The Cash Envelope System, the Ultimate Weapon to Fight Overspending

The cash envelope system is never new; it has been used for ages. However, not too many people understand how to maximise its benefits.

It aims to basically stop you from going overboard on your budget by spending only what’s cash-on-hand rather than swiping your plastic. It will try to beat the psychology of your spending habits. The system will ultimately help you to control your spending; once you successfully get this done, it only means that you are able to stick to your budget. 

When we were using plastic for our purchases prior to this journey, any amount we spend is very little as compared to our credit card maximum credit limit. Example: shopping cost of $100 versus a credit limit of $6000. Hence, we tend to relax and just keep swiping away. It’s truly a mindset. If we only have the cash intended for spending on our specific budget category, we are reminded to slow down and simply stop when the money is gone. 

For someone like me that has been cashless ever since I can remember, I had my apprehensions at the start prior to trying out the cash envelope system. I had to battle serious anxiety. I had concerns on worse case scenarios flashing over my head especially the thought of having a couple of hundred dollars with me; it freaked the hell out of me. But I got over that since we only take out the money that we need on weekends when we do our grocery shopping run. It has more benefits as we now have more control of our spending and tracking them is just smoother. There is no turning back since. 

How does it work?

I have been using various budgeting methods in the last two years but I did not have much success. I had no idea what I was doing and it was just a total mess. I only had everything sorted out when I strategically used the budget-by-paycheck and zero-based budgeting methods which are both anchored on our paychecks received on a monthly basis. 

Using cash envelopes is only one of the system in place to ditch the use of swiping plastics as I have mentioned earlier. This is to deal with the problem of not exactly knowing how much you are actually spending when you are not using cash. This may result in spending more than you make and can end up in piles of huge credit card debt. 

I realised that the envelope system has been the missing piece in my financial journey. I am sticking to it as I have now fully understood its benefits. I only decided to utilise some pretty envelopes because I am a very visual person. 

Cash Envelopes from TBM

I am going to use this system for the long term especially for my variable expenses: 

  • Food
  • Shopping
  • Petrol
  • Fun
  • Events and Family Occasions
  • Miscellaneous

All the rest will remain cashless. 

When is the best time to start? 

You can start anytime you want, whenever you are ready. You do not need any fancy materials to get yourself started. Don’t stress out about pretty. Functionality and getting it done is more important. I used only the normal white envelopes just for me to test the waters. 

If you are in the Philippines, you can do similarly or you may also opt for the brown jacket as pictured below:

What is the process?

  1. You need to identify your budget categories and mark/ label each envelopes accordingly. I would highly recommend variable expenses for this as it tend to blow up your budget. 
  2. Allocate an amount for each budget categories.
  3. Fill the envelopes in with your money allocated for each month. 
  4. Spend only what’s inside the cash envelopes. 


The beauty of this system is that you instil discipline on yourself as you control your spending. You will need to only spend the money that’s inside the envelope. Once it is gone, it’s gone! You also can not borrow from other cash envelopes. Therefore, you are held accountable for your own money and you tend to track it more often for you not to overbudget. Tracking is the key step in creating a successful envelope system. You also learn to be creative when the budget goes low. You will find every means there is to stretch your money. 

If you have money left on the envelopes at the end of the month, I’d say, “Well done!” It means you went underbudget and has managed to control your money well! You may opt to put away the leftover money as savings on a separate envelope and you can watch it grow, or you can roll it over for your next budget. 

You may also wish to use this money to reward yourself; it’s great to celebrate little victories to help keep you motivated. 

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