Do you know that the grandparents from the older generation used to stuff money in envelopes? But for what purposes? They marked that money for things like “purchasing groceries” and “paying rent.” It’s similar to the ‘cash stuffing’ trend you might’ve seen on TikTok because the envelope system is the “original” cash stuffing system. And now, you have dedicated envelope budgeting apps to help you make it all even more efficient. This article will tell you everything about the envelope system and share our picks for the best envelope budgeting apps.
Why the Envelope System (or ‘cash stuffing’) Works
In the envelope system, instead of leaving your paycheck in your bank account, you categorize it by putting it physically into several separate envelopes. All of them will have their function, for instance, one to buy groceries, another one to spend on fun, and the last one to pay the electricity bill. That’s easy because whenever your “dining out” envelope is out of money, just cook at home until the next month.
Think of this situation: buying things with the card seems thoughtless, but giving away cash from the envelope makes you more careful. This sort of physicality of finance creates good spending habits. Moreover, the system keeps you away from overdoing your expenses due to the allocated amounts.
Setting Up Your Envelope System
Setting up the envelope system is not an easy task and takes a good amount of planning. Let’s walk you through how Sarah, a marketing coordinator, was able to establish a budgeting plan that could help her save money. In line with the 50/30/20 rule, she firstly distributed 50% ($2,000) to her needs, 30% ($1,200) to her wants, and 20% ($800) to savings and debt repayment.
At first, she summed up her total income every month after taxes and made sure that her necessary bills did not go unpaid. The rent ($1,400) and utilities ($200) were reoccurring expenditures paid through her account setup for automatic billing, thus leaving her with only $2,400. Regarding these categories as separate sections of your home will prevent confusion – just like the kitchen is for cooking and the living room for entertaining, so each envelope represents a distinct financial goal.
Sarah’s envelope breakdown looked like this:
Needs (remaining from the 50%):
- Groceries: $300
- Transportation: $100
Wants (30%):
- Dining out: $300
- Entertainment: $200
- Shopping: $300
- Personal care: $200
- Hobbies: $200
Savings/Debt (20%):
- Emergency fund: $400
- Student loan extra payment: $400
Each payday, Sarah would visit the bank and physically divide her cash into these labeled envelopes. When her $300 “dining out” envelope started feeling light mid-month, she’d peek inside and find only $50 left. This tangible reminder helped her choose a home-cooked meal over takeout, knowing she needed that $50 to last two more weeks.
By the end of her first month, Sarah was amazed to find she hadn’t overspent in any category – something that had never happened when she was just using her debit card for everything.
This hands-on approach made her spending limits feel real in a way that digital banking never had. Plus, there was something oddly satisfying about opening her “emergency fund” envelope each month and watching her savings physically grow, just like her grandmother used to do with her “rainy day” jar decades ago.
Also Read: Zero-based Budgeting vs Incremental Budgeting – Which Is Better?
Best Envelope Budgeting Apps
1. Goodbudget
Goodbudget is often counted as the best envelope budgeting app. The virtual envelopes created by the app can be effectively synced across the devices providing an efficient and affordable way for couples to manage their money. It is like you have transparent envelopes that both partners can see at one time. The free version offers 20 envelopes, while the Plus version provides unlimited envelopes and additional features.
Google Play rating: 3.8
App Store rating: 4.6
2. YNAB (You Need A Budget)
Among the other envelope categorization apps, YNAB is probably unique as it has included in its software almost all the functionalities of budgeting. Albeit users are forced to pay for the service, they still get a wide range of services, and many see the subscription cost as a small price to pay to experience all the benefits it offers. The app gives every dollar a job, in a way, where you divide each envelope for the purpose of spending on something specific. YNAB also ranked at the top of our list of the best budgeting apps of 2025.
Google Play rating: 4.7
App Store rating: 4.8
3. EveryDollar
Honed by the money guru Dave Ramsey, EveryDollar replicates the envelope system in line with current convenience. The free version allows users to create and manage their accounts. The premium version includes bank synchronization in addition to basic envelope budgeting. Moreover, the clean user interface of the app is appropriate for beginners who want to start budgeting.
Google Play rating: 4.3
App Store rating: 4.7
4. Mvelopes
Mvelopes is an app that transforms a regular budget envelope into the digital environment. The app gives you real-time awareness of your spending as it connects to the bank and helps you keep control of your spending. While it may not be the most popular envelope budgeting app, it does offer decent functionality.
Now, let’s learn the right way to budget using the envelope system.
The Right Way to Budget Using the Envelope System
- Start Simple: Instead of trying to track everything, begin with a few essential categories. Think of it like learning to juggle—start with two balls before attempting four. As you become comfortable with the basics, gradually add more spending categories.
- Regular Check-ins: Make reviewing your envelopes a daily habit, just like checking your social media. Consequently, you’ll catch overspending early and can adjust your habits accordingly. Furthermore, frequent check-ins help you understand your spending patterns better.
- Sync with Your Partner: If you share finances with someone, ensure both of you understand and commit to the system. Therefore, schedule regular money talks to discuss your progress and adjust your envelope allocations as needed.
FAQ
Is the envelope system and the cash stuffing system the same?
Yes, they are more or less the same. Both refer to the practice of physically separating cash into different envelopes (or digital categories) for specific spending categories.
Can I use both cash and digital envelopes?
Yes! Many successfully combine physical cash envelopes for daily expenses with digital envelopes for bills and subscriptions.
What happens if I overspend in one category?
You’ll need to transfer money from another envelope but make this a conscious decision rather than a habit.
How many envelopes should I start with?
Begin with 5-7 main categories. As you become comfortable with the system, you can always add more.
The Bottom Line
The envelope system, digital or physical, gives you a powerful way of hardening your spending and being the master of your finances. Like any money management method, the results are always up to the user to stick to the rules and stay motivated. To get you started, pick the easiest one that you think will be good for your lifestyle, and then when you are comfortable mulling over it, add other categories.
Modern envelope budgeting apps have made this time-honored technique more manageable than ever. Thus, you can get the psychological benefits of the envelope system while still using the modern-day help of digital means. So, don’t just wait, envelope your money today!
