The cash envelope budget is a favorite for many people but we found that we prefer a digital version instead. Blame our love for making things easier than they already are or our disdain for carrying cash.

Either way, the digital envelope method really works for us.

Here’s how:

Why We Don’t Use Cash Envelopes

We tried using the cash envelope system for all of about one week. Neither of us particularly liked the idea of carrying around our whole budget in cash! I guess some people are fine with it but that was an idea we could not get behind.

We thought it would be a good idea for us, but it didn’t work out for a variety of reasons:

• It’s a safety hazard in our view because you’ve got to open up your little cash envelope wallet every time you pay for something.
• Both people need to have access to the cash, which isn’t possible if you aren’t always together.
• You could drop your wallet somewhere and lose your entire budget! (We’re both prone to losing things so this was very possible)

The argument we normally hear is that you can solve these problems by only carrying the portion of your cash envelope that you plan to spend that day.

This is a good idea in theory, but how many times have you been driving home and needed to stop for gas? If you left all of your money at home, then you’ll need to hope, wish, and pray that you can get home, get money and get to a gas station in time.

No thanks!

This realization led us to search for a digital envelope system that would work for us.

How Does The Digital Envelope System Work?

Step #1: Make a Budget

In order to use the digital envelope system, you’ll have to create a monthly budget first. The categories for your digital envelopes will come straight from your budget. Read: How To Create A Monthly Budget In Less Than 20 Minutes

Step #2: Transfer $$$ To Your Budget Account

We use a separate checking account for all of our budgeting needs. Each month, we calculate exactly how much money is needed to pay for all of our bills and budget categories and we add it to our joint bank account.

From here, you can use the debit card linked to the account or use a rewards credit card (that you pay off after each purchase) to do all of your spending throughout the month.

Step #3: Add Categories To Your Digital Envelope App

Once your money is in place you’ll need to add your categories to your digital envelope app of choice. If you don’t already have one, we wrote a comparison of the two most popular choices to help you out. Personally, we use Goodbudget, but you should use whatever app works best for you!

Step #4: Track Your Spending

The only way this method works is if you actually track your spending throughout the month. Update your app after every purchase and put what you’ve spent into the proper category.

We always ask for a receipt so that we don’t forget this step. Most of the time we’ll log our spending as soon as we get into our car or even as we’re walking out of the store!

Has It Worked?

Heck yea! In short, the digital envelope system has worked wonders for us because we’re still able to use one of the best budgeting methods of all time without having to actually carry cash!

What method do you use to stay on track each month? Are you a cash budgeter or do you stick to digital methods?