Is anyone successfully using a digital form of the "envelope system"?

I have some of the pieces, but have not figure out a complete process to automate. I am thinking of using a pre-paid debit cards (e.g. Kaiku) or another checking for food, gas, and household purchases. Personally, I see some issues with cash in envelopes such as theft, loss, and an inability to share joint expenses. While I like the envelope system I want to avoid some of the pitfalls of carrying cash.

Ideally, I want:

1) duplicate cards for myself and spouse

2) automated transfers from checking to the pre-paid cards for the budgeted amounts (Looked at the kaiku FAQ and I see they don't offer automated recurring transfers. May have to go with dwolla for that feature and pay the $0.25 ach fee)

3) ability to check balances easily on iPhone, Android, or mobile web site

4) an eventual unified card (e.g. Coin) that will hold all the cards/accounts in one card

  • 6
    So... what's your question?
    – Philipp
    Commented Sep 9, 2014 at 9:22
  • youneedabudget.com is the best software I've ever used, and I've budgeted "envelope" style my whole adult life. Commented Feb 3, 2016 at 20:36

7 Answers 7


My wife and I use a digital form of the envelope system. We call it a budget; we record how much we want to allocate each month to spend--for each category of expense--in a spread sheet.

Why use prepaid cards? Why not open a bunch of bank accounts and use debit cards from each if you want to separate the money? You could also keep a ledger for each account that you spend from on a smart phone or even in a physical ledger.

The reason for the envelope method is that it psychologically hurts some people to physically part with cash. Once you digitize it in some factor, you lose what is the primary touted benefit, and it's no longer the envelope system. The secondary benefit that--once the budget for one category is gone, it's gone--is only as good as the discipline you have to not rob cash from another envelope; why is this any easier than the discipline of not debiting beyond the bottom of the ledger? So a budget IS a digital version of the envelope system; once the physical cash is removed from the equation, it's definitely not the envelope system.

Sorry for the contrarian take on this question, but I've never been a fan of the envelope system for many of the reasons you have described. I guess I'm too young for the cash psychology to work for me.

  • You make a good point about opening a bunch of bank accounts. We have BofA and they have requirements for free checking. It used to be easier to have free checking accounts. After the law changed on overdraft, the banks decried they could not offer free checking. If you know of any banks that allow me to sign up for multiple checking accounts, I am open to your suggestions.
    – Sun
    Commented Sep 9, 2014 at 16:55
  • Where I live, there are a lot of credit unions that offer free checking. I can think of a dozen distinct institutions with branches within 10 miles of where I live that only require $25 in a savings account to secure free checking. If you download the mobile apps for each of those on your phone then you can print your own checks to deposit through the phone to the other accounts. All for free. ACH is also free with most of those institutions. Commented Sep 9, 2014 at 19:14
  • Thanks, it seems one of our local credit union offers a quasi-free checking account. I appreciate the tip!
    – Sun
    Commented Sep 9, 2014 at 23:48
  • We ended up opening up another checking account with the same bank, as I found out our employer allows split direct deposit. Both checking accounts ends up being free this way. We both have a debit card that withdraws from this second checking account. We are starting off with food (groceries and eating out) first. So far, the system has been working well. We use a free service called Check (was PageOnce) to see our checking balance easily. You could use Mint too.
    – Sun
    Commented Oct 2, 2014 at 19:48

I definitely get where you're coming from. The envelope system sounds good, but doesn't appeal to most people under 50 for many of these reasons (physical cash in my hand is just a hassle - it has no appeal or reduced spending affect on me).

There are various options for prepaid debit cards such as https://www.netspend.com/ or you could use gift cards for things like gas and groceries (though that likely won't get you duplicate cards or automatic payments). As far as automatic payments, just set that up through your bank.

So it's still not a perfect solution. I wish there was a better, more straightforward way, but this is the best as far as I know.

Update: Ramsey solutions has since launched EveryDollar. This is Dave's preferred solution for an online "digital envelope system".

  • I will take a look at NetSpend. At least with Kaiku, they accept ACH transfer, but will not initiate it for you. My bank, BofA, charges $3 for external ACH transfers. Crazy right?! This is why I mentioned Dwolla which $0.25 but would require two accounts to be set up for the transfer.
    – Sun
    Commented Sep 9, 2014 at 13:59

While Googling answers for a similar personal dilemma I found Mvelopes. I already have a budget but was looking for a digital way for my husband and I to track our purchases so we know when we've "used the envelope". It's a free app.


The whole point of the "envelope system" as I understand it is that it makes it easy to see that you are staying within your budget: If the envelope still has cash in it, then you still have money to spend on that budget category.

If you did this with a bunch of debit cards, you would have to have a way to quickly and easily see the balance on that card for it to work. There is no physical envelope to look in. If your bank lets you check your balance with a cell-phone app I guess that would work. But at that point, why do you need separate debit cards? Just create a spreadsheet and update the numbers as you spend. The balance the bank shows is always going to be a little bit behind, because it takes time for transactions to make it through the system. I've seen on my credit cards that sometimes transactions show up the same day, but other times they can take several days or even a week or more. So keeping a spreadsheet would be more accurate, or at least, more timely.

But all that said, I can check my bank balance and my credit card balances on web sites. I've never had a desire to check from a cell phone but at least some banks have such apps -- my daughter tells me she regularly checks her credit card balance from her cell phone. So I don't see why you couldn't do it with off-the-shelf technology.

