to buy some food items there, I still just use my “household” envelope. For your Sam trips just always take your “clothing” envelope. Give your self room for error and keep all your reciepts for the first month so you can really get a good idea where you money is going. Be ready to adjust the budget for month two. DO NOT GIVE UP. It does work and you will feel so much better when you have cash in say the “gift” envelope the next time you get that last minute birthday invite :)

          • Melanie says

            Thank you! I think I may give it a shot. Maybe start with a few categories at first. And not give up! I am so used to using my debit card though.. rather than cash.

          • Mandy H. says

            Just a side note … when we use our cash envelopes … it is not uncommon for me to “borrow” cash from one envelope (let’s so “groceries”) and use it for an item in the “clothing” category. Not to change up the budget at all … but if I’m out and only have one envelope (groceries) and come across those socks we really need that are on clearance, I’m OK with borrowing that $3 from the grocery envelope and then “paying it back” when I get home. Taking the $3 out of the clothing envelope and putting it back into the grocery envelope to keep the budget the same.

            It’s not a habit of mine, but with 4 kids in tow, it’s just not feasible for me to go back home to get the other envelope and then head back to the store again. There are times when I borrow it just during that trip and then pay it back immediately when I get home. If I don’t have money in the clothing envelope (which I should know if we do or do not), then I don’t buy the socks, no matter how good the deal.

            It’s a balance.

            That said, I usually do have multiple envelopes with me … just in case. hahhaa.

  3. Stephanie Wilson-Fava via Facebook says

    man…this always scares me. especially because we dont have a fixed income…i think i’m going to try it with just a few things and see how it goes

  4. says

    I use gift cards for grocery and drug stores that I get through my kids school. It’s kindof like cash – when the cards are out, I’m done! Plus the school gets a certain % for my child’s classroom account. Love that!

  5. says

    We use the cash system as well! After reading Dave Ramsey’s book, we realized that our spending was out of control. Our house is our only debt, but we are now working hard to pay it off. Using the cash envelope system has allowed us to cut way down on the amount that we spend every month. We were trapped in the credit card swiping habit, but now it is a thing of the past.

  6. says

    We have used a cash system for about 2 years and it is amazing that we seem to live better now then when we relied heavily on credit cards. We have yet to use the envelope system though and I read Dave Ramsey about 2 years ago and prob need a refresher course 😉 I made up our envelopes today and we’ll try it. I really hope it comes it handy to be able to have extra $$ for kids day out, eating our or gifts. I am always struggling with those extras.

  7. Lisa says

    We started using something called You Need a Budget (YNAB) last Feburary and it has been really helpful. It’s basically like virtual enveloping. It is simple to use and I now know exactly what I’m spending in each category I create. Every dollar is accounted for and there are no surprises. When I started I realized I was spending $700 to $800 in groceries/toiletries for our family of 4…. it has been so helpful to set a bedget and stick to it (or close to it at least).

    I even have categories set us for things that I know I need to buy on an annual basis…. like car registration, Christmas, Costco membership, etc…. I am saving money each month in my virtual envelopes for these things. So, when the bill rolls around, I have the money to pay and it doesn’t cause a big hit for me that month.

  8. Melyssa Green via Facebook says

    @Stephanie – yes. Just start off with a few envelopes to get a feel for it. I am a true believer in the envelope system. Wishing you luck.

  9. Adriane B says

    “but the key here is to be flexible, it will change. It will change more than once, twice, and possibly even three times. Life is always changing and so will your budget.”
    “Also, please remember to make your budget realistic, if you undercut yourself too much, you will give up”
    These two things are so important. I can not tell you how many times we have started out with a budget (cash envelopes) only to have it fall apart and we give up instead of adjusting. No quiting this time. We will adjust until we get it right.

  10. Jamie Howard-Sears via Facebook says

    We do a combo thing here. Cash envelopes for some and gift cards. I haven’t written a check or used a credit cards in several months =)

  11. Kim says

    We used to use cash and I think we spent less but does anyone worry about carrying cash or do you just keep small amounts of it when you are out?

    • Kelleigh @ Kelleigh Ratzlaff Designs says

      I can tell you my experience: We get paid once a month, and I fill our envelopes once a month. I give my husband the money for his envelopes (gas, fun, haircut), and I keep the rest in my envelopes in my wallet: Groceries 1, 2, 3, 4, Gas, Fun, Hair, Gifts – which is empty, except at Christmas time, Date Night and Misc). Our budget is sort of small, so I’m certainly not carrying around a WAD of cash, but it is a few hundred dollars, especially at the beginning of the month. We are a couple of days away from our pay day, and right now my wallet is EMPTY. :)

      For us, having our cash with us is a matter of convenience. I don’t like the idea of having to run home to grab money to buy a gallon of milk or to fill up the gas tank. For some people, that is no biggie, but it just doesn’t work for us!

  12. SueBee says

    I hear ya, Kim! I am a sleep deprived mom of soon-t0-be 5 little ones and I am NOT comfortable carrying cash. Our income is also extremely sporadic at present and it would be extra work for me to have to go GET the cash, keep track of everything, etc…So no, I am not at a point in my life where I am ready to try the envelope system. I totally get it, I just don’t think it’s for me at this time.

