Cash Envelope System for Beginners

May 11, 2018

cash envelope system for beginnersToday we will talk about cash envelope system for beginners.


Years ago, I created an introductory post about envelope budgeting.


But, although the cash envelope system has been widely recognized and used, there are still others who don’t know how it works.


And so I thought of sharing a comprehensive guide for those who are new to the method.


The Cash Envelope System is something I have used on and off, accompanied by the 50-20-30 Budget Rule for years and it tremendously changed my money habits. It works pretty simple, using envelopes to store your cash for specific expenses. You are only allowed to use the money you have on each envelope. No ifs and buts.


If you are prone in making impulse shopping, if you are currently living from paycheck to paycheck, if you are still living in debt and want to reclaim your finances, then this system may be the answer.


Let’s begin.




Why Budget with the Cash Envelope System?


We all hear how important budgeting is. They say if you are truly serious to reach financial independence and early retirement then you need to master how a budget works.


The Cash Envelope System works to accomplish the above and even better.


Because you are tucking in money on specific envelopes, you can see exactly how much money you have left in a certain category. Just take a quick peek in the envelope and you will are reminded if you are already out of budget.


How the Cash Envelope System Works?


Here’s a step by step procedure on how the cash envelope system for beginners work.


Step 1. Create your rough budget for the month


Have you ever made a budget?


I hope this is not your first time to create a budget.


A budget is an estimate of your income and expenses over a set period of time.  Normally done on a monthly basis, budgets work to:


1. Allocate your salary/income/money wisely

2. Know how much is coming in and going out in your cash flow

3. Identify the areas where you can spend less to save more


People create a budget when they receive their salary, go on a planned vacation, grocery shopping and many more.


Creating a budget is actually very easy…its committing to it that’s hard. Budget involves tough choices to make all ends meet and it is your sole responsibility to accomplish one.


Your very first task is to choose which method works for you when it comes to budgeting.


Are you more of a pen and paper kind of person or you love using apps for your budget? You need to identify which budget system applies to you. Or try both and see which method works for you best.


Pen and Paper Budget involves a clean sheet of paper and simply identifying how much money you have and the list of expenses you need to pay.


There’s also the 50-20-30 Budget Template which I made available for free if you are part of my email list. Sign up here.


Just simply key in your password to the SavingsPinay Resource Library, find the template and download. (There are other freebies on the library too!) 


Here are some budget apps I recommend:


Check (Free for iOS and Android)


If you want all your bills, due dates and account details are displayed in one dashboard then this Check app is for you.


The application helps you track bills and monitor your bank accounts as well as credit cars.


A reminder feature is available and notifies you if ever you have an account that’s near credit limit or low in value. (Free for iOs and Android) Personal Finance app has been one of the most famous and well-applauded budget app.


It allows you to track and manage your money in one place and see how much money goes to your spending and how much is left for your saving.


You can easily add a bank account, credit card account or even loan. A starter Budget is created based on your spending history and this can make your budget more personalized.


All of your bill reminders have alert functionality so that you will be sure to pay on time.


Money Lover (Free for iOs, Android and Window)

A new app that I discovered is the Money Lover.


It is a super easy application where in you just easily input you budget of the day or of the month. It has Cloud Sync Solution so that you can view your account anytime, anywhere.


The good thing with Money Lover is that you have more than one account so if you are like me who is more of a freelancer this could help a lot with the different income we generate.


Pocket Expense (Free for iOs)

I have personally used the Pocket Expense because it is easy to understand.


The fact that I can input multiple accounts and view my daily, weekly, monthly and yearly statistics is simply amazing.


Pocket Expense app is also nice for it shows a graph form of both your income and your expenses. You can also set a spending limit so that you know how much money you still have once the budget for the said expenses is gone.


Same as the other Personal Finance App, you can track bills, set alerts to remind you of due or overdue bills and helps you create that said payment too.


Step 2. Identify Your Income


If you’re employed this will be your take home pay less government fees and taxes. This money will act as your baseline.


Personally, I only do the cash envelope system on my day job salary. The money I get on my side hustles goes straight on my extra income fund which acts as a opportunity fund for me.


