Life { Faith } Tea

and ramblings on everything in between

Minimalist Monday: The Envelope System

There are a lot of things about Dave Ramsey’s financial freedom plan that were life changing – but the envelope system has been one principle that continues to transform my finances.

The idea is as minimalist as it gets: put cash in an envelope and quit spending when the cash is gone.

Yes, the idea is that easy.


As you can see, my envelopes have a lot of miles on them. They’ve been busy. I laugh to see how scraggly they look. Some of them have been around since the beginning, almost five years now. I should send Dave a picture of them. I think he’d be proud. Not only does it show that I’ve stuck to it, but it shows how “thrifty” I am to reuse them over. And over. And over. And over.

Here’s why this idea works.

Research by Dun & Bradstreet proves we’re likely to spend up to 18% more on purchases when we use a credit card. Why? Because we mentally know we aren’t paying for the bill right then and there. It’s easy – and so tempting – to throw in a few extras and find the difference at the end of the month when the statement arrives. What does that 18% amount to over the course of a year in your life?

It makes me nervous to hear people say they pay for everything with a credit card so they can get the rewards. I feel that only creates a bad habit of always reaching for the credit card – even when the money isn’t there. That whole muscle memory thing, you know. If we do it that often, we to do it without thinking. How many unplanned purchases are you adding to the credit card out of reflex? That’s a danger zone for your budget. If you don’t ever reach for your credit card, you’ll pause before using it to purchase something you can’t pay for it.

Paying cash for purchases hurts. When you hand over those hard-earned dollars, your body has a reaction. Your brain acknowledges that you are losing money. Swiping a card doesn’t have the same effect. It also keeps us from fully comprehending how much things cost. How many times have you swiped your card at the grocery store before the cashier was done ringing up your purchases – just to zone out or answer a call when he does tell you the total?

Or how many times have you slipped your card into the bill holder at a restaurant without glancing at the total first? We sometimes don’t take the time to recognize how much our purchases are when all we have to do is wave a plastic card. Hearing the total then counting out the cash forces you to do this.

Here’s how this idea works.

The first step is creating a budget. Dave’s got all kinds of advice on this. Once you know how much you are allocating for each expense each month, start your envelopes.

Get cash from the ATM every pay day and fill the envelopes with the allocated money. Then commit to spending only what is in the envelope for each designated purchase. When you run out of cash, you’re done spending until the next pay day. If you have cash left over (I rarely do!), roll it over to the next round of money for that expense – or add it to a surprise envelope to save for something unexpected or fun.

If you need to purchase something and the right envelope isn’t with you, hold off on buying it or go home to get it. This sounds extreme, but it builds your diligence which has a lot to do with you staying within the limits you’ve set for yourself no matter what (emergencies excluded). On the rare occasion I can’t make it to the ATM and buy groceries or house supplies with a debit card, I feel extremely guilty. That sounds crazy, I know! But I’m that committed to this system. When I break the rules, I feel terrible.

This is a great sign. It means I’ll never stray too far from the plan. 🙂

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Here’s how to put this idea into play.

Dave has fancy envelope systems you can purchase, but I say save the money and use good old fashion paper envelopes. One dollar will get you 100 – then go wild. Create an envelope for every weekly and monthly expense in your budget. Designate envelopes for your bigger savings goal. Make an envelope for surprises.

Some of my envelopes live in my purse – such as groceries, house supplies, and spending cash – because I need them on hand constantly.

Others live in a drawer in my home – such as gifts, oil changes, tithe, donation, and travel fund.

Then stick to it.

Marvel at how odd and strange it feels to pay cash for things. Continue to do this until you marvel at how odd and strange it feels to pay with a debit card for things.

This is when you know you’ve succeeded.


4 comments on “Minimalist Monday: The Envelope System

  1. ronprestonjr
    June 20, 2016

    I share many of the same practices that you have in this post. I started my financial journey with Dave Ramsey and since then have combined his baby steps with a few other principles that match my desired lifestyle. I know he would yell at me for investing $900 per month instead of placing it as “extra” on my wife’s student loan; but I have calculatedd the opportunity cost and in 5 years I can turn that disposal income into $70,000 while paying the mininum ($250). No I don’t want it around that long, but I get large bonuses so it should disappear within a couple of year anyway. I Also I maintained 2 credit cards that are paid in full. Guess I’m a rebel. Anyway great post!

    • Ashlee
      June 22, 2016

      Thank you! I appreciate you sharing a little about your journey. I always feel energized learning about what others are doing to take control of their finances. If you’re rebel plan works for you, that’s all that matters! Best of luck with your debt-free journey.

  2. This works so well!!!!

    • Ashlee
      June 22, 2016

      🙂 I’m glad you’ve had success with it too!

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This entry was posted on June 20, 2016 by in Debt-free Living, Finances, Minimalism, Money, Simple Living and tagged , , .

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