How to Set Your Monthly Budget using the Envelope System

I talk a lot about living your best life on my site and in my posts. To me, that means so much more than weight loss and food. I know firsthand that when one area in your life is unhealthy, it affects the rest of your life too. This is especially true with your financial health. My husband and I started our journey to become debt free at the beginning of last year and we were able to pay off over $24,000 of debt in just one year. For the first six months of that I was working part time and my husband was a full time pizza delivery driver while he was going through a career transition.

How Did We Do It?

I get a lot of questions about how we did this, and I so I wanted to start with the basics of budgeting. We are still on this journey, so we are right there with you. Just like with weight loss, I know how hard this can be. But if you learn from your mistakes and put in the effort, you can move mountains.

The first piece of advice that I have is about mindset. It’s not easy to sit down and face the reality of where your finances are at. I know that my husband and I both struggled for a while with guilt and frustration that we let it get so out of control. You have to let that go and look forward. The guilt, shame and ‘what if’s’ will only hold you back.

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Budgeting Using the Envelope System

1.) Income – 

Write out all the money that comes in as income each month. Be as accurate as possible. You can do this on an Excel spreadsheet (if you are a nerd like my husband) or with pen and paper (if you are like me).

This is a little difficult for us at times because we have a variable income. Variable income means that your paychecks are not the same every month. My husband has a full time job with a steady paycheck, but he also still delivers pizza at night. His delivery paychecks vary and the amount of nursing shifts I pick up varies as well.

We have been doing this for a while now, so we can usually estimate fairly accurately what our income will be for the month ahead.  We both have flexibility with our jobs to pick up some extra shifts if needed.

2.) Expenses –

This can take some time because you want to account for everything. First you will account for your scheduled monthly expenses (food, housing, utilities, transportation, etc.) Write out everything that HAS to be paid.

Then write out what you spend on the extras (eating out, subscription services, coffee stops, entertainment, etc.) Next are the things that might only come up quarterly or annually (insurance, christmas, etc.) We start saving for Christmas in January, this way we set aside a little at a time and don’t have to stress about finances or go into credit card debt every December.

The goal is to have every single penny allocated to something in the monthly budget BEFORE the month begins. Once we have the full picture of our income and expenses, we put our monthly budget into the EveryDollar app which is free and makes it so easy to update regularly. I can access it from anywhere and see what I have left in each category.

3.) Make Some Cuts –

You will do this for a few reasons 1.) if your budget doesn’t balance or 2.) if your budget balances but you are in debt.

It’s not easy to sit and decide what needs to go, especially because these are usually the things that make us feel good. We also live in a culture that tells us YOLO, so buy what you want! But do I really need both Hulu and Netflix? How much am I spending on that drive thru coffee every morning?

Since these cuts can be difficult, it is nice to have some blow money if something comes up. I like to be able to have a bit of cash in my wallet if I want a coffee as a treat or to do some fun shopping.

*Reminder that I am still working on this in my own life. There is no judgment or condemnation, but you have to remember that nothing worth having comes without sacrifice. Do you truly want financial freedom? Then you have to fight for it!

4.) Envelopes – 

After the budget has been set, you need to then fill your cash envelopes. You might not be able to completely fill all of them at the beginning of the month, so take half out to start and then the rest out later with your next paycheck.

These are some of the categories we use cash envelopes for:

  • Groceries
  • Clothing
  • Entertainment
  • Christmas/Gifts
  • Car Repairs
  • Kids Allowance
  • Gas

You might be thinking, why would I use cash when I can just use a debit card? There are multiple reasons for this. The first reason is that a debit card works just the same as a credit card. It is too easy to swipe and not keep track. But if you have an envelope of cash, you can see exactly how much you have spent and how much you have left.

The second reason is that when you are out of cash, you are out of cash. It is a self imposed accountability system. Studies have shown that spending cash versus swiping plastic literally creates a different reaction in the human brain. Spending with cash activates the pain center in our brains while swiping a card does not. It has been statistically proven that we spend more when we use plastic.

Use these cute cash envelopes to make it more fun! And I love this wallet by Rachel Cruze because it has multi-colored clips to help you keep your cash organized.

5.) Have Grace for Yourself

It may take a couple of months to really get the hang of setting and following a budget, but once you do, it will become second nature. It is such a freeing feeling to no longer be controlled by your money.

Sometimes, we do need help, especially if we find ourselves in a lot of debt. If you are looking for additional support, my husband Ryan is a financial coach. He is passionate about seeing people find freedom from financial burden and to have hope for their future. We know firsthand what it feels like to be overwhelmed by debt and Ryan’s coaching comes from a place of empathy and understanding. Visit to learn more about his services.


*We learned the envelope system by reading Dave Ramsey’s Total Money Makeover.

*This post contains affiliate links that help keep The Bettered Blondie up and running. When you make a purchase using one of these links, I make a small commission. It does not add any additional cost to you.


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