Related Read: Where Does Your Income Go


Step 3. List down your budget categories


Budget categories are the specific expenses you will be spending your money on. Here are some categories commonly found in every person’s spending plan.


1. Tithes. This consists of 10% of your total income. Other variants of this budget category will be Offerings, Missions (if you are supporting a missionary) and giving fund.


2. Bills. Bills refers to all the daily, weekly or monthly subscriptions that you need to pay with. Under Bills are the following:

  • Tuition Fee
  • Allowance
  • Electricity
  • Telephone
  • Internet
  • Cable
  • Water


3. House. Though this could be included in the Bills category but I choose to separate this one to give you a much thorough breakdown on sub categories that you need to allocate money with when we talk about house.

  • Rental Fee
  • House Loans
  • House Repair Fund
  • Property Tax


4. Food. This category is of high importance for we need to eat in order to live. If you are someone like me who still is in the care of parents then the only item to budget is the daily breakfast and lunch. Dinner will sometimes be care your Mom same with how the weekend goes. (Thanks to the tight family culture of Filipinos) But for others who live independently and or are Moms below are much more specific allocation.

  • Groceries
  • Dine Out
  • Treats


5. Transportation. Personally, this is where most of my income goes since I choose to ride conveniently on an FX (Skyway) going to and from work. In short, I choose convenience over saving here. Below are other sub categories:


For those who commute will be a dedicated transportation allowance.


For those who own their car:


  • Fuel
  • Tires
  • Oil Changes
  • Maintenance
  • Parking Fees
  • Repairs


6. Investments. If you have different investment instruments then you need to allocate an amount for each.

  • Short term and Long term Healthcare plans
  • Insurance like Auto insurance and the like
  • Mutual Fund, Stocks and the like


7. Emergency Fund. This is something that you need to put emphasis –building your emergency. Put this as part of budget allocation so you won’t forget to put aside some money. You might also try the other funds I created that had renewed my financial life.

  • Fun Fund
  • Financial Goal Fund


8. Personal Expenses. This is anything that have to do with you or your family on a personal level.

  • Clothing Allowance
  • Load Allowance
  • Gym Memberships
  • Hair Cuts
  • Salon Services
  • Cosmetics
  • House Help
  • Subscriptions


9. Miscellaneous. There are expenses that just come along the way so it is better to put aside some amount some reasonable amount.


Step 4. Define your spending percentage


I recommend you use the 50-20-30 Rule of Budgeting to calculate how much of your income goes to each category. You can also use other budget allocation depending on your comfort level.


The 50-20-30 Budget Rule suggests that you essential expenses should be limited only to 50% of your net income. Your financial goals to 20% of your net income and your lifestyle wants to 30% of your net income.


Essential Expenses

When we say Essential Expenses these are your necessities, the fixed items that you certainly need to pay no matter what. Example will be your house rent, transportation allowance, food/grocery and/or utilities, electric bills.


Financial Freedom

When we say Financial Freedom these are your savings and investments. Money meant to help you towards better financial security. Count on here your debt payments, loans, savings and/or investments from different investment vehicles you own.


Lifestyle Fund

When we say Lifestyle Fund these are your “flexible spending” meant to pay for things that you personally need like hobbies, shopping and other miscellaneous expenses. Included in this is gym membership, clothing/shoes shopping allowance, etc.



Step 5. Start budgeting with envelopes


This is where the Cash Envelope System goes handy.


After you have established how much of your money goes to where, start placing them on your cash envelopes.

Photo from National Bookstore Facebook Page


I highly recommend this My Personal Budget and Bill Organizer available in National Bookstore. You can also buy a pack of money envelopes with around 10 to 20 envelopes available instead.


Another good idea is this DIY Cash Envelope System in Your Wallet.


Use folder to create more partition inside your wallet and ready-to-use label makers to write your categories with.


Bring the cash envelope along with you and spend only in accordance to the dedicated amount you have specified for each category.Remember to stick to your budget.

Photo from A Bowl Full of Lemons


If unwanted expenses arise, adjust. Reserve some money for miscellaneous spendings.