  13. Tami says

    How do you account for things that you may need to buy for the house – curtains, garbage can, etc? I am looking forward to giving it a try, I’m just working on getting my categories set.

    • Kelleigh @ Kelleigh Ratzlaff Designs says

      Tami, I have a category called “Groceries” (one envelope for each week, actually) and I use it on food and household items. If there is money left in the envelope, we might pull it out for a coffee treat or new socks for the kids. Flexibility is a good thing! :)

  14. says

    I’m a cash-only budget lady as well and it was a key component in my saving a quarter of my income last year. Little leftovers of cash from the envelopes went toward my goal, as did spare change, which I wouldn’t have had if I was using a credit card. I didn’t overdraw my bank account once and had no late fees or interest, either.

    I interpret the McDonalds 47% comment in a different way than Dave Ramsey. I think that many people use cash for small purchases, like if they’re going for $1 item for themselves, but not necessarily if they’re planning on purchasing a meal for the whole family, which could easily be over $20. Many people prefer to use credit cards for more than a few dollars. That doesn’t mean that they bought more than they would have with cash, though, just that they don’t want to use a credit card for $1 and would use a credit card for a purchase of $20 or more in general. Does that make sense?

  15. Amber says

    We started our budget and envelope system in June of 2010 and I have to say that I wish we would have stuck it out all the times we tried before, failed and never ADJUSTED the budget and system. For the first time in 12 years together we actually go to use our “fun money” ie tax returns, refunds, overtime….for fun..not to get “caught up” on bills or even pay down debt. My husband works in construction and so at times it is very sketchy but for 8 months we were so diligent about everything from couponing, envelopes, cash-only and saving that now we’re debt free, car is almost paid off and on our way to our first family vacation in 11 years!! It works..believe me. I have a teenager, 2 little ones and run a day care…there is no excuse for not at least trying it.

  16. Cindy says

    My in-laws are in their 80’s and have used the envelope system throughout their marriage of over 50 years! When I first saw them pull out the envelopes I thought they were crazy because I had never heard of this system. I have been witness to an envelope coming out many a time whether it be for gas, eating out, vacation or groceries, even their weekly allowance. In this debit, credit, gift & store card era it is much easier to adopt your own ‘envelope’ system. I make it a point make Costco my gas-station as it has the lowest price. I have suggested to my husband that my monthly gas allowance be put on a Costco Cash Card to use at the pump instead of my debit card. I’m trying to convince my husband that getting him a gift card for his monthly gas allowance (diesel) might be a wise choice. The possibilities are pretty much endless.

  17. says

    Just wanted to let you know we are kind of trying this this month. I haven’t read any of the books mentioned, just going off what I’ve read from your site. I decided to try and keep groceries to $50/week and other spending to $50/week. So far this week I’ve already messed up on the groceries part, but I think we can really get a good budget figured out and stop relying on our debit card.

  18. says

    Hi Julia ~ Thank you for sharing the envelope system and the list of envelopes that work for your family. I would really like to cut-back as much as possible and it would be very helpful to know what you budget in each of your envelopes. I do know that $50/week is your grocery budget. Again, I realize that this is the budget that works for your family – we are a family of 6 as well – I believe that this would provide me a realistic place to start so that I don’t budget to low, but more so that I don’t budget too high (I really want to see how “frugally” our family can live & still feel like we can eat out or treat ourselves to “things” every now & then.

  19. Melissa says

    A few years ago, I was watching Oprah(2008) and she spoke to the debt Americans, along with the American Government, had gotten themselves into using credit cards. She called for a nationwide “debt diet”! My husband and I decided to join the diet and sold our “high-end” vehicles and purchased used “new to us” vehicles we could afford to pay off in two years. We stopped several indulgences ie. cable, netfilx, eating out at high-end restaurants , etc. In two years time we had NO DEBT–other than our mortgage….we even paid off our son’s car and college tuition. We do not use debit cards but do use A credit card. I use it like a debit card and pay it off in full monthly. Why the credit card??? Because I earn points for every dollar charged on that card and those points turn into CASH, Airline Tickets, Giftcards, etc. We paid our airfare to Alaska this summer with those points and we plan to pay our airfare to Europe next Spring with those points.

    I have done this for years and the KEY is to PAY MONTHLY AMOUNTS IN FULL!!!!

  20. cindy says

    Maybe a good way to carry the cash for different things are to put the bills in a small coupon carrier and label it. It might also show better what money is being spent more or less for each. After making the purchases put the bill change into a slot for savings and the coins can be put in a collection container to later be deposited into savings. Also when you receive your household bills, right away put the cash in those envelopes.

  21. Heather says

    We started the cash envelope system a little over a month ago and what a HUGE difference that has made! It’s amazing how much MORE money we seem to have. We just pad off two credit cards and have one more to go! Once the credit cards are paid off do we cancel the credit cards? Do you keep one or two for emergencies? If we cancel them does that ruin our credit and does that matter?

    • says

      Heather, Dave Ramsey would tell you to cancel them. Instead of using CCs for emergencies, keep a cash reserve – once you’re out of debt, he recommends saving up 6 months of living expenses. As for credit score, that’s up to you. Closing them will not help it, but if you don’t need credit then it doesn’t matter.


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