Envelope System of Budgeting: Refocusing and Refreshing

Back when I was a new blogger and a newlywed, I posted frequently about our budget. We got married right at the beginning of the 2008 economic downturn, and with a mortgage, car payment and a volatile job market, we got strict about living on a budget. I was laid off 4 months after our wedding from my job in marketing at an internet start-up, and while I luckily found a job again quickly, at the age of 24, B and I became acutely aware of how quickly things can change. We started living on Dave Ramsey’s envelope system of budgeting to sock away a 12 month emergency fund (because we didn’t feel 6 months was enough in the economy at the time), pay off that car loan, and save wherever we could. We did well, loved the cash budget system, and paid off our only debt other than our mortgage (that car) by age 25. Then we had kids – we bought a used family car in cash rather than taking out another loan, continued to be dutiful about saving and living well within our means, and moved forward with our financial goals – eventually for me to stay home with the kids, to buy a bigger home and to long-term provide for our family’s future needs. And in those years that I was blogging frequently about budgeting, it was a hot topic. But have you noticed that it’s kind of gone away? Blogs have turned from “DIY this! Save money!” to “Buy this amazing sofa right now!” And that’s okay, to an extent. The economy is better. But that doesn’t mean that living on a budget should go away! So, I’m bringing it back up – let’s talk about it, even if it’s not cool anymore.


We credit the envelope system of budgeting with where we are today. Over the last few years, we decided we didn’t really want to stick to just cash budgeting anymore. Part of it was laziness, part of it was a lack of need to account for every single purchase, part of it was just the feeling of a comfort and a better economy. We’ve usually done one or two “No Spending Months” a year to reel things in and reset when we felt like we were getting a little too spendy. We saved cash for our bathroom remodel, and are now saving cash to purchase a new vehicle (or maybe a slightly used one) to tote our soon to be family of 6 around town (and the country…because 6 plane tickets makes me think we’ll be driving to many of our vacation destinations in the future). We have good budgeting principles and do pretty well with our monthly spending – that doesn’t mean we don’t have months that get a little out of hand and we have to reel ourselves back in, but overall, we live well within our means.

So why go back to cash budgeting? First, no matter what situation we’re in, we spend less money when we use the cash budget and saving – no matter how good the economy is – is always a good reason to do something!  There’s that likely car purchase on the horizon (I need to install 4 carseats in my Pilot to see just how imminent that purchase is). And anytime there’s a big purchase in the future, I feel the need to really save to help offset that expense even if it’s one we plan for and can afford. But, mostly, it’s driven by teaching our kids about money. I recently read Dave Ramsey’s “Smart Money, Smart Kids” book. We’re at the age with our oldest two where we need to start teaching them about money – how to make it, how to spend it, how to save it, how to give it. B and I have slightly different philosophical opinions on allowance and kids earning money and I needed to be informed before we entered into that world – I like the idea of giving the kids an allowance because they are active participants in our household and we do things to help around the house, B prefers allowance to be tied to work performed. Dave Ramsey sides with B on that one, and while I don’t agree with everything in his book – I will NOT be paying my kids to make their beds every day, they make their beds because in this house, we make our beds! – I do see a lot of value in teaching them that money is earned, not given. As I was reading the book, I realized that I can’t ask my children to budget if we’re not actively and outwardly living on a budget either. As I thought about the relationship I want my kids to have with money, I realized we needed to model that. Nell LOVES to pay for our groceries. But paying for groceries, these days, involves me handing her our credit card to swipe (we still pay our credit card off in full every month, but she doesn’t see that side of things, she sees a piece of plastic that magically buys food!). I see how it would be so much more powerful to count out the $75 -$100 I spend each grocery store trip with her, and let her hand it over to the cashier.