How I Apply the Cash Envelope System in My Finances


1. As soon as I receive my salary, I do a rough allocation using my 50-20-30 Budget Template. You can download a free 2018 50-20-30 Budget Template on the SavingsPinay Resource Library today. Sign up here to receive the password.


2. 30% goes straight to savings and investments. I do this first and foremost.


3. Encash the rest of the money and put them on this Budget and Bill Organizer I bought at National Bookstore. It already contains several envelopes and I put each of the categories I use to budget.


4. I bring along the Budget and Bill Organizer with me all the time and spend in accordance to the money I have in each envelope.


5. If there is money left, whether I saved money on food allowance or transportation, I put it on the last envelope as a fun fund. Money I can freely use to buy a new pen or a new book, perhaps.


Related Read: How I Organize My Finances + Inside My Money Map


Tips in Using the Cash Envelope System for Beginners


Make your budget realistic


Always build a budget out of real and actual numbers. Put the real income you get in a payday, the real expenses you usually spend on your budget categories and the real magic numbers you have in your saving goals. Make your budget as close to your real life spending as possible.


Don’t cheat on your envelopes


In the beginning, I always run into a tight spot. My weakness has been eating out instead of having dinner at home so my food allowance will run out of cash easily.


Then I gave myself a rule not to pull from whatever is left to other envelopes, say transportation just to satisfy my cravings. I also bring my baon like canned tuna to make sure the rest of the envelopes remain untouched.


Please remember that the Cash Envelope System is meant to make sure that you are following your budget. Stick only to the amount you have inserted per envelope and avoid borrowing on other envelope. You will never succeed if you keep on cheating on your own system.



Budget regularly


Setting regular budget from monthly, weekly to daily will definitely make you more knowledgeable in your own personal cash flow. Don’t stop with just a monthly budget but add a weekly spending plan to further break down your expenses. Also try tracking your expenses on a daily basis to see whether you live within your means.


Avoid Overspending


We all have our weaknesses when it comes to finances.


I, for example find it hard to say no to new makeup or skincare. I always feel like I need to stay updated on what’s out the in the market.


This changed dramatically last year when I started using less makeup than usual. I invested on good skincare product so I do not have to hide my imperfections with makeup.


Here’s what I’m currently using:

  • Celeteque Brightening Facial Wash – Buy here
  • Human Heart Nature Balance Toner – Shop here
  • Human Heart Nature Day and Night Moisturizer – Shop here
  • Nivea Intensive Moisturizing Lotion – Buy here


One cool way I found out to avoid overspending is keeping a Needs and Wants Page on my bullet journal. Having a list of the important purchases motivates me to spend better.


Bullet Journal 2018



Automate Some of Your Expenses


Don’t use the Cash Envelope System for everything! If you can automate your finances, then so be it. As I mentioned in my process, 30% of my salary goes straight to savings and investments.


I mentioned before that having too much cash in my possession is a big no-no for me. As soon as I earn a good amount of money I immediately look for alternative investment vehicle to invest with.


Currently I only have the following envelopes:

  • Tithes
  • Transportation
  • Food
  • House Bills
  • Phone Bills
  • Miscellaneous Expenses


Review your system as often as you can


This is the part that can make or break any budget. Doing regular reviews of your system is essential to keep yourself updated on your spending habits as well as whether you are acing your financial goals.


Reflect on how your money went from the past month or past week and find out possible solutions to make it better. Also make sure that the cash envelope system is really working for you and not against you.



Final Notes from SavingsPinay


In a nutshell, the cash envelope system work this way:

You allocate the money you have to different envelopes.

How to do it:

1. Create a rough allocation of your income by writing it down or using the 50-20-30 Budget Rule (Php 1000 to Tithes, Php 2500 to Utility Bills, etc.)

2. Take the money out of the bank or your payroll account.

3. Divide the money into envelopes labeled with a specific budget category.

4. Spend only with the money allocated on the budget category. Always with cash.

5. Repeat.


Have you ever used the Cash Envelope System before?


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Clariza Glino

Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at, a beauty and lifestyle blog for frugal Pinays and manages,, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at

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