The Envelope Budget System in a Digital World

If you are anything like me, then you don't like to have a bunch of cash just sitting around in your house. I love the idea of having an envelope for each set of expenses and having only that to work from. The thing I don't like about that is cash doesn't go through the internet very well, and I am not about to send cash through the mail to pay my bills and I never had checks made for my account. So I created a digital version of the envelope system for myself.

Step 1 - Create a Budget

I will be honest, it took me a while to create my budget and get it locked down so I knew what days things were due, exactly what amounts they were and when I would pay them. It meant I had to change some due dates on bills and distribute them around the month so it was easy for me to manage. In all it took me about 3 months of revising, changing and massaging until I got my budget down to the point where it ran itself.

Here is how I created my budget.
1. Figure out your income - The actual amount of money that you bring home in a month and when you usually get paid. Some people get paid on the 1st and 15th, others every two weeks, either way, figure out your total monthly income.
2. Plan in your savings. If you can, save 10% of your income. If you can save more, do it! Pay yourself first and make it a priority, otherwise it will never happen.
3. Figure out an itemized list of all expenses/bills that come out every month. Things like utilities, house payment/rent, car payment, insurances, entertainment (netflix, hulu), internet, etc. This is where I had to revise a couple times because there were things I had forgotten about.
4. Find out the dates when each of the above things get paid or are due.
5. Rearrange these dates if needed.

Why rearrange?

When I had done steps one through three, I realized that the first half of the month was very bill heavy, while the last half of the month was bill light. I didn't like this as it meant that I was strapped in the beginning of the month and then usually went a little crazy the last half with frivolous spending. So I rearranged my bills to be a little more evenly spread so half (when I say half, I meant half in the way of dollar amounts, not number of bills) would be paid in the first half, and half would be paid the last half of the month.

For me, I also arranged the payments so most of them came out around the same time so there wouldn't be a temptation to use money in that particular category.

Step 2 - Create the Envelopes

I am not endorsing mountain america credit union, but I do know that they offer the types of accounts that are perfect for this digital envelope system, which they call the myexpress debit card. I have one main checking account, and five sub accounts. With MACU (Mountain America Credit Union) I have these accounts set up as limited checking accounts with no checks, but they each have debit cards. Here are the categories I have for the accounts.

1 - Bills (This is the main checking account)
2 - Food
3 - Gas/Car
4 - Everything Else
5 - Personal Spending Account
6 - Spouses Spending Account
I also have 2 savings accounts, one for cash short term savings, the other for emergency savings.
One very important note, I purposely made it so all of the sub accounts could not overdraft. This meant that once the money was gone, it was gone. The main checking account was set to pull from the cash savings in case any overdraft did happen so the bills would always get paid.

Why did I choose these categories?
Bills - I figured that everything that was a regular monthly expense like rent/mortgage, insurance premiums, etc would come from that bills account. That way I would know how much had to be in the account after every check to meet all the obligations. Every pay day I would transfer the amount of money that needed to be there for those two weeks and leave it alone. I had everything set to auto pay so I literally could set it and forget it. Just this alone gave me an incredibly amount of peace of mind, because I knew that my bills would get paid on time every month.
Food - We would set aside our monthly food budget and only use the food card for food. This allowed us to also keep track of how much was going to fast food vs actual groceries.
Gas/Car - Our monthly gas budget was here. Nothing else to really say about that.
Everything Else - Everything that didn't fit into these categories would go here. Maybe family entertainment, etc.
Personal Spending accounts - I feel budgeting in spending money is paramount. This allowed us to spend money, not feel guilty about it, and it wouldn't set our budget back. This makes it much easier to adhere to a budget when you have spending money that you know will be there every 2 weeks.


It was very easy to maintain. After putting this budget and digital envelope system into use, it was so much easier to save money, pay bills on time and never worry if we were going to be able to pay a bill. Everything was compartmentalized, automated and trackable. I would get paid, deposit the check, and then 30 seconds later, I would hop on my phone and transfer the money where it needed to be. Then walk away and know all my bills were going to be paid, my savings/retirement were getting funded, and I still had money to spend.

It made it very easy to track spending habits and change them.


Sometimes things take time to clear. I also noticed that if you ever tried to buy anything from a site using paypal, that the sub-account debit cards didn't always work. The particular bank I used wouldn't allow custom pictures when I got my cards, I think they do now. But that made it hard to distinguish cards sometimes.


What do you think about the digital envelope system?

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