How I learned to be thrifty: some thoughts on The Envelope System

How I learned to be thrifty ZoeAtHome.com

Could you live off $35 a day? It’s a topical question here. Our family spent a year living off an income that was little more than this so I know I could, but feeding the family and paying our bills on this tiny amount tested our marriage, and drained our resources both financial and psychological. It was one of the most stressful years of my life. But it did teach me to be thrifty.

That year I experimented with the Envelope System. The idea is that on payday, you pay all the bills that are due and then withdraw the rest and stuff it into envelopes or jam jars labelled Food, Family Entertainment, Petrol, Clothing or whatever makes sense to you. Then you put your plastic away and just live off the cash until next payday.

However, I found some issues with managing our spending like this:

  • What do you do with the coins? They will rip your envelopes, unless you buy fabric envelopes with zipper closures. You can find these on Etsy.
  • I’d get very tempted to ‘borrow’ from other envelopes when one category was drained.
  • Cash burns a hole in my pocket! If I had the money on me, I’d always find a way to spend it.
  • The money is better off in my bank account, earning interest, not tempting me from my handbag.
  • You have to carry a lot of cash around with you, which isn’t always safe. Or,
  • You have to keep a lot of cash at home and I’d always worry about being robbed.

If you keep most of the cash at home then you need something like this box, which is a hand-me-down from my father-in-law. The categories on the box didn’t suit our family, so I put my own labels on each section.

How to use the envelope budget system ZoeAtHome.com

The lock on this box wouldn’t deter many robbers!

Keeping a Budget Book for a few weeks is a good way to get your spending under control, especially if you suddenly find yourself earning less than you’re used to. Suddenly earning more than you’re used to can be a problem too, because if you’re not careful you might just waste the surplus, and a book like this will help you work where that money is actually going.

Using a home budget book ZoeAtHome.com

I bought this book from kikki.K

So after some time on the Envelope System, we switched to debit cards and tried to carry as little cash as possible. But I realised that having some cash on hand made me feel wealthier, and it’s nice to be able to have something for charity collectors, or shout a friend a coffee. So now I use a modified version of the Envelope System.

I only have two spending categories now: Housekeeping and Personal. Even if you’ve merged finances with your partner, I think it’s nice for each person to have some money that is theirs to spend on whatever they like. I always look for wallets and purses with two sections like this one made by Octopurse:

Managing coins with the envelope budget system ZoeAtHome.com

If you think you’d like to give the Envelope System a go, I recommend the SavvyCents wallet. Using a wallet that’s purpose-designed for this system is much better than carrying around a few dog-eared envelopes! It’s designed by Melinda, an entrepeneurial mother from the US. She’s very friendly and sells her wallets through Amazon which will ship to most countries.

I’d love to know if you’ve used the Envelope System, and how it worked for you. Let me know in the Comments.

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8 thoughts on “How I learned to be thrifty: some thoughts on The Envelope System

  1. I love the box and I’m surprised that I have never seen anything like it. I have never really used the envelope system as I feel I am better off without immediate access to cash. My husband and I have only just started to allocate ourselves cash each week as personal spending money. It is so much easier to go out for a coffee these days or buy small items without the hassle of using cards for small things.

    • I think my father-in-law must have received this when he signed up for insurance or something. The sections are labelled House Payments, Rates, Housekeeping, Phone, Insurance, Gas/Electricity, Bread and Milk… so quaint! Back in the days when bread and milk were delivered. I looked on Ebay to see what it would be worth and I did see one there, so I think you can find this sort of thing in antique shops.

  2. I’ve used the envelope system for cash, but like you, I don’t like carrying all that cash around. Lately, our family uses the You Need a Budget app for our iPhones. You can designate how much you want to spend for whatever categories. When you’re out and about, just plug it in, and it will subtract what you’ve just spent from your category. Currently I have $25.10 left in my dining out category. Uh oh, it’s only the 13th… yikes! Guess we’ll spend Valentines day dinner at home. 🙂

    • That’s a good idea; I didn’t know there were Apps for doing that. I guess one day we will be able to use our smart phones to actually pay for things too, so it will be integrated into one system. It would be much easier to manage money that way. Thanks for your comment. Enjoy Valentine’s Day!

  3. I’ve tried the envelope system, too, but I don’t like it. For example, if I go to Wal-mart, I might be spending out of 3 categories. I had a friend who handled that by having the checker ring up 3 different purchases and then paying for each out of the appropriate envelope. No way I’m doing that. It’s too much trouble & inconveniences the people in line behind me. I also don’t want that much cash at home (we have been broken into and both times they took my change bank). I also hate standing in line and having to count out cash. The debit card is so much easier.

    I’ve tried a modified version using cash for my household spending like groceries, clothes, eating out. Gasoline I use the debit card because it’s a LOT easier!

    But, I spend a lot less when I use cash. I’m the opposite of you, I have a hard time spending cash but don’t blink twice about using my debit card. So I haven’t decided what I’m going to do. I’m still playing around with different ideas.

    • Yes, the envelope system can get very confusing! I had a similar experiences where I was fumbling with all these different envelopes and people look at you strangely. I think cash is good for teaching children about money, though.

  4. Hi,
    How much did you spend on the personal site when you only have 35$ a day? How many persons have to live from this money a day?

    • Hello Iraya. This was a few years ago now, but we had to feed everyone on this amount. It was possible to do it, but it required a lot of planning. But then a bill would come in the mail and it would blow the budget. We drained our savings that year, but we survived it.

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