Through TikTok and YouTube, the Cash Envelope Money system created by radio host and financial guru Dave Ramsey has become increasingly popular over the last few years. After discovering it on YouTube, I decided to give it a try, and it helped me save $300 in three months with relative ease.

Credit and debit cards make spending money very easy. The envelope method involves using a limited amount of cash, so you have to be more restrained in your spending. The method works by assigning every dollar in your paycheck to a certain category.

BEGIN WITH THE BILLS.

The first thing to do is list all of your monthly bills and how much they cost (if you get paid biweekly you’d split the bill in half since you get roughly two paychecks a month). Once you’ve made the list and added up the total, you subtract it from your whole paycheck. Since it’s likely that most (if not all) of these bills are paid online, you don’t need to take out any cash for them.

CREATE CATEGORIES.

Next, you’ll want to decide on what your budget categories are for and how much you’ll need in each. This is stuff you’ll need to pay for every pay period such as groceries, gas, etc. Each of these categories will get an envelope, and you’ll put your chosen amount of cash in each envelope. You then can carry these envelopes with you! These cash totals should last you until your next payday and should stay relatively consistent each time you budget. Once those cash totals are added up, subtract that amount from what was left of your paycheck after you’ve paid your bills.

The envelope method involves using a limited amount of cash, so you have to be more restrained in your spending.

THAT SINKING FEELING.

Lastly, the rest of your paycheck will go into your sinking funds. These are things that are savings goals or stuff you pay for occasionally, whether that’s saving for vacation, buying beauty products, setting aside fun money, or saving for medical expenses or an emergency. Based on what you’re doing between paychecks, the amount each envelope can vary and can change from paycheck to paycheck. Take out that amount in cash and divvy it up in envelopes. This way you know what each dollar is for and you prevent yourself from using it for other things.

BUILDING A BUFFER.

Sometimes we’re in a bind and have to pay for things with our credit or debit card, even if there is a corresponding cash envelope for it. For this, I like to have a $100 to $200 buffer in my bank account. If I don’t end up using all of the cash from each envelope, I’ll just take that cash out and either save it for the next budgeting period or put it back into the bank.

Sticking with this method over time can be super helpful in saving for future expenses and managing your budget. It is also really nice to see your savings grow physically and know that every single dollar in your paycheck has its own purpose.