How to Hack the Cash Envelope System to Forgo Using Cash

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The cash envelope system is a great way to keep yourself from going over budget. Your spending is restricted to the amount of money you fill in envelopes to represent different budget categories.

The pandemic, however, has made it less convenient to stick to this budgeting method. Many of us are doing more shopping online, and many are avoiding the germs that handling cash may expose us to.

But you can still follow the basic principles of the envelope budgeting method without using cash. Here are four ways to transition to a cashless version.

1. Use Gift Cards

Instead of stuffing your spending envelopes with cash, use gift cards. At the beginning of the month, purchase gift cards that correspond with your various spending categories.

For example, you might get one card for groceries, another for gas and another to use for entertainment purchases. You’ll save money on activation fees if you purchase a gift card for a particular retailer — like a Target or Walmart gift card — rather than a Visa or Mastercard gift card.

Before buying gift cards, read the fine print so you’ll know if there are any expiration dates or fees. You may have to adjust your spending limits to match up with the gift card denominations.

2. Use a Budgeting App Based On the Envelope System

Envelope system budgeting apps existed way before COVID-19 changed our worlds. Goodbudget and Mvelopes are two apps built around this budgeting method.

The free version of Goodbudget gives you 20 envelopes to manage your spending. Its paid version — which costs $7 monthly or $60 annually — offers unlimited envelopes. Goodbudget doesn’t sync to your bank account, so you have to manually update your transactions to keep your envelope balances current.

Mvelopes, on the other hand, does link to your bank account, so your spending is accounted for in real time. This app lets you choose from three paid plans — a basic version costing $6 monthly, an intermediate level at $19 monthly and a complete plan for $59 a month. While there is no free version, you can take advantage of a free trial for one month.

3. Use Multiple Accounts for Different Types of Spending

Another way to create digital “envelopes” is by using separate bank accounts for different areas of spending. You may want to stick to just a few broad budget categories so you don’t end up having to open a bunch of bank accounts.

For instance, you might want to have one account that covers food and home essentials rather than four separate accounts for groceries, take-out, beauty products and home supplies.

Pro Tip

If your bank allows you to create sub accounts, use them to separate your money for different uses.

When working with multiple bank accounts, you’ll want to maintain a master account where your paycheck comes in and then distribute money into each spending account. You can set up bank alerts to let you know when your balance reaches a certain level so you’re careful not to overdraft.

4. Track Your Spending After Every Transaction

Keeping yourself acutely aware of your spending as it happens is another way to stay within your budget limits. Use a makeshift ledger that you carry around with your debit card — it could be an empty envelope, an index card or a small notebook — to record your spending.

Before you make a purchase, take a minute to check your budget to see how much you’re able to spend in that category. After you make the transaction, quickly do the math to update your remaining balance.

It’ll take a little more self discipline to stick to your spending limits, but it can be done without resorting to using cash.

Feeling overwhelmed? Create a budget that works for you with our budgeting bootcamp!

Nicole Dow is a senior writer at The Penny Hoarder.