Using the Envelope Budget Method for Only Savings

You’ve probably already noticed my love of all things, Dave Ramsey. So, these tips for Using the Envelope Budget Method for Only Savings are an obvious fit here. The cash envelope method is a hugely popular way of managing finances and paying down debt, but it can be used uniquely in many ways.

Using the Envelope Budget Method for Only Savings

If you aren’t familiar with the cash envelope or Dave Ramsey method of handling finances, you can start with our post about How to Shop Using Cash Envelopes, and our video about How to Use Cash Envelopes to Stay on Budget. Once you understand the basics of using a cash system to pay your bills and manage finances, you’ll understand how this can be great for using just for savings.

Determine what you are saving to purchase

The envelope method is a great way to create what some refer to as “sinking funds”. These are specific savings funds that you know you need for a set expense. Examples are for vacations, upcoming clothing purchases, a new computer, or even a holiday fund. Most often, these funds are created several months in advance so you can “sink” extra income into them in small increments that add up over time making the end purchase easier to manage.

Some savings account options for using the envelope method: vacation funds, holiday gift funds, new computer fund, upgrade your wardrobe fund, amusement park pass fund, annual subscription fund, or home repair funds.

Choose if you will be keeping the cash at home or putting into the bank

Yes, the cash envelope system is designed for you to put all of your money into envelopes for different expenses, and once that envelope is empty you don’t spend any more for that month or time period. However, keeping a ton of cash in your home isn’t always the safest option. Some individuals feel okay about keeping a safe in their home and just storing their cash there for future use. Others prefer to take the cash and deposit into separate accounts each month.

A good home safe can be a great option for some. The idea of putting money into the bank does have benefits if you are looking for a long term savings goal and would prefer earning interest on your savings. Weigh the pros and cons for your needs, and choose accordingly.

Set realistic goals for each month

Look at your whole budget and figure out the best goals for you each month for your new cash envelope savings plan. I recommend setting small goals for yourself at first so you don’t feel overwhelmed. If you have multiple things to save for, then you can start with just $5 per month in each category.

One great idea is to look at what is left over in your budget after all of your mandatory bills and monthly expenses have been managed. Look at the most pressing needs in your savings envelopes first. Things like home improvement, updating a laptop, or even saving for an upcoming birthday may come before the new wardrobe if your clothing is still in good functional condition. Designate larger amounts each month to the more immediate needs, and smaller amounts to things that can wait for longer to accomplish.

Create a tracking method

If you are choosing to keep your cash envelope savings in your home safe, then you may already be looking at some of the various envelope options available. A simple manilla envelope with a piece of paper attached to the outside is great for tracking each “deposit”. You can quickly make notes of money added or subtracted from each category, and know at a glance what you have saved so far this year. Some create individual envelopes and laminate them, while others use money pouches or pencil cases to store the funds. Choose what works well for your situation.

For those who are depositing their savings into a traditional bank or credit union, a spreadsheet is a great way to keep track. This is especially handy if you are wanting to put all of the money into one singular account to gain the most interest over time.

How the Envelope Budget Method Works for You

Setting up a savings plan is a great way to make large expenditures easier to manage over time. This process helps you to put the money safely into different budgeted categories so you don’t overspend or use the money before it is needed for another expense. Just because it is called the envelope method doesn’t mean you have to keep all of the money in an envelope every day. Using envelopes as a visual way to separate your money works great for many who struggle with financial accountability.


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