And then there’s the fact that I’m a planner. I tend to be a bit of a worst case scenario-ist when it comes to the economy, but I’m not convinced that the current economy is here to stay. I personally believe (and have done very little research to back this up, so this is strictly my personal opinion) that low interest rates have driven home prices up and allowed people to buy more house than they can really afford. So, I’m not convinced that the strong housing market in Colorado is here to stay. There’s retirement, which we contribute to pre-tax but I think we could always pump more into. Not to mention the fact that we’ll have 4 teenagers (three of them boys) to feed one day – I told my neighbor (with two boys) a couple months ago when she was lamenting the cost of groceries and how much her boys eat, “You know it’s not going to get better, right?” She looked at me like I was crazy, and then she told me the next day, “When you said that I really had to think! You’re totally right – I will just continue to spend more on groceries. It was alarming, but a good perspective change for me.” Sports and activities are absolutely choices, but are things that we feel are healthy and important parts of kids’ childhoods, and they cost more and more the older and more competitive they get. We would love to give our kids the gift of a fully paid for (in-state) college education. B and I were both given the huge gift of graduating from college without debt. We’d love to give our kids that same gift – there will be expectations for performance and behavior attached to those gifts, but it’s something we really want to be able to do for them. We will have 16 years of college educations to pay for in the not really all that distant future – and those 16 years will be paid over 10 years due to our 2 year apart kid spacing. I googled “Colorado in-state tuition and room and board cost predictions for 2028” the other day. Don’t do it. Or do. But, those 529s are gonna need a little more attention than we’ve currently been giving them.


So, we’re getting serious about the budget again. I’ve simplified the categories a bunch from when we first started this in 2009. Rather than having a category for absolutely everything, I’ve roped our spending into 6 categories: Food (groceries, eating out, any beer or wine that is purchased, etc), Household expenses (anything not food that you might buy at Costco or Target, including diapers, plus fun stuff like home decor), Pets, Gifts, Clothing for the entire family, and spending money. We will continue to pay all of our bills online via our credit card and pay that off monthly, and we pay gas via our credit cards, too. Another thing I’ve changed up is to pay ourselves first. In the past, I’ve had our budget, and whatever we had leftover was our savings. Instead, I’ve setup automatic transfers from our checking account to our savings account for a specific percentage of our income every single paycheck – and I’ve done the same with our charitable donations (church & a few non-profits we support). I think those two small changes – paying our savings first, and then paying our tithe and other donations before allotting money to spending, have me feeling the most energized. I might need to read a Dave Ramsey or other budgeting book every three months to keep me energized, but for now, I’m feeling good about getting back to our budgeting roots – so that we can raise our children to do the same!

{All the old blog posts on our budgeting adventures can be found here.}


  1. I still credit you for turning me on to the envelope system of budgeting in 2010. We are now debt free and my husband is able to do what he wants for a occupation, which was a huge cut in salary but a awesome life change. I feel we live more comfortably now, even though we make two thirds less, because we learned to manage our money well. I’m glad to see you talking about budgeting again. It always is inspiring to me!

  2. Emily- thank you for your honesty. I agree that the world of blogs has changed so much, all the links to the products suck me in and make me want to buy things. I need to try the envelope system (I like your categories). I always think that I am good at not wasting money, but then when the credit card bill comes each month, the line items for “splurges” adds up to way more than they should!

  3. We have a 2008 Pilot and I was able to put 4 inside. I had two convertible seats and the infant seat between on the middle row bench and then another convertible in the back. That child had to enter from the trunk and I’d have to climb in to buckle/unbuckle, which was a hassle. I’m not sure how your Pilot is set up. My husband took my Pilot two years ago to drive his commute; he leaves in the wee hours of morning and was hitting small animals with his Civic and the bumper was going to fall off! The Pilot is not great on gas mileage ~17 mpg if I remember correctly, but that’s not terrible for an SUV either. I bought a barely used Odyssey. I swore I’d never drive a van, but I do love it. I have two that can buckle themselves and they’ll go in the back. Marlo stays in the middle in a captain’s chair and baby will go in the other captain’s chair behind the driver – we removed the middle seat for easy access to the rear of the van.

  4. I hate to be a downer but I want to point out that budgeting never gets any easier. We are now empty nesters and financially speaking, things should be getting easier but that is not the case. My husband has an 8 hour commute to care for his elderly parents and the cost of gas, food and wear and tear on the vehicle is an added expense- not to mention helping his parents out financially in the little ways we can. Then we have to think about our own retirement and the time when we can no longer care for ourselves. The care for his parents currently runs $10,000 every month and that does not include things like utilities and food. They will be out of money in a year- then it will be left to us and the other siblings. Just something to think about. I always focused on savings for college for my kids which we did but I guess I never thought beyond that and I am suggesting that in hind sight, that would be a good idea. Just another reason that we should always strive to live below our means.
    It is a blessing and honor to take care of our parents and being in a financially sound position when that time comes means we can focus on enjoying our time with them and taking good care of them instead of worrying about finances.

  5. You have always inspired me with your budget, and I love your thoughts and consideration about teaching kids about money. That’s something I need to do some thinking about and that Ryan and I really need to talk about.

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