Get Financially Fit

TikTok made me do it: How to budget with cash envelopes

Apr 17, 2023

Do you feel like your money’s constantly slipping through your fingers these days? Maybe it’s time to get more hands-on for a better grip on your cash with a manual budgeting system? Loqbox gives you the lowdown on the latest financial trend going viral on TikTok — the envelope budget system. 

Discover how budget envelopes can transform your finances.

What is the envelope budget system?

The envelope budgeting system is a new way of building a budget. Simply put, you divide your money into different envelopes. That’s right - real envelopes.

Not digital pots or in-app wallets. Physical, tangible envelopes! Don’t worry, they don’t have to be the boring ones you get your bills in. They’ll work fine, but you can get more creative than that.

The cash envelopes for budgeting each represent a different category of your expenses. The aim is to use only the cash in the envelope for that particular category and to replenish it when it runs out. It’s a great way to avoid overspending, and it’s surprisingly easy to use. Find out how to budget with envelopes with our 5 step guide:

5 Steps: How to budget with cash envelopes

1. Choose your categories

The first step in creating your own envelope budgeting system is deciding what categories are important to your daily and monthly expenses. 

What do you regularly spend your money on? Go through your bank statements and pick out those recurring expenses. Particularly focus on the things that you absolutely have to spend money on first, and then the ‘nice-to-haves’ later. 

Here are some examples of categories that people often choose:

  • Groceries
  • Energy bills
  • Paying off debt
  • Savings
  • Tax (if you’re self-employed)
  • Entertainment
  • Eating and drinking out
  • Holidays
  • Haircuts
  • Gifts

2. Work out your budget

Once you have a list of categories, decide on a budget for each one. Be realistic about what you can afford to spend each month and use a budget planner with your cash envelopes to record each allocation. 

It’s a good idea to overestimate your budgets for each category. Better to end up with too much money, right?

If you need help working out how much money you should be putting into each category, a good option is to use the 50/20/30 rule. This splits your income into 50% for what you need, 20% for your savings or debts, and 30% for what you want . You can read more about the 50/20/30 and other budgeting rules here.

3. Grab some cash envelopes for budgeting, and a budget envelope wallet

Now it's time to get some envelopes and a budget envelope wallet to keep them all in. You can purchase special transparent plastic wallets online, or simply use any spare paper envelopes you have lying around. 

As mentioned above, you can get creative too. Label each envelope with its category to get started and feel free to add some finesse to your finances as you do,  because budgets don’t have to be boring.

4. Share out your money

Once you’ve got your envelopes ready and your categories sorted, start stuffing your cash into them! 

Put the correct amount of money into each envelope, according to your budget. Then when it comes time to pay out, just take that amount out and pay off whatever you need to pay off. Easy, right? 

Any money you have leftover at the end of the month rolls into the following month’s budget, freeing up more cash for you! This is especially good if you have any ‘sinking funds’ coming up (i.e. preparing for your car’s MOT, making extra debt payments,or a huge pile of Christmas presents to buy.)

5. Stick to the system

The key to success with the envelope budgeting system is sticking to it. Once the cash in the envelope is gone, you can’t spend any more in that category until the next month. 

It's important to hold yourself accountable and not dip into other envelopes. If you’ve spent your entertainment fund, think about how you can make it stretch next month.

Ultimately, the envelope budget system is a great way to keep track of your expenses, avoid overspending and stay organised. With the right mindset and tools, you can transform your finances and take control of your money. 

Budget binder envelope ideas

If you need some inspiration, check out budget binder envelope ideas by searching #budgetenvelope on TikTok or maybe take a look on Pinterest. There are some pretty colourful and imaginative versions out there so find your flavour and power-up your finances. 

Who can use a budget planner with cash envelopes?

The envelope budgeting system can work for anyone, no matter what your financial situation is. If you break up your income with one of the budgeting rules, you’ll often be working with percentages. So no matter what you earn, the rule still works for you! Take the leap and give it a try — your bank balance will thank you.

What else can I do to boost my finances?

Another way to boost your finances while using cash envelopes is by growing your credit score. The quickest route to a better score is getting your membership started and activating Loqbox Grow, Loqbox Save and Loqbox Rent for just £2.50 a week.Members have seen up to a 300 point increase in the first three months using all of our products.

Improvements to your credit score are not guaranteed.

Get a little Loqbox in your inbox

A special delivery of money saving tips and financial know-how each month