Side not, not really related to your question: I don't really see the point of the envelope system. Personally, I keep my checkbook electronically, using a little accounting app that I wrote myself so it's customized to my needs. I enter fixed bills, like insurance premiums and the mortgage payment, about a month in advance, so I can see that that money is already spoken for and just when it is going out. Besides that, what's the advantage of saying that you allot, say, $50 per month for clothes and $100 for gas for the car and $60 for snacks, and if you use up all your gas money this month than you can't drive anywhere even though you have money left in the clothes and snack envelopes? I mean, it makes good sense to say, "The mortgage payment is due next week so I can't spend that money on entertainment, I have to keep it to pay the mortgage." But I don't see the point in saying, "I can't buy new shoes because the shoe envelope is empty. I've accumulated $5000 in the shampoo account since I went bald and don't use shampoo any more, but that money is off limits for shoes because it's allocated to shampoo."

  • My intent is to automate the process as much as possible. I feel entering spreadsheet data is a timewaster, although I get your point about timeliness and accuracy. I like that I can only spend what I have budgeted, not more like a credit card. I agree to keep the categories short. Not every penny has to be budgeted and can remain in the main account. Although not fixed, gas and utility are mandatory so we would not make it part of the "envelopes". It is the discretionary spending such as food that I would initially set a limit on.
    – Sun
    Commented Sep 9, 2014 at 23:16
  • Personally I think of myself as having three categories of expenses: Fixed bills, like the mortgage and insurance premiums. High-priority bills, things that I have to pay if I don't want to starve, freeze, etc., like the heating bill and food. And then discretionary spending, which is pretty much everything else, entertainment and new clothes and computer toys and anything else that I could do without if I don't have the cash.
    – Jay
    Commented Sep 10, 2014 at 13:42
  • @Jay: "This was not the post I was looking for...". Sorry, I've gotten two entirely different posts mixed up. The other post boiled down to "no budget software handles credit card spending properly" My other comment has been deleted. Commented Feb 3, 2016 at 22:10

If psychologically there is no difference to you between cash and debit (you should test this over a couple of months on yourself and spouse to make sure), then I suggest two debit cards (one for you and spouse) on your main or separate checking account.

If you use Mint you can set budgets for each category (envelope) and when a purchase is made Mint will automatically categorize that transaction and deduct that amount from the correct budget. For example: If you have a "Fast Food" budget set at $100 per month and you use the debit at McDonalds, Mint should automatically categorize it as "Fast Food" and deduct the amount from the "Fast Food" budget that you set. If it can't determine a category or gets it wrong, you can just select the proper category.

Mint has an iPhone (also Android and Windows phone) app that I find very easy to use.

Many people state that they don't have this psychologically difference between spending cash and debit/credit, but I would say that most actually do, especially with small purchases. It doesn't have anything to do with intellect or knowing that you are actually spending money. It has more to do with tangibility, and the physical act of handing over cash. You may not add that soda and candy bar to your purchase if you have visible cash in your wallet that will disappear more quickly. I lived in Germany for 2 years before debit cards were around or common. I'm a sharp guy and even though I knew that I paid $100 for the 152 DM, it still kind of felt like spending Monopoly money, especially considering that in the US we are used to coins normally being 25 cents or less and in Germany coins are up to 10 DM (almost $10) and are used more frequently than paper.

  • Using a debit card with a balance serves the purpose of spending in a specific category without having to categorize transactions to know our spend down amount. I tried Mint when it first came out and I spent way too much time categorizing transactions. Mint often gets it wrong and I stopped using the service for that reason. Quicken Online (Mint Copy) does a better job since categories and auto-categorization works with your Quicken. I haven't looked at cash vs card too heavily. I just don't want to use cash for budget purposes.
    – Sun
    Commented Sep 10, 2014 at 20:44
  • Because I do my budgeting with Mint, I have a much harder time spending money on a card than I do with cash. With cash, I know that either the money is "free money" - that is, it's not money that came in from my job income so it's extra money - or I know that it's "already spent" - it's been accounted for in one of my budgets so it's not going to affect my budget. Spending on a card though is always going to hit one of my budgets, so I have to think about it more.
    – David Rice
    Commented Feb 17, 2015 at 19:27
  • These days coins larger than 2 Euros (€) (~2 $) are very uncommon in Germany (and the parts of the EU that use the Euro), ok that's still more than a quarter but not really big money.
    – Ghanima
    Commented May 25, 2015 at 21:37

I opened several free checking accounts at a local credit union. One is a "Deposit" account where all of my new money goes. I get paid every two weeks. Every other Sunday we have our "Money Day" where we allocate the money from our Deposit account into our other checking accounts. I have one designated as a Bills account where all of my bills get paid automatically via bill pay or auto-pay. I created a spreadsheet that calculates how much to save each Money Day for all of my upcoming bills. This makes it so the amount I save for my bills is essentially equal.

Then I allocate the rest of my deposit money into my other checking accounts. I have a Grocery, Household, and Main checking accounts but you could use any combination that you want.

When we're at the store we check our balances (how much we have left to spend) on our mobile app. We can't overspend this way. The key is to make sure you're using your PIN when you use your debit card. This way it shows up in real-time with your credit union and you've got an accurate balance.

This has worked really well to coordinate spending between me and my wife. It sounds like it's a lot of work but it's actually really automated. The best part is that I don't have to do any accounting which means my budget doesn't fail if I'm not entering my transactions or categorizing them.

I'm happy to share my spreadsheet if you'd like.


Envudu (envudu.com) looks very promising, and I think what they are planning to put out will do essentially everything you want. It's a single prepaid card, but with a connected app. On the app you choose which budget category you're going to spend on next, and then swipe your card. Your purchase gets deducted from that category.

There aren't a ton of details yet on their website (e.g., what happens if you try to swipe on a category that doesn't have the funds available?) and there is going to be a $20/year fee, but I think it meets all of your criteria, even though it's a single card--you'll just need to use a smartphone with it